Planning to punish 16 lawyers for ethics violations, Arkansas judge indicates

Lawyers, ethics at issue, he says

High-profile class-action lawyer John Goodson is shown in this file photo.
High-profile class-action lawyer John Goodson is shown in this file photo.

A federal judge in Fort Smith intends to penalize 16 lawyers, including the well-known attorney husband of an Arkansas Supreme Court justice, for violating federal court ethics rules in a class-action case, according to an order filed Thursday.

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"Because sanctioning [the attorneys] will have an adverse effect on their careers," the court had to give notice of the penalties under consideration, the order says.

The issue in Adams v. United Services Automobile Association centered on whether the lawyers improperly moved the case in mid-litigation from federal court to state court so they would face less scrutiny and could settle on more favorable terms, according to the order by Chief U.S. District Judge P.K. Holmes of Arkansas' Western District.

This mid-litigation forum shopping "was objectively unreasonable under the circumstances," Holmes wrote in the order.

Holmes also cited evidence of "misleading conduct" that was "unequivocally improper" and, in some cases, exhibited "bad faith."

"Respondents have jointly abused the federal court system through their conduct in this case," the order says.

Among penalties Holmes is considering is a requirement that attorneys identified as having acted in "bad faith" notify courts that they have been sanctioned.

Holmes will hold a hearing on June 10 for individual attorneys to address factors "relevant to the nature of sanctions the court intends to impose against him or her."

The hearing "will not be conducted for the purpose of reconsidering this order."

Adams v. USAA was initially filed in Polk County Circuit Court on Dec. 5, 2013, then moved to U.S. District Court in Fort Smith the next month.

Attorneys for plaintiffs and the defense reached a settlement agreement in principle on March 31, 2015, with terms that included "dismissal of this action and refiling in Polk County," Holmes noted in Thursday's order.

Yet the attorneys on April 15, 2015, filed a report with Holmes proposing "several dates for continued litigation of this action in this court."

Holmes had 17 lawyers appear before him in February to "show cause" why he shouldn't sanction them for forum shopping.

In his order Thursday, Holmes found 16 of the 17 attorneys "responsible for violating Rule 11," which governs ethical issues in the Federal Rules of Civil Procedure.

Those facing sanctions include attorneys from Arkansas, Texas, Oklahoma and Pennsylvania.

One of the Arkansas lawyers who is facing sanctions is John Goodson of Texarkana, who has won millions in class actions in his home court in Miller County and elsewhere. Goodson is a member of the University of Arkansas System board of trustees, a large donor to state and national political campaigns, and married to Arkansas Justice Courtney Goodson.

One of the defendant attorneys, Stephen Clancy of Connecticut, was found not to be in violation because Clancy stopped working on the case after May 21, 2014, before the violations occurred, Holmes' order says.

Besides John Goodson, other Arkansas lawyers cited by Holmes include Matt Keil, a Goodson partner; W.H. Taylor, Timothy Myers, Stevan Vowell and William Putman of Taylor Law Partners in Fayetteville; Stephen Engstrom of Little Rock; and Tom Thompson and Casey Castleberry of Murphy, Thompson, Arnold, Skinner & Castleberry in Batesville.

Sanctions under consideration include:

• All of the attorneys -- plaintiff and defense -- who violated Rule 11 "in bad faith" would have to file notices in federal courts in Arkansas in class-action cases where a class-action settlement is filed and the attorneys appear. The notice would say the attorney "has previously been sanctioned for improper conduct in connection with a class action settlement agreement."

• For "any plaintiffs' counsel whose violation was characterized by bad faith, those attorneys in addition would have to file a notice of sanction for improper conduct any time they asked to be appointed as a class counsel or any pending case where they are acting as class counsels."

• For any lawyer whose violation is not characterized by "bad faith," an admonition, reprimand, caution, censure or similar sanction.

The issue of "bad faith" -- involving "dishonesty of belief, purpose or motive" -- and how much bad faith a particular attorney may have shown, is at the center of which sanctions Holmes might levy, the order says.

But all the conduct of all of the attorneys "reveals some degree of bad faith," the order says.

"An appropriate sanction is necessary to vindicate judicial authority."

Attorneys for the 16 lawyers facing sanctions could not be reached Thursday or declined to comment.

After the June 10 hearing and any sanctions Holmes may order, the lawyers could appeal to the 8th U.S. Circuit Court of Appeals in St. Louis.

A Section on 04/15/2016

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