by Mark Friedman

Chief U.S. District Court Judge P.K. Holmes III on Wednesday reprimanded five attorneys, including the husband of a state Supreme Court justice, after finding bad faith and abuse of the court system in their manipulation of a controversial class-action case.

Ten other attorneys were found to have abused the judicial process, but their misconduct didn’t rise to the level of bad faith, the chief judge for the Western District of Arkansas said. They were not sanctioned.

Holmes also reversed his earlier finding of misconduct by Little Rock attorney Stephen C. Engstrom.

In the 15-page order filed Wednesday morning, Holmes reprimanded plaintiffs’ attorney John Goodson of Texarkana, who is married to Arkansas State Supreme Court Justice Courtney Goodson; his law partner, Matt Keil; Jason Earnest Roselius, a partner of Mattingly & Roselius of Oklahoma City; R. Martin “Marty” Weber Jr., of counsel of Crowley Norman LLP of Houston; and Richard E. Norman, a partner of Crowley Norman LLP of Houston.

The case at the center of the matter was Mark and Katherine Adams v. United Services Automobile Association. The Adams case, which concerned the method used to calculate homeowners’ insurance claims, was pending in Holmes’ court for 17 months until both sides jointly agreed to dismiss it in June 2015. (Under court rules, the judge did not have to approve the agreed dismissal.)

The case was refiled the next day, with a settlement agreement attached, in Polk County Circuit Court, where the settlement was approved without any questions by Circuit Judge Jerry Ryan.

Holmes, who learned that the case was moved to Ryan’s court for settlement from an article in Arkansas Business in December, said the settlement that was negotiated “benefited everyone but the class members” and indicated that he would not have approved it had the case still been in his court.

Moving a federal case from one jurisdiction to another just to get a more favorable ruling has repeatedly been forbidden by the U.S. Court of Appeals for the Eighth Circuit, which includes Arkansas, and Holmes found that most of the attorneys were aware of that prohibition.

The attorneys had argued that a court rule allowed such cases to be dismissed before the class was certified, as in the Adams case, but Holmes shot down their interpretation of the rule as “unreasonable.” And without that argument, he said, “Respondents are left to contend with the unequivocal statement of law in the Eighth Circuit that ‘a party is not permitted to dismiss merely to escape an adverse decision nor to seek a more favorable forum.'”

Attorneys who were found to have abused the system but without bad faith were: defense attorneys Wystan Ackerman, a partner at Robinson & Cole LLP of Hartford, Connecticut; Stephen Edward Goldman, a managing partner at Robinson Cole; Lyn P. Pruitt, a member at Mitchell Williams Selig Gates & Woodyard of Little Rock; and plaintiffs’ attorneys Stevan Earl Vowell, William B. Putman, W.H. Taylor and Timothy J. Myers, partners at Taylor Law Partners of Fayetteville; A.F. “Tom” Thompson III and Kenneth “Casey” Castleberry, partners at Murphy Thompson Arnold Skinner & Castleberry of Batesville; and Matthew L. Mustokoff, a partner at Kessler Topaz Meltzer Check LLP of Radnor, Pennsylvania.

Holmes expressed some sympathy for the defense attorneys representing USAA, which had instructed them to settle the case, which the plaintiffs were only willing to do in a more lenient state court.

“This directive put Defense counsel between the proverbial rock of asking the Court to do something they knew it could not do — grant a motion to dismiss so they could purse this action in a more favorable forum and avoid an adverse decision — and the hard place of violating their ethical duty to settle as directed by their client,” Holmes wrote. “This is not to say that Defense counsel’s failure of candor to the Court is excusable, and had this been the first instance that litigants used a state court action to certify and settle a federal putative class action, this might not be enough to protect Defense counsel from a finding of bad faith.”

Attorneys Keil, Goodson, Roselius, Weber and Norman, however, didn’t have the same mitigating factors, Holmes said.

“The Court sees no reason to depart from its finding that their misconduct in this case was characterized by bad faith,” he wrote.

He did, however, step back from some harsher penalties that he said he had been considering, including requiring them to give notice of the sanctions in all future cases.

In the order issued Wednesday, Holmes said that he finding that the attorneys abused the judicial process “will be sufficient deterrent to their own future misconduct, and the publicity this case has received and change the Court is instituting to it management of putative class actions will deter other attorneys from misconduct.”

He said that any sanctions on the attorneys’ records will raise questions by other judges as to what led to the punishment. “As this was the intended effect of the notices proposed as injunctive sanctions by this Court, those notices will not be necessary,” he wrote.