A former Louisiana attorney general’s lawsuit that contends major insurance companies manipulated prices on hurricane damage claims will remain in federal court, an appeals court ruled.
In a 2-1 decision, a panel of the 5th U.S. Circuit Court of Appeals rejected an effort to have the case sent back to state court where it was originally lodged.
Charles Foti hired a slate of private attorneys to handle the lawsuit, filed at the end of his term last year. It alleges under state antitrust law that Allstate Insurance Co., State Farm Fire and Casualty Co. and several other insurers fixed prices, manipulated damage estimates and low-balled claims payments after hurricanes Katrina and Rita devastated the state in 2005.
The lawsuit asks the companies to forfeit profits and for any damages awarded to be multiplied by three.
In an opinion by Judge Carl Stewart and joined by Judge Priscilla Owen, the appeals panel upheld a ruling by U.S. District Judge Jay Zainey of New Orleans.
Zainey agreed with insurers who said the case is a class action that belongs in U.S. court under terms of a 2005 federal law designed to streamline class action suits and end “forum shopping,” a method used by attorneys to choose a jurisdiction — state or local — where they feel they can get the most plaintiff-friendly juries.
The state argued the suit doesn’t qualify as a class action because policyholders are not a party and may not be entitled to recover any money if the case is successful. State attorneys earlier told Zainey it was not clear how money would be disbursed.
In a dissent, Judge Leslie Southwick said the case should be returned to state court to determine whether the state can seek treble damages under the Louisiana antitrust law.
Foti, who finished third in the October 2007 primary, filed the case less than a month later. Caldwell has said he inherited some “curious” cases from Foti, who collaborated with campaign donors to file several multimillion-dollar lawsuits on his way out of office.
Foti lost his bid for a second term following sharp criticism over his failure to prosecute a doctor and two nurses over the deaths of patients at a New Orleans hospital after Katrina and the owners of a New Orleans-area nursing home where 35 patients died in the flooding.
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