State Farm makes argument for disqualification of Scruggs' colleagues in another case

John O'Brien Jan. 3, 2008, 7:13pm



GULFPORT, Miss. - Attorneys for State Farm Insurance Cos. have filed another motion asking a federal judge to disqualify all members of the former Scruggs Katrina Group and throw out all the evidence they obtained from one of its higher-profile cases.

Following a similar motion filed Dec. 18 in the case of Glenda Shows, State Farm says none of three firms still handling Katrina cases after indicted trial lawyer Richard "Dickie" Scruggs dropped out should be allowed to continue to represent Thomas and Pamela McIntosh in their case against the company.

"Plaintiffs' counsel have committed numerous egregious ethical violations which warrant their disqualification from this case," says the motion, filed by John Banahan of Tuscagoula's Bryan, Nelson, Schroeder, Castigliola & Banahan.

Three firms (The Lovelace Law Firm, Barrett Law Office and Nutt & McAlister) took over all the Scruggs cases and renamed themselves the Katrina Litigation Group. The motion also seeks the disqualification of former Mississippi Attorney General Mike Moore, who is also representing the McIntoshes and hired Scruggs in the 1990s to represent the State in litigation against tobacco companies, resulting in nearly $1 billion in attorneys fees for Scruggs' firm.

Scruggs and two other members of the Scruggs Law Firm (son Zach and Sidney Backstrom) were indicted by a federal grand jury in November on charges that they conspired with attorney Timothy Balducci and former state Auditor Steven Patterson to bribe a state judge.

The indictment claims they offered $40,000 to Lafayette County Circuit Court Judge Henry Lackey for a favorable ruling in a dispute over $26.5 million in attorneys fees earned when State Farm settled 640 cases last year.

Shortly after the indictment, Scruggs' firm left the SKG. He faces up to 75 years in prison and $1.5 million in fines. Balducci has already pleaded guilty and is cooperating with federal prosecutors.

In the McIntosh case, Scruggs filed a motion to intervene Dec. 27 with the intention of defending himself against an order that requires he be deposed.

Again central in State Farm's argument is the SKG's relationship with sisters Kerri Rigsby and Cori Rigsby Moran, just as it was in the Shows case.

State Farm reasoned that the SKG's decision to pay the Rigsbys $150,000 salaries as litigation consultants constitutes bribery. The Rigsby sisters copied 15,000 pages of State Farm confidential documents while working at E.A. Renfroe and Co. and turned them over to Scruggs, who then gave them the jobs. Kerri Rigsby testified that she only worked about five hours in a 20-day period in Nov. 2006.

Though the Rigsbys primarily dealt with Scruggs, State Farm said the group's other attorneys are liable as accessories.

"In addition to their own independent violations of the ethical rules, all of the SKG lawyers are subject to acessorial liability under (Modern Rules of Professional Conduct 5.1), which provides that '(a) lawyer shall be responsible for the another lawyer's violation of the rules of professional conduct if... the lawyer orders or, with knowledge of the specific conduct, ratifies the conduct involved,'" the memorandum says.

"Here, there is no question that the SKG ratified Scruggs' misfeasance when its members hired the Rigsbys to serve as litigation consultants and utilized the documents they stole from State Farm in the SKG cases."

Also mentioned is Brian Ford, a former engineer at Forensic Analysis and Engineering Corp. who performed the analysis of the McIntoshes' home.

Scruggs offered Ford indemnity, a $10,000 monthly retainer and a percentage of each settlement work for the SKG to become a "fact witness" and "consultant" on a case, State Farm alleges.

"By definition, Ford is a key material fact witness in this case," the motion says. "Nevertheless, the SKG has offered him vast sums of money to 'consult' for them."

Concerning Moore, the motion points out testimony from Deputy Insurance Commissioner David Lee Harrell. Harrell claimed Scruggs was planning on attacking insurance companies the same way he and Moore did tobacco companies, by turning their employees into insiders for their side.

"Although Moore is now representing Plaintiffs in this action, he had previously acted as an agent of Attorney General (Jim) Hood," the motion says.

"In particular, Harrell testified that he met with Moore and that Moore stated that 'he was helping Jim Hood with the Grand Jury process' which was investigating possible criminal charges against State Farm and its officers and employees.'

"When Harrell inquired further into whom Moore was representing, Moore stated that, 'he was serving as resolution counsel' and would be 'paid at the end of the day.'"

SKG attorney Derek Wyatt, the motion claims, repeatedly abused subpoena power. In another case, McFarland v. State Farm, the court agreed with State Farm's argument that Wyatt's subpoenaes were improperly issued and void.

Specifically, the motion mentions Forensic office manager, Nellie Williams. The SKG obtained her hard drive through a subpoena and found an instant message that said, ""State Farm would prefer that all reports make water the cause of destruction (then they don't have to pay) - they have been returning our wind cause reports and demanding another inspection as they don't agree with our findings."

"(W)hen Plaintiffs' counsel deposed Ms. Williams on December 14, 2006, Plaintiffs' counsel badgered and browbeat her to produce a multi-disk set of CDs even though privilege was asserted over some of their content," the motion says.

"Though Ms. Williams was, as Plaintiffs' counsel acknowledged, not represented by counsel in her first-ever deposition, Plaintiffs' counsel repeatedly and aggressively threatened her, and told her that she was 'in contempt' unless she immediately turned over those CDs in response to the subpoena."

It also contains an e-mail exchange between Wyatt and Forensic counsel Larry Canada concerning the e-mail:

"Next engaging in a game of 'hide and seek' when Plaintiffs' counsel suddenly sprang Forensic e-mails in a deposition in this case - e-mails that neither Forensic's counsel nor any other defense counsel had previously seen - Forensic's counsel asked Wyatt how he acquired them, but he refused to answer.

MR. CANADA: And you shouldn't have it [i.e., the e-mail] to begin with.
MR. WYATT: We shall see.
MR. CANADA: How did you get it?
MR. WYATT: We shall see.
MR. CANADA: How did you get it?"

Forensic reached a global settlement of Katrina cases in November.

The KLG filed an unopposed motion for extension of time to submit a reply in the Shows case. It is due by Jan. 17.

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