State Farm wants all former Scruggs Katrina Group attorneys off lawsuits

By John O'Brien | Dec 19, 2007

Don Barrett

GULFPORT, Miss. - State Farm Insurance Cos. feels it has brought its argument against the Katrina Litigation Group up to date and on Tuesday filed a motion to disqualify the group's firms from all Hurricane Katrina lawsuits.

The company is again trying to prevent several prominent Mississippi firms from representing policyholders who claim State Farm intentionally miscalculated the amount of wind damage (covered by the policies) and water damage (covered by a federal program) during the 2005 hurricane.

At the heart of the argument is the consulting jobs given to two former insurance claims-handlers who copied several thousand pages of State Farm documents and gave them to attorney Richard "Dickie" Scruggs, who formerly headed the group when it was called the "Scruggs Katrina Group."

He and two other members of the Scruggs Law Firm have since been indicted for allegedly attempting to bribe a state judge, causing the Scruggs Law Firm to drop all the Katrina cases it was handling.

That left the Barrett Law Firm, Nutt and McAlister and the Lovelace Law Firm to handle the remaining pending cases. State Farm says they shouldn't be allowed to do so.

"(T)he mere withdrawal of Scruggs and his law firm from the joint venture and the change of its name... does not absolve the SKG members of responsibility for the highly unethical acts that they have committed in conjunction with this case," wrote Oxford attorney Scot Spragins of Hickman, Goza and Spragins, local counsel for State Farm.

The motion was filed in Glenda Show's lawsuit against State Farm, presumably because it is one of the newer Katrina cases. The complaint was entered into U.S. District Court for the Southern District of Mississippi on June 20.

In an earlier attempt to disqualify the firms, District Judge L.T. Senter ruled that State Farm waited too long to ask.

"Neither Senter or the Fifth Circuit said the merits in the motion to disqualify were not correct," said David Rossmiller, an insurance attorney at Dunn Carney in Portland, Ore., who has been analyzing the Gulf Coast's insurance situation for Legal Newsline.

"To the contrary, in the opinion Judge Senter sounded like he was leaning toward finding merit to it."

Still, Senter said the case was too far along to disqualify the attorneys. Now, with the November indictment of Scruggs, his son Zach and coworker Sidney Backstrom, State Farm is trying again.

"It's somewhat the same, except it draws an analogy between the Scruggs indictment and the conduct of the group in general," Rossmiller said. "While it admits the indictment doesn't have anything to do with Katrina litigation, per se, it is saying that payment to material witnesses like the Rigsby sisters and negotiations with Brian Ford that could have resulted in payments are a form of bribery, actual illegal conduct."

State Farm reasons that the SKG's decision to pay Cori and Kerri Rigsby $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 Risbys 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 motion 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."

State Farm also claims Ford was paid "hefty sums" to perform consulting work for the SKG even though Ford, a former engineer at Forensic Analysis and Engineering Corp., was a material fact witness in another case.

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.

"(O)n June 25, 2007, (SKG attorney Derek) Wyatt again spoke to Ford, telling that while the SKG could not pay him as a 'fact witness,' it could pay him as a 'consultant,' ultimately prompting Ford to ask, 'Do I need to move assets?'" the motion says.

Rossmiller said the personal journal of Ford, entered as an exhibit by State Farm, must be a new piece of evidence and should help convince Judge William Barbour that the company's argument is more timely than the last.

"Many of these things were not known," Rossmiller said. "The point of this motion is to say they didn't wait too long or waive their objection to a lot of things they didn't know because they were prohibited from trying to find them out by the threat of a criminal investigation (from state Attorney General Jim Hood)."

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