Youngblood v. Prudential

Justice and Rule-of-Law Gone Astray

The purpose of this site is to tell the story of a failure in the United States judicial system.  The failure was allowed due to the weakening in the last quarter century of two fundamental safeguards of justice.  This site is posted as a cautionary tale to others and a call to action to repair the damage done to our nation's justice system, so that this judicial horror story never happens to another American.

Summary

Youngblood & Associates (owned by successful medical malpractice defense attorney, Katherine Youngblood) was defrauded, and bilked out of $100,000 in fees by the firm's long term client, Prudential.

Katherine, for the first time in her life,  retained counsel and sued Mary Miller, the lead Texas attorney for Prudential who had committed the fraud, and Prudential in Texas state court.  Prudential retained Fulbright & Jaworski for its defense.  Fulbright  promptly removed the case to federal district court under the theory that no Texas jury would find against Mary Miller.  Judge Kenneth Hoyt, to whom the case was assigned in federal Southern District of Texas court, refused to remand the case back to state court, even while he inconsistently refused three times to drop Miller from the suit.  A jury trial was started, but Judge Hoyt shut it down three days into the trial and sent the jury home, saying he would rule instead of the jury.  He then signed a final judgment saying that Katherine and her firm took nothing.  They immediately appealed.

Although the denial of a jury trial and the improper removal to federal court was stunning, the outrageous part of the story comes next.  Prudential then filed a motion to punish Katherine and her firm for bringing the suit in the first place.  Prudential told the judge that he had the "inherent power" to ignore the law that says that in America, those who bring suit and do not prevail do not pay the attorneys fees and expenses of the other side.  Judge Hoyt ignored the law, and in July, 1999 signed a form order that Fulbright & Jaworksi provided to Judge Hoyt on Prudential's behalf.  He filled in the blanks on the form, and ordered Katherine Youngblood and her firm to pay the financially ruinous amount of $132,287.  ($100,000 in attorneys fees and $32,287 in expenses.)  The form order gave only one reason for the excessive and unusual fine:  "bad faith, oppressive, vexatious, and wanton" behavior.

Youngblood's attorney assured her that such a shocking order would be easily overturned, and a second appeal was filed against  the sanction.  Unfortunately, the U.S. Fifth Circuit Court of Appeals used a relatively recent and little know device called an "affirmance without opinion" to say that Judge Hoyt had done nothing wrong.  The three judge panel then said simply, without any statement of the facts or law that justified its ruling, that the district court's actions were affirmed.

How does one appeal to the Supreme Court when the appellate court has not written an opinion which can be appealed?  See the beautiful writ of certiorari to the Supreme Court below, written by Joseph Weeks.  Unfortunately, like 99% of cases submitted to the Supreme Court, the Court declined to hear the case.

Prudential then tried to collect on the sanctions order.  But Fulbright & Jaworski had made an important technical mistake that did not allow Prudential to use Texas collection law to seize the non-exempt assets of Youngblood.  Prudential then went to Judge Hoyt and asked him to declare his order to be a judgment so they could use Texas collection law, even though he no longer had the jurisdiction to do so.  Judge Hoyt then issued an order in March, 2002, declaring the sanctions order to be a judgment.  That  unprecedented order was appealed to the Fifth Circuit, but once again Youngblood received no explanation of the legality of the district court's action in ANOTHER affirmance without opinion.  Probably because she had raised the issue in the second appeal that the words of the first appellate ruling were so sparse that it was not even clear that all issues were addressed, the ruling in the second appeal at least detailed what was ruled upon this time.  In other words, the WHAT was present in the second ruling, but the WHY was still missing.

This second appellate ruling without reasons or justification occurred despite the fact that the Texas Justice Foundation filed a friend of the court (amicus curiae) brief on Katherine's behalf and the court was explicitly asked for a written opinion that would explain its reasoning.  On the second appeal, not only was the most recent order appealed, but the Fifth Circuit was asked to actually visit the issues of the sanction and the venue in the federal court in this appeal.  It refused to do so, despite clear rulings of that very Circuit stating that it should.

Imagine that even though you know how to drive, you hire a driver to take you on a trip for legitimate purpose. As your driver drives down the road, obeying all traffic laws, a policeman pulls your car over, and comes over to the passenger side and says, "I’m going to have to write you up." Why? "Vexatious, wanton, and oppressive driving." he says. "I wasn’t driving," you reply. "And besides, my driver was doing nothing wrong."

"Your driver was accelerating up to the speed limit too quickly and occasionally changing lanes," the policeman says. "That’s not illegal," you cry. "The fine is $132,287", says the policeman. "I want to see a jury on this one," you say. "Sorry," the policeman says, "you won’t get a jury, and you won’t even get to see the judge. Just write up your objections, and submit them to him."

