Former Louisiana AG’s Katrina Lawsuit Stays in Federal Court

Former Louisiana Attorney General Charles Foti’s lawsuit contending major insurance companies manipulated prices on hurricane damage claims will remain in federal court, a panel of the 5th U.S. Circuit Court of Appeals ruled in a 2-1 decision.

Foti hired 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 other insurers fixed prices, manipulated damage estimates and low-balled claims payments after hurricanes Katrina and Rita devastated the state in 2005. The lawsuit also 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.