Eighth Circuit Reverses Sanctions on Lawyers that Settled Federal Court Class Action in State Court

by Carlton Fields

Last year at this time, we posted about two recent orders from a federal judge in Arkansas that found Rule 11 violations and abuses of the judicial process by attorneys for both the plaintiffs and the defense. Specifically, the district court found that counsel for both plaintiffs and defendants violated Rule 11 when they stipulated to dismissal of a yet-uncertified class action “for the improper purpose of seeking a more favorable forum and avoiding an adverse decision.” The court also determined that counsels’ “use of properly-attached federal jurisdiction as a mid-litigation bargaining chip was an abuse of the judicial process.” The court sanctioned the lawyers for the class in the form of a reprimand. Because it was not convinced that the defense attorneys acted in bad faith, those lawyers avoided an actual sanction. Notwithstanding, the district court was highly critical of the professional conduct of the attorneys involved, criticism that is stinging with or without an actual sanction.

The attorneys appealed to the Eighth Circuit Court of Appeals. The Eighth Circuit allowed the Competitive Enterprises Institute’s Center for Class Action Fairness to appear in defense of the district court’s judgment. On July 25, 2017, the Eighth Circuit reversed the judgment, ruling that the district court abused its discretion by (i) concluding that the attorneys violated Rule 11; (ii) concluding that the attorneys abused the judicial process; and (iii) imposing sanctions.

First, the Eighth Circuit examined the contours of Rule 41(a)(1) and held that the district court “misread” the Court’s precedent related to such voluntary dismissals. According to the Court, stipulating to a dismissal under Rule 41(a)(1) for the purpose of forum shopping and avoiding an adverse result does not amount to sanctionable conduct. The stipulated dismissal in this case “was in accordance with Rule 41(a)(1)(A)(ii).”

Second, the Eighth Circuit examined whether the district court’s judgment might be justified by Rule 23(e), which states that “[t]he claims, issues, or defenses of a certified class may be settled, voluntarily dismissed, or compromised only with the court’s approval.” The Court concluded that, “[g]iven that (1) the overwhelming majority of courts have held that when no class has been certified, voluntary dismissal of a putative class action is governed not by Rule 23 but by Rule 41, and (2) CAFA did not affect the 2003 amendment to Rule 23[,] . . . a reasonable lawyer would have a colorable legal argument that a stipulation of voluntary dismissal under Rule 41(a)(1)(A)(ii) is permissible in a case in which the class has not yet been certified.” Notably, the Eighth Circuit expressly refused to actually decide the scope of the post-2003 version of Rule 23(e): “We decline to determine whether the post-2003 version of Rule 23(e) requires court approval for a dismissal or compromise even if a class has not yet been certified. It is sufficient to hold that counsel had at least a colorable argument.”

In the end, these attorneys had their names cleared on appeal after suffering much criticism from the district court for their exercise of professional judgment in how to resolve the putative class action. But the whole episode still serves as a cautionary note to class action attorneys for plaintiffs and defendants alike that creative class settlement approaches may lead to unforeseen or uncomfortable challenges. Despite its reversal, the Eighth Circuit did observe that “[t]he district court’s frustration with what it perceived as an abuse of the federal court system and lack of candor with the court is understandable.”

Adams, et al. v. USAA Cas. Ins. Co., etc., et al., 2017 WL 3136919 (8th Cir. July 25, 2017).


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Carlton Fields | Attorney Advertising

Written by:

Carlton Fields

Carlton Fields on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.