In appeal, lawyers say penalty unjust

Judge’s ruling appealed to 8th Circuit

A federal judge in Fort Smith was wrong on all counts when he penalized five class-action lawyers, including University of Arkansas Trustee John Goodson, for dismissing a case from his court to settle in state court last year, according to a brief filed on the lawyers' behalf.

Chief U.S. District Judge P.K. Holmes III ruled Aug. 3 that the lawyers violated a federal civil procedure and abused the court system.

Holmes' analysis to support the penalty "was unprecedented and infirm," according to the lawyers' 75-page brief filed Wednesday with a federal appeals court.

"The imposition of a sanction on reprimanded counsel was unjustified," said the brief by the lawyers' attorney, Gregory Joseph of New York City.

Besides Goodson, the sanctioned lawyers include: Matt Keil of Texarkana, Jason Roselius of Oklahoma City, and Richard Norman and Martin Weber Jr. of Houston.

All have worked together suing large companies through class-action cases. Goodson is known in Arkansas for winning millions in class-action settlements and as a donor to political campaigns.

Holmes' sanctions must be noted when the lawyers apply to work in out-of-state courtrooms, experts say. Judges could refuse to let those lawyers take part.

Those five lawyers and a dozen other plaintiff and defense lawyers have appealed Holmes' findings to the 8th U.S. Circuit Court of Appeals in St. Louis.

A similar but separate appeal by three defense lawyers, including Lyn Pruitt of Little Rock, was filed with the appeals court Thursday.

All the lawyers worked on Adams v. United Services Automobile Association (2:14-cv-2013) in Holmes' courtroom.

The class action involved a group of claims holders suing the insurance company for under-payment. Lawyers on both sides agreed in June 2015, after 17 months of litigation, to move the class action from Holmes' federal court to Polk County Circuit Court .

When Holmes learned of the switch through an article in Arkansas Business newspaper, he ordered the lawyers to show why they shouldn't be sanctioned for improper conduct.

In his show-cause order, Holmes accused the lawyers of engaging in improper "forum-shopping" because Arkansas state courts don't scrutinize class-action settlements as closely as federal courts.

The judge said he wouldn't have approved the settlement and criticized it as favoring the lawyers and the insurance company at the expense of policyholders.

Though Holmes faulted all the lawyers involved, he sanctioned only five that he judged acted "in bad faith," or with prior knowledge that what they did was improper.

In their appeals brief, the five lawyers said Holmes based his findings on a misinterpretation of Rule 23(e) of the Federal Rules of Civil Procedure.

"This error is the [linchpin] of the lower court's conclusion," according to the plaintiff lawyers' brief. "No other court has construed amended Rule 23(e) this way -- the cases are uniformly to the contrary."

Other than Holmes, "every Arkansas federal judge presented with the procedure sanctioned here has permitted it, and this court [the 8th U.S. Circuit Court of Appeals] has never disapproved it."

Holmes was also wrong in his interpretation of another procedure, Rule 41 (a)(1)(A), his analysis of "improper forum-shopping" and finding of "bad faith," the briefing continues. And he erred in relying on "inherent power" authority to bring the sanctions.

"Independently, reprimanded counsel's conduct -- acting in conformity with the plain language of Rules 23(e) and 41(a)(1)(A) and virtually all authorities construing them -- did not abuse the judicial process or satisfy the stringent requirement for imposition of an inherent power sanction."

The defense lawyers' brief filed Thursday argued many of the same issues.

Even though Holmes didn't penalize any of the defense lawyers, his finding that the defense counsel took part in abusing the court system, along with "nation-wide publicity" about the ruling, has "tarnished appellants' heretofore spotless reputations and should be resolved by completely exonerating them with a reversal of the district court's finding," the brief filed by attorney Thomas Walsh of St. Louis said.

Lawyers on both sides requested oral argument before the appeals court.

Holmes' office doesn't comment on his rulings.

The federal appeals court has granted a request by The Center for Class Action Fairness in Washington and attorney Ted Frank to file a brief in support of Holmes' ruling. That's expected in November.

Metro on 10/21/2016

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