State Farm asks judge to recuse himself; AG Hood files to intervene in Katrina settlement hearing

John O'Brien Feb. 23, 2007, 3:52pm


GULFPORT, Miss. - A day after State Farm Insurance Co. asked a federal judge to recuse himself from presiding over a portion of a proposed settlement with policyholders affected by Hurricane Katrina, Mississippi Attorney General Jim Hood filed a motion to participate in Wednesday's settlement hearing.

To view the Motion To Recuse, click here.

To view the Motion To Intervene, click here.

To view the Memorandum In Support of the AG's Motion, click here.

State Farm asked U.S. District Judge L.T. Senter on Thursday to step away from the class of plaintiffs who have "slab cases," which describes total or near-total destruction of their home, because U.S. Chief Magistrate Judge John Roper and Terri Brown, a clerk for a federal judge who works in the same district as Senter and Roper, have slab cases.

Senter already recused himself from those cases individually, but State Farm, which announced last week that it will stop accepting new homeowners and commercial policies in the state because of an "untenable" legal and political climate, feels he should withdraw from the class totally.

"In its current posture, this case presents the identical circumstance that led Judge Senter to recuse himself in Chief Magistrate Judge Roper's and Ms. Brown's individual suits," State Farm's motion to recuse says.

"Judge Senter will be required, perhaps as early as Feb. 28, to make rulings affecting and to adjudicate the rights and claims of a fellow federal judicial officer and a judicial employee. Accordingly, Judge Senter should recuse himself pursuant to 28 U.S.C. § 455(a), as before, to avoid even an appearance of partiality towards Chief Magistrate Judge Roper and/or Ms. Brown."

Insurance attorney David Rossmiller, a partner at Dunn Carney in Portland, Ore., who has been analyzing the Gulf Coast's insurance situation for Legal NewsLine, said any other judge in the Southern District of Mississippi would not be able to pick up the case if Senter recused.

"I'm not sure State Farm figures on getting completely out of Mississippi, but maybe into the U.S. District Court for the Northern District of Mississippi, instead of the Southern District, where Senter is," said Rossmiller, a former reporter at the now-defunct Phoenix Gazette. "The jury pool might be different, less hostile, although I'd be skeptical there are very many folks walking around northern Mississippi wearing State Farm hats and T-shirts."

On Jan. 11, Senter took the case of Norman and Genevieve Broussard out of a jury's hands by ruling himself that State Farm was liable for $223,292 in damage caused by the storm. Once he gave the jury a bad faith instruction, it awarded the couple $2.5 million in punitive damages, though that amount has since been reduced to $1 million.

"I think the reason they are doing it is that, overall, they feel Senter's rulings have been incorrect and a severe detriment to them, and they would like him out of any case where they can get him out," Rossmiller said.

"Also, when there is a possible conflict of interest, you owe it to your client to raise it and deal with it."

State Farm is the main target in Hood's Hurricane Katrina-related class action lawsuit filed against it and four other insurers that claimed they weren't responsible for flood or storm surge damage, only wind damage. The case was filed just weeks after the hurricane, and the attorneys general of the other affected states have not filed similar suits.

Recently, Hood and State Farm reached a settlement that would provide an estimated $500 million to policyholders who claimed damages incurred during Katrina were covered by State Farm. Part of the settlement was rejected by Senter, who worried that State Farm had too much control of the arbitration process in which policyholders and State Farm would participate if the policyholder rejected State Farm's initial offering, an automatic 50 percent of the structure's value according to the policy.

The proposed settlement separated policyholders into two groups -- those who have already filed suit against State Farm, and those who haven't but will.

Senter's rejection of the settlement did not stop 640 of those who had already attached their names to the suit from being given their money by State Farm. Checks have already been sent to several.

But the second group, estimated at 35,000 policyholders who will make claims, was more problematic to Senter. He did not feel it could be certified as a class because policyholders' homes were affected in different ways by the hurricane.

A meeting between the sides is scheduled for Wednesday. Hood has said that reopening a criminal investigation against the company will be a possibility if a settlement is not reached, and he is introducing legislation designed to prevent State Farm from scaling back its business in Mississippi even though he compared the company to a "cult" and called its business practices "decadent" at a recent press conference.

Friday, Hood asked to be involved in the settlement talks which was originally just between State Farm and plaintiffs attorneys like the Scruggs Katrina Group. Hood says in his memorandum in support of his motion to intervene that his interests will not be adequately represented at the meeting if he is not there.

"Moreover, the Attorney General seeks to protect the interests of the State of Mississippi, which by nature are much broader than the interests of private litigants," he says. "Because the Attorney General must represent the broad public interest, his interest is not necessarily aligned with the economic concerns of private parties."

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State of Mississippi
200 S Lamar St
Jackson, MS 39201

Mississippi Attorney General
550 High St Suite 1200
Jackson, MS 39201

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