After submission of your objections to the judge, he signs an order, telling you to pay the fine without any explanation of the law or what you did to deserve such a punishment. He just agrees with the policeman that you drove "vexatiously, wantonly, and oppressively." And amazingly, when you get to an appellate court, it too, refuses to give an explanation. It just issues a cryptic statement saying the lower court judge did nothing wrong. The Supreme Court refuses to hear the case.  And on a second appeal of the improper collection methods, the appellate court again refuses to explain itself or revisit the injustice of the first appeal, despite clear precedent that it should revisit the injustice of the first appeal.

This is in essence what happened in regard to the $132,287 sanction issued against Katherine Youngblood by Judge Hoyt.

No Due Process or Rule of Law

How did this result, which gave no due process, and clearly did not follow the law, happen?  The two institutional erosions that made this result possible are:

For a more complete discussion of the history of these two concepts, see www.rule-of-law.info.

The Details and the Supporting Documents

To read the following documents, you need Adobe Acrobat Reader.  To download click here:

The most recent briefs filed in the appeal contain an excellent way to understand most of the picture of the case:

Youngblood's Opening Brief - August 26, 2002

Texas Justice Foundation Amicus Curiae - September 4, 2002

In the interim while Prudential was supposed to be working on its response brief, it filed two motions, the first being unprecedented:

    Prudential's Motion to Strike Portions of Youngblood's Brief

    Prudential's Motion in Opposition to the Texas Justice Foundation Amicus

    Youngblood's Response to Pru's Motion to Strike    (this document contains the most compact summary of the case)

    Texas Justice Foundation's Response to Pru's Opposition

The Court did not rule on those motions until after Prudential filed their response brief.  In a happy turn of events on October 22, 2002,  Prudential's motions were denied by the Fifth Circuit!  The Order was signed by Judge R. Grady Jolly.

Prudential's Response Brief - October 18, 2002

Youngblood's Reply Brief - November 7, 2002

Youngblood's Motion to Strike Prudential's Items Not in Record - November 7, 2002

Prudential's Response to Youngblood's Motion to Strike Items Not in Record - November 19, 2002

Youngblood's Reply in the Motion to Strike Items Not in Record - November 27, 2002

An interim order was issued by a three judge panel of the Court (Davis, Weiner, and E. Garza) on January 6, 2003 which granted 5 of the 7 items in Youngblood's motion to strike.  The panel declared that two items (the reference to the Supreme Court Writ of Certiorari and record excerpts should be carried with the case.  Prudential then resubmitted a revised brief:

Prudential's Amended Response Brief - January 15, 2003

Oral arguments were held in front of Judges Will Garwood, Grady Jolly, and Patrick Higginbotham on April 8, 2003.

The ruling by Judges Garwood, Jolly and Higginbotham on the second Fifth Circuit Appeal, which once again gave no justification for the actions under the law or the facts and contained no legal reasoning:

Fifth Circuit Ruling without Explanation - April 15, 2003

The final two issues of Youngblood's Motion to Strike Items Not in Record were also resolved:

Order on Youngblood Motion to Strike - April 15, 2003

The Fifth Circuit was asked to reconsider its second ruling with the following petition:

Petition for Rehearing En Banc or Panel Rehearing - April 29, 2003

On May 30, 2003, the Fifth Circuit rejected the petitions for rehearing.

On July 24, 2003, Judge Hoyt signed an order accepting a confidential settlement between all parties.

******************

Youngblood's Writ of Certiorari to the Supreme Court from the First Appeal 

The Merits of the Original Lawsuit

Katherine Youngblood started her legal career as in-house counsel for Prudential in the Health Care (PruCare) division.  One of her co-workers, mentors, and friends while there was Mary J. Miller.  When Prudential shut down its Houston office in the early 1980's, Katherine, moved to work for a firm that did work for Prudential, and Mary moved out of town with Prudential.  Later, when Prudential re-opened a Texas office, Mary moved back to Texas.  Meanwhile Katherine did increasingly more complex work for Prudential, and eventually opened her own law firm, Youngblood & Associates.  Her practice consisted primarily of medical malpractice defense work.  In other words, she represented medical insurance companies, health maintenance organizations, doctors, and hospitals when they were sued.

Katherine has been lead civil defense attorney in more than 20 jury trials, many of them for Prudential, in which she never lost a jury verdict.

In 1996, Prudential decided it wanted to lower the costs of its outside legal work, and decided to do for the practice of law what it had done for the practice of medicine with managed health care.  It specifically talked about managed legal care.  The general idea behind the initiative was to persuade its outside counsel to lower rates.

