Attorney Richard “Dickie” Scruggs wore “two hats” as the employer and lawyer for two key witnesses in a Hurricane Katrina insurance case and can be questioned under oath by an insurance company’s attorneys, a federal judge ruled Wednesday.
U.S. District Judge L.T. Senter Jr. said Scruggs and his son and law partner, Zach, can be questioned about their handling of leaked documents in a case over damages to a home on the Mississippi coast.
Richard Scruggs is a wealthy plaintiffs lawyer who successfully used “whistleblowers,” or corporate insiders, to win billions in lawsuits from tobacco companies in the 1990s. The 1999 movie “The Insider” was based on that feat.
After Hurricane Katrina, Scruggs announced that sisters Cori and Kerri Rigsby, former employees of a State Farm contractor, were helping him build cases against insurance companies over their handling of storm claims. The sisters gave him thousands of internal State Farm records.
Scruggs hired the Rigsby sisters as consultants for $150,000 a year and served as their lawyer. State Farm wants to know more about those relationships.
“This is why the Scruggs’ depositions are appropriate to ferret through this forest of relationships, especially in terms of the timing of various conduct and activity,” Senter wrote in a three-page ruling.
John Keker, an attorney for Scruggs, did not respond to a call for comment.
State Farm spokesman Jonathan Freed said, “We wouldn’t have asked for the deposition in the first place if we didn’t think they are important to the case.”
Scruggs has said the leaked records proved that State Farm fraudulently denied the claim of policyholders Thomas and Pamela McIntosh, whose Biloxi home was destroyed by the storm on Aug. 29, 2005. Scruggs sued Bloomington, Ill.-based State Farm on the couple’s behalf.
The documents already have been the source of legal troubles for Richard Scruggs. When a judge in Alabama told him to return the records last year, he instead gave them to Mississippi Attorney General Jim Hood, who had launched a criminal investigation of State Farm.
U.S. District Judge William Acker in Alabama ruled that Scruggs willfully defied his court order and appointed special prosecutors to pursue contempt charges.
State Farm claims Hood improperly used the information from Scruggs to pressure the company to settle civil lawsuits. State Farm sued Hood, and a judge ordered the attorney general in November to temporarily halt his investigation of the company.
But the contempt case is not the worst of the Scruggses’ legal woes. They were indicted along with three associates on Nov. 28 and accused of conspiring to bribe a Mississippi judge in a case involving disputed fees from a mass settlement of hurricane cases.
Timothy Balducci pleaded guilty Dec. 4 to conspiracy in the bribery case and is helping investigators.
Also on Wednesday, lawyers for the McIntoshes asked Senter to bar State Farm from presenting any evidence at trial referring to the judicial bribery charges against Scruggs and his son, calling it “irrelevant and unfairly prejudicial.”
The couple’s attorneys also asked Senter to block jurors from hearing any testimony that Kerri Rigsby had romantic relationships with a State Farm employee and with a co-worker who also helped State Farm adjust Katrina claims.
Associated Press reporter Michael Kunzelman in New Orleans contributed to this report.
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