GULFPORT, Miss. - With every twist in the saga of high-profile trial lawyer Richard "Dickie" Scruggs, another turn is made in State Farm Insurance Cos.' attempt to disqualify his former partners from representing Hurricane Katrina victims.
E.A. Renfroe & Co., a co-defendant of State Farm's that teamed with the company after Katrina, alerted U.S. District Judge L.T. Senter Monday that all three members of the Scruggs Law Firm who were charged with bribing a state judge have admitted guilt, and that it should be held against the firms that made up the former Scruggs Katrina Group.
Scruggs, his son and law partner Zach and Sidney Backstrom all admitted to roles in offering $50,000 to Lafayette County Circuit Court Judge Henry Lackey in a dispute over at least $26.5 million in attorneys fees earned in Katrina settlements. That dispute, brought by former SKG member John Jones, is being presided over by Judge William Coleman now.
"Significantly, these latest ethical violations are not confined only to the Scruggses and Sidney Backstrom, but -- according to the judge in the Jones v. Scruggs lawsuit -- also implicate ethical wrongdoing by current members of the KLG," Renfroe's Notice of Supplemental Authority says.
"(Coleman)... has held that any unethical conduct by Scruggs or Backstrom may be imputed to all of the members of the SKG: 'The Court finds further that as to the conduct on the part of one or more of the defendants in this matter, the actions for one, if shown to have occurred in the furtherance of the joint venture, are the actions for all, and the Court may order sanctions accordingly.'"
Scruggs withdrew his Scruggs Law Firm from the SKG shortly after his November indictment. That left Nutt & McAlister of Ridgeland, Miss., Barrett Law Offices of Lexington, Miss., and Lovelace Law Firm of Destin, Fla. to represent more than 1,100 Mississippi residents, of whom more than 450 have cases against State Farm.
Renfroe attorney Joseph Walker argued that Nutt & McAlister should be held accountable for Scruggs' actions because it handled the finances. Nutt & McAlister largely funded the group with the agreement it would receive 35 percent of the attorneys fees.
"Pursuant to the SKG Joint Venture Agreement, any payment from the SKG's common fund, presumably including bribery payments, would have been approved by Nutt & McAlister..." Walker wrote.
Renfroe admitted that not much of its Motion to Disqualify relies on Scruggs' criminal case but thinks the outcome is still pertinent.
"The subject Motion to Disqualify is not about criminal responsibility for bribing a judge," Walker wrote. "Rather, the motion is about the ethical obligations of members of the SKG and the KLG.
"It is in that context that Renfroe believes that all of the relationships between the Scruggses, Backstrom and the current members of the KLG, as well as the various benefits and obligations attendant to those relationships, are relevant to its pending Motion to Disqualify."
Scruggs also faced criminal contempt charges in Alabama, but they were dismissed. The KLG filed its own Notice of Supplemental Authority earlier this month to let Senter know.
U.S. District Judge William Acker's Dec. 2006 order told Scruggs to return insurance documents obtained through a pair of employees at Renfroe, Kerri Rigsby and Cori Rigsby Moran. The sisters had been sued by Renfroe.
Instead, Scruggs gave them to Mississippi Attorney General Jim Hood, who had sued five insurance companies -- including State Farm -- over their handling of Katrina claims.
Acker recommended to U.S. Attorney Alice Martin that Scruggs be prosecuted for contempt, but she declined. Hood had written Martin, urging her not to file charges because Scruggs was acting as a confidential informant for his office. Acker then appointed three special prosecutors to file an indictment.
Judge C. Roger Vinson ruled that because Scruggs was not the Rigsbys' attorney-of-record on their case, the court had no jurisdiction over him. He added that a law enforcement exception in the order allowed Scruggs to give the documents to Hood.
State Farm and Renfroe had reasoned that Scruggs' decision to pay the Rigsby sisters $150,000 salaries for consulting work constituted bribery of a witness. It made the same argument about Brian Ford, an engineer who worked at Forensic Analysis and Engineering Corp.
In a reply to one of the KLG's arguments, State Farm in February said much of its case rests on the group's connection to another insider, Brian Ford.
Ford kept a journal that has been submitted as an exhibit. 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.