Miss. AG settles lawsuit over failed beef plant

By Jessica M. Karmasek | Apr 20, 2012


JACKSON, Miss. (Legal Newsline) - Mississippi Attorney General Jim Hood announced earlier this week that his office has settled a lawsuit over the design and completion of a failed beef plant project.

The beef plant, located in Oakland in Yalobusha County, was scheduled to be completed April 1, 2004 but did not begin operations until about five months later.

From the first date of operations, the plant experienced significant mechanical problems, which resulted in a production rate well below the established "break even" point. The plant closed permanently on Nov. 29, 2004.

Frozen foods firm Windsor Quality Foods later bought the plant, and currently employes about 300 people.

The attorney general sued Facility Group, a Georgia-based architectural and engineering firm hired to oversee construction of the project, in 2007.

After two failed attempts at mediation, the State's case had been set for trial March 19.

However, Hood said Monday his office has recovered $3,965,000 for the State -- the maximum possible recovery available under Facility Group's errors and omissions policy for its numerous design and construction defects.

This was a $5 million diminishing policy that had already dropped to $3.9 million from the defendant's legal defense, including attorneys and expert fees, the attorney general explained.

"A settlement was in the State's best interest because the maximum recovery available would have continued to diminish while awaiting trial and likely appeal. Moreover, had the State been successful in proving the fraud claims against the cash-strapped individual owners of the company, the insurance company would have used its fraud exclusion clause to take the insurance policy money off of the table," Hood said in a statement.

The beef plant project listed a "guaranteed maximum price" of $43,395,134. Of this amount, Facility Group was paid its contractual maximum of $3,547,974 from the Land, Water and Timber Board and $3,021,418 from Mississippi Beef Processors for a total compensation of $6,569,392.

The State previously recovered $550,000 from a federal investigation, but only $250,000 came from Facility Group. The rest came from individual defendants Sean Carothers and Richard Hall.

Hood said the State received the full settlement check from Facility Group Monday.

He said $65,000 of the current settlement includes compensation to a subcontractor still unpaid by Facility Group. The rest will be deposited to the state's General Fund.

Jackson construction law firm Burr and Forman LLP, who agreed to handle the case in July 2007 on an hourly basis contingent upon the Legislature providing funding in a deficit appropriation each year, looks to collect more than $400,000 for its work on the case.

"The lawyers in our Civil Litigation Division, who are presently handling over 3,400 active cases, did not have construction law expertise or five years to litigate one case," Hood explained. "These 10 state lawyers primarily defend the State against short-notice emergency type actions, instead of filing suits where the State is a plaintiff.

"Since the case involved intricate issues of construction law, I tried to get the Land, Water and Timber Board to provide funding to hire an experienced construction law firm to prosecute this lawsuit, but the board refused. No law firm wanted to take the case on a straight contingency fee basis."

The attorney general said the lawyers agreed to an hourly fee that was about half of their normal hourly rate, resulting in a savings of about $460,000 to the State.

"I appreciate their service to the state for five years of complex construction litigation," Hood said.

The attorney general -- the only Democrat to hold a statewide elected office -- is currently under fire by Republican lawmakers for giving cases to outside lawyers on a contingency basis.

In response, they introduced House Bill 211 this legislative session, in hopes of limiting Hood's power to hire outside attorneys.

In particular, HB 211 allows state officials, agencies, boards, commissions, departments or institutions to hire their own outside attorneys over the state's top lawyer.

The measure also requires the attorney general or any other state official make public contracts with outside lawyers.

Also under HB 211, all outside legal contracts must be filed with a state board and any contracts for more than $100,000 must be approved by that board.

As of last week, the Senate amended and passed HB 211 with a vote of 35-17, returning the bill to the House for concurrence.

Hood argues that the House bill violates the Mississippi Constitution, which gives him the sole authority to speak in court with one voice on behalf of the State.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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