Scruggs-Affiliated Mississippi Lawyers Barred from State Farm Katrina Cases

April 7, 2008

A group of Mississippi attorneys once affiliated with tort lawyer Richard “Dickie” Scruggs is barred from representing any policyholders in lawsuits against State Farm Fire and Casualty Co. over Hurricane Katrina damage, a federal judge ruled