Five Arkansas attorneys have been formally reprimanded by a federal judge in the Western District of Arkansas after stipulating to dismissal “for the purposes of seeking a more favorable forum and avoiding an adverse decision” in connection with the approval of a class settlement. The court had initially considered harsher injunctive sanctions, including requiring the attorneys to provide notice to any federal Arkansas court in which they submitted a class settlement for approval that they “had previously been sanctioned for improper conduct in connection with a class action settlement agreement.” The court’s decision serves as a warning to class action attorneys as they engage in settlement discussions.
In Adams et al. v. United Services Automobile Ass’n et al., W.D. Ark. No. 2:14-cv-02013, the plaintiffs originally filed their putative class action in Polk County, Arkansas. The case was removed to the Western District of Arkansas and assigned to Chief District Judge P.K. Holmes III. After lengthy settlement negotiations, the parties stipulated to voluntary dismissal of the case in federal court. The next day, the plaintiffs refiled the action in Polk County, along with a motion for class certification and for approval of the class settlement.
The settlement, which resulted in a 4 percent claims rate against an estimated settlement value of $3.5 million, included a quick-pay provision allowing class counsel to collect fees of $1.85 million without having to first address objectors or wait for class members to obtain relief. The settlement was approved by the state court, which, according to Judge Holmes, was unsurprising because “Arkansas courts have a lenient approach to class certification and require no heightened attention when a class is certified for settlement purposes.” Continue Reading