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January 8th, 2013

Case Gives SCOTUS Chance to Rein in Class-Action Extortionists in Once and Future Judicial Hellhole

Miscarriages of civil justice in plaintiff-friendly Miller County, Arkansas are nothing new (see the 2006 Judicial Hellholes report, p. 22), but now they’re the makings of an important case heard on appeal yesterday by the U.S. Supreme Court — a case that invites the justices to rein in once and for all the class-action extortionists who continue to thrive, despite the best intentions of a 2005 federal reform law.

As reported thoroughly by Roger Parloff of Fortune.com, the plaintiffs’ attorneys in Standard Fire Insurance v. Knowles stipulated they would not “‘seek,’ in aggregate, more than $5 million in damages and attorneys fees in the lawsuit.”  In doing so, they argued that the $5 million threshold that Congress required before a defendant could remove a case to federal court under the Class Action Fairness Act (CAFA) of 2005 was not reached and, thus, their yet to be certified class-action should instead stay before a palpably biased backwoods judge in Miller County.

“The problems defendants have with these” CAFA-dodging “stipulations are legion,” reports Parloff. “To begin with, the defendants don’t believe for a second that any of these cases can be settled for $5 million or less. (Whatever settlement negotiations have occurred to date are confidential, so there is no hard evidence in the record on that question.) Defendants note that a commitment not to ‘seek’ more than $5 million is not a commitment to ‘refuse’ more than $5 million, if a sufficiently desperate defendant is spooked into offering it.”

Making his own stipulation that anticipating how the high court will decide a case based on justices’ questions during oral arguments is a fool’s game, Victor Schwartz, the American Tort Reform Association’s general counsel, was present for those arguments in Standard Fire and offered the following observation:

“A majority of the Justices, led by Justice Breyer, appeared to appreciate that letting plaintiff’s lawyers have total control over whether a class action meets the Class Action Fairness Act’s $5 million jurisdictional threshold could allow them to chop class actions into small pieces and keep such litigation in super plaintiff-friendly state and county courts ATRA often cites as Judicial Hellholes.”

Let’s hope that a solid majority, or even a unanimous court (as Parloff suspects), upholds the will of Congress, as expressed in CAFA, by shutting down this particular class-action racket perpetrated for too long by certain plaintiffs’ lawyers and friendly judges in Miller County and elsewhere.  And regardless of the high court’s decision, Judicial Hellholes readers can rest assured that ATRA’s white-hot spotlight will make things increasingly uncomfortable for Miller County’s racketeers in the future.

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