Arkansas angle? You bet:
But behind that technical question lurks a lurid, tragicomic, outlandish back story. That story concerns the goings-on inside the circuit court of Miller County, Ark., where a handful of local law firms have made almost $400 million in fees over the past seven years, all from class-action settlements that have been procured without a judge's ever having ruled that these cases are even worthy of class treatment, let alone meritorious.
Precisely how much cash the lawyers' clients — the class members themselves — have received from the lawyers' so amply-compensated efforts on their behalf is, on the other hand, a mystery to this day. Those numbers are regarded as "confidential" and "proprietary" by the plaintiffs attorneys, and have been found to be "irrelevant" by the Miller County court, which has repeatedly refused to order that information disclosed to defendants who have sought it.
State jurisdictions with plaintiff-friendly venues became so notorious that Congress passed federal legislation to allow transfer of cases from such places. Miller County was infamous among these places, described in the article for tort reformers as a "judicial hellhole" or, less subjectively, as "magnet jurisdictions." The legislation didn't abruptly bring a new legal day.
During the final weeks before CAFA took effect on February 18, 2005, several Texas-, Arkansas-, and Oklahoma-based plaintiffs firms filed several mammoth, nationwide class actions in Miller County circuit court, thereby getting their noses in under the wire under the pre-CAFA rules. The key firms were Keil & Goodson of Texarkana, Ark., and the Austin-based Nix Patterson & Roach, which has an office in Texarkana, Tex. These firms are also involved in the Standard Fire case, being heard today by the Supreme Court, though Standard Fire was not filed until much later, in 2011. Bear with me and we'll eventually get to Standard Fire. (Attorneys from Keil & Goodson and Nix Patterson each declined to return phone messages seeking to discuss court practices in Miller County.)
One of these last-minute, pre-CAFA, Keil & Goodson/Nix Patterson cases was Hensley v. Computer Sciences Corporation. It was brought by 15 plaintiffs who had suffered bodily injuries in auto accidents caused by uninsured or underinsured motorists. Each plaintiff's insurer made offers, engaged in negotiations, and in some in some instances reached settlements. But the class action attorneys now argued that all the insurers' settlement offers had been artificially depressed because of certain software programs — the best known was called Colossus — that were used by the insurers. Claims adjusters would enter the claimants' reported injuries and medical histories into spreadsheets and the software would compute a recommended range of settlement offers. The plaintiffs lawyers alleged that the insurers and software manufacturers were conspiring to use the software as a "'cost-containment' tool to enhance their profits at the expense of first party insured person."
Though the named plaintiffs' policies had been written by just seven insurance companies, the suit was filed as a class action, naming 584 insurer defendants from across the country, as well as three software manufacturers. At least 24 "families" of insurance companies were sued, including, for instance, Allstate, State Farm, ANPAC (American National Property and Casualty), and Farmers. The plaintiffs asserted that they represented a class that included everyone who had filed uninsured motorist claims with any of these 584 companies going as far back as July 1996 — almost nine years before the case was filed.
The article goes on to make a case that practices friendly to plaintiffs forced huge settlements — worth hundreds of million in sum — in Miller County. And they gave rise to spinoff suits that remained in state court as cases related to those filed before the new federal law took effect. What's more, the law firms have come up with a procedural wrinkle to keep new cases in Arkansas courts, a procedure that is at issue in the Supreme Court argument today.
The Fortune article doesn't mention, but I will note that these big law firms coining tens of millions in Miller County courts are powerful political players. Nix, Patterson was a top campaign contributor to Sen. Blanche Lincoln, among other political beneficiaries. Keil, Goodson partners include John Goodson, the politically ambidextrous player who sits on the University of Arkansas Board of Trustees, has associated Republican Sen. Jeremy Hutchinson with his firm's work and is married to Arkansas Supreme Court Justice Courtney Hudson Goodson.
POLITICAL PS — Attorney General Dustin McDaniel weighed in on this case as a friend of the court on the side of, yes, the plaintiffs' lawyers.
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