More than a dozen lawyers who already face a federal judge's penalties tied to ethics violations in a class-action insurance lawsuit last year -- Adams v. USAA -- find themselves in another legal tangle involving the same case.
Now, policyholders for the insurance company United Services Automobile Association have sued.
The latest court action, Wartick v. USAA, alleges that 12 plaintiffs' lawyers and three who defended USAA worked together improperly last year to arrange the settlement in Adams v. USAA that played out in federal and state courts.
One of the best-known plaintiffs' lawyers named in the suits is John Goodson of Texarkana, a state and national political campaign donor and a University of Arkansas System trustee. He is married to Arkansas Supreme Court Justice Courtney Goodson.
"The true people who had been harmed, the class members, were going home empty-handed by design," Little Rock attorney Robert Trammell said Tuesday. Trammell's law firm filed Wartick v. USAA, 63CV-16-463, in Saline County Circuit Court on Friday.
The three named plaintiffs, led by Kenneth Wartick of Benton, "wanted something done," Trammell said.
The Adams case plaintiffs alleged that the USAA insurance company illegally depreciated labor costs in figuring claims for actual cash-value property damage, harming certain insurance policyholders.
The case's settlement in Polk County Circuit Court in December primarily benefited the plaintiffs' attorneys and the insurance company, the Wartick filing says.
The Wartick complaint alleges that the plaintiffs and defense lawyers worked as adversaries for about 17 months in Adams v. USAA in federal court presided over by Chief District Judge P.K. Holmes III of Fort Smith. But by June 19, 2015, lawyers for both sides had "secretly colluded in 'misleading conduct ... acting with some degree of bad faith'" to file a dismissal of that federal case.
They didn't inform Holmes of an "already-signed settlement document duly consummated in secrecy on June 16, 2015," the Wartick complaint says. "Defendants knew the tactic was 'improper,' 'misleading,' and 'with reckless indifference' thus implying bad faith."
The proposed settlement included a long, difficult-to-read notice to class members; quick-pay plaintiffs' attorneys fees of $1.85 million; and a "cumbersome, annoying" claims process for policyholders to fill out before they could be paid anything by USAA for their losses, the Wartick complaint said.
The plaintiffs' attorneys fees were more than 12 times higher than the damages paid to injured class members, the lawsuit said.
The Wartick suit asks for compensatory and punitive damages from USAA and the 15 lawyers individually, and "in concert or as part of a conspiracy ... for an abuse of process."
The same 15 lawyers, plus one more from Arkansas, are scheduled for a hearing at 10 a.m. Friday before Holmes. At issue is ethics violations related to their handling of the Adams v. USAA case, (2:14-cv-2013), in state and federal courts.
In April, Holmes notified the lawyers that he had decided to penalize them for "misleading conduct" that was "unequivocally improper" in moving Adams v. USAA in midlitigation from his federal court to state court in Polk County.
Their intent, Holmes said, was to gain approval of a joint settlement agreement from a state judge working under state court rules that required less scrutiny than federal courts require.
The lawyers who face penalties have denied any wrongdoing in Adams v. USAA. In court filings, they have argued that many Arkansas federal judges have allowed court procedures that Holmes wants to punish them for using.
Federal judges in and outside of Arkansas allow forum-shopping, and federal appeals courts have upheld the practice, the lawyers have argued. The lawyers also have asked Holmes to spare them from punishment.
The federal judge has suggested that he may order the attorneys to file documents in every class-action case they are involved in, acknowledging that they have been penalized for ethics violations in similar cases.
Attorneys for the lawyers and USAA could not be reached for comment late Thursday.
Besides John Goodson, the Arkansas attorneys named in the Wartick class-action case include: plaintiffs' attorneys Matt Keil, a Goodson partner in Texarkana; W.H. Taylor, Timothy Myers, Stevan Vowell and William Putman of Fayetteville; and Tom Thompson and Casey Castleberry of Batesville. Defense attorneys include Lyn Pruitt of Little Rock.
Other attorneys named are based in Texas, Oklahoma, Pennsylvania and Connecticut.
Metro on 06/22/2016