In order to get their outside counsel to lower rates, they offered the unprecedented inducements of promising not to transfer cases started with the firm and offered to transfer all cases within a geographical area to one partnered outside firm.  Youngblood & Associates was selected by Prudential to be the partner in the Texas Gulf Coast Area.  Mary Miller was the contact for Youngblood & Associates in this change of relationship.

Mary Miller proposed a complicated deal structure that would guarantee a certain amount of dollars to the firm no matter how much work materialized.  Above that, if a certain amount of business did not materialize, Youngblood & Associates would owe a refund to Prudential, but if the business for the geographical are went above $750,000 in billings for the year, the rates would be higher for the work the above target work.  Implicit in the deal was exclusive assignment of cases for a geographical area.  Otherwise, Prudential could always keep the rates low for Youngblood & Associates by sending cases for the region to other law firms.

During discovery, Youngblood learned that Mary Miller had from the very beginning told her one thing to get her into the deal, while telling Prudential management that she did not plan to honor her word.  In a smoking gun memo, a document in Mary Miller's handwriting written in late 1996 while the deal was being negotiated, tells her management that she had no intention of transferring all cases to Youngblood & Associates.  In fact her intent was, if the billings appeared to be close to the $750,000 level, to divert cases to another law firm.  This is fraudulent inducement under Texas law.

Toward the end of 1997, Katherine got a call from Prudential, saying that her bid for 1998 and 1999 work was a bit high.  Katherine was a bit shocked and confused because she had not been asked to submit a bid, nor had she done so.  When she asked about it, she was told that the bid had been submitted for her by local Prudential attorneys.  She was told that if she would lower her rates from the assumed rate that Prudential had prepared for her, that she would get the business for 1998 and 1999.  She said that would be fine.

On January 7, 1998, Youngblood & Associates received a letter from Mary Miller of Prudential stating that effective immediately that Prudential would no longer need the services of Youngblood & Associates, and that the firm should transfer all files to another law firm in very short order.  Not long thereafter, Prudential informed Youngblood & Associates that it would not pay about $100,000 of outstanding bills which were generated for work not covered under the contract between Youngblood & Associates and Prudential.  After the law suit was filed, Prudential paid about $30,000 of those invoices, proving that the lawsuit was indeed a substantive one.  To this day, there is a factual dispute over how much of the outstanding invoices were in the contract and what was not.  Fact issues such as this are what juries are supposed to decide under our system of government (see the Seventh Amendment of the United States Constitution), but Judge Hoyt sent the jury home before they could hear evidence on this issue or decide it.

During the course of the trial, Prudential requested and received a judicial seal of the exhibits which Youngblood had presented detailing the fraud and breach of contract by Prudential.  That means they are not available via the public record in the federal court system.  But, because Prudential continued its harassment of Youngblood long after the trial was over, the public record now contains some of the original exhibits associated with the trial.  Attached below is a response to a motion seeking to disqualify Katherine Youngblood from represent a woman who was insured by Aetna under the PruCare label that they had bought from Prudential.  Youngblood was simply trying to help a young woman investigate the details of the death of her baby in a hospital shortly after the baby was born.  But even though there was no expectation of a lawsuit against Prudential or Aetna, Prudential eventually sent attorneys from two powerful law firms (Andrews & Kurth and Fulbright & Jaworski) to try to stop Katherine from representing the young mother.  In fact, in front of witnesses at the courthouse, Kendall Gray of Andrews & Kurth threatened Katherine by saying, "Prudential is going to come down on you like an old building."  In response to the personal attacks that they made on Youngblood in those proceedings, Katherine responded in Texas state court with the following:

Response to Motion to Disqualify Youngblood - November 2, 2001

Affidavit of Youngblood for Resp to Motion to Disqualify - November 2, 2001 (explains exhibits)

Exhibits for Response to Motion to Disqualify Youngblood - November 2, 2001

Two District Court Nonopinions  -  Remand and Sanctions Motion

Here is the District Court's Order with no explanation why a suit brought in state court should not be sent back there:

District Judge Hoyt's Order Refusing Remand - September 8, 1998

Here is the District Court's Order with no explanation imposing $132,287 penalty on Youngblood. Note that this was a form, prepared by Fulbright & Jaworski attorneys on behalf of Prudential (see page 22 of their motion below), and submitted to Judge Hoyt.  He just filled in the blanks and signed.  Note also that even though the form order states that hearing was held. In actuality, no hearing was held:

District Judge Hoyt's Sanctions Order - July 23, 1999

This is the Motion for Sanctions submitted by Fulbright on behalf of Prudential:

Prudential Motion for Attorneys' Fees and Expenses - June 17, 1999

Youngblood's Response to Motion for Attorneys' Fees and Expenses - July 6, 1999