Jackson, Miss. Law Firm Sues Scruggs Katrina Group over Fee Dispute

A Jackson, Mississippi law firm has sued millionaire trial attorney Richard Scruggs for allegedly withholding money it claims it was owed for working on Hurricane Katrina insurance-related litigation.

The lawsuit was filed March 15 in Lafayette County Circuit Court by Grady F. Tollison Jr. on behalf of the Jones, Funderburg, Sessums, Peterson & Lee law firm in Jackson. No court date has been set for the lawsuit. Tollison has requested a jury trial.

“I can’t really add to (what’s in the lawsuit) other than I signed those pleadings and we have every reason to believe we can prove what is alleged,” Tollison said.

He said he plans to file an amended complaint this week with additional issues for the court to consider.

Scruggs is one of the nation’s wealthiest trial attorneys. In the late 1990s, his Mississippi-based firm earned nearly $1 billion in fees for his part in reaching a landmark $250 billion settlement with tobacco companies.

He used that windfall to finance lawsuits against insurance companies for denying thousands of policyholders’ claims after Katrina destroyed their homes.

Scruggs created a legal team, called the Scruggs Katrina Group, to represent the policyholders. SKG’s work led to a settlement with State Farm Fire & Casualty Co. that will earn the attorneys about $26 million.

Those legal fees are at the crux of the lawsuit.

“They’ve already received that money, none of which has gone to my clients,” Tollison said.

Scruggs said that lawyers’ disagreements over fees are ‘”unfortunate” but “not uncommon.”

“These things usually get worked out, and we expect that will happen in this case,” he added.

Also named as defendants in the lawsuit are other members of the SKG team.

The lawsuit, which gives only one side of the legal argument, alleges that senior partner John G. Jones and other members of the Jackson law firm deposed witnesses, handled briefs, filed motions and other tasks for Scruggs’ group.

Specifically, the lawsuit mentions Jones and his law firm’s work on a July 2006 lawsuit, filed by SKG on behalf of Pascagoula police officer Paul Leonard against Nationwide Mutual Insurance Co. over denial of Leonard’s claim. Jones participated in the questioning of witnesses in that lawsuit.

The lawsuit notes that the agreement with SKG did not specify a percentage of fees that each participating law firm would receive. The exception was a Ridgeland law firm that had agreed to finance part of the SKG joint venture.

The lawsuit alleges Scruggs and other conspired to “freeze out” the Jones firm and offered it a “ridiculously low figure” for its “substantial” work. Jones claimed his firm was offered a $1 million payment and was told it would get nothing from the legal fees to be paid by State Farm, according to the lawsuit.

Jones contends Scruggs declined to negotiate or enter into arbitration to settle the fees issue and kept Jones’ law firm out of any other lawsuits filed by SKG.

The Jones firm claims it is entitled to 20 percent of all past attorney fees collected by SKG and 20 percent of all future attorney fees SKG collects. The lawsuit also asks for unspecified punitive damages.

AP writers Michael Kunzelman in New Orleans and Chris Talbott in Jackson, Miss., contributed to this story.