An intramural dispute between two plaintiffs' attorneys caused a Louisiana state court to toss a $35 million settlement reached on behalf of victims of Hurricanes Katrina and Rita, leaving some of those plaintiffs without compensation for the time being.
The unanimous decision from the Louisiana Fourth Circuit Court of Appeals concerned the settlement of cases brought against Louisiana Citizens Property Insurance. The suits accused the company of failing to cover hurricane victims settlement offers within 30 days of receiving a claim, as required by law.
According to the court, the settlement constituted an unacceptable "end-run" against a second class action, to the potential detriment of that suit's plaintiffs.
The decision grew out of an increasingly heated feud between attorneys on both cases, Orrill v. AIG and Oubre v. Louisiana Citizens. Orrill was brought on behalf of Katrina victims whose claims weren't addressed on time, while Oubre covered victims of both Katrina and Rita. The suits' overlapping class definitions mean Katrina victims could potentially take part in both.
But in October 2008, with the Oubre case set to go to trial, the Orrill plaintiffs reached an agreement with Louisiana Citizens. The settlement was approved in March 2009, and the Orrill class was expanded to include victims of both Katrina and Rita -- essentially swallowing the entire Oubre class, in effect nullifying that suit.
The Oubre lawyers, upset about having their class snatched out from under them, cried foul, and said the Orrill agreement was a raw deal. Although that settlement was nominally for $35 million, only $13 million of that amount was actually expected to be distributed to the class. Five million would go to class counsel, and the remaining $18 million would go back to Louisiana Citizens.
Despite its relatively dull factual foundation -- this is about two insurance class actions, after all -- the increasingly bitter legal standoff had a distinctly Louisiana flare, to the point that, in late 2008, a fight broke out in an Orleans Parish court.
The appeals court noted that the Orrill lawyers essentially reached a settlement for clients they never represented, since the case was originally brought only on behalf of Hurricane Katrina.
"This Court ... finds it curious that Citizens negotiated with Orrill counsel to settle all outstanding claims, when, at the time of the settlement negotiations, Orrill counsel did not represent all outstanding claimants," the court wrote.
John Wortman, Citizens' CEO, said the company is "kind of looking at our options at this time, but we'll most likely appeal."
In the meantime, the Oubre case netted a $92.8 million settlement, which works out to $5,000 per plaintiff. An appeal on that case is set for May 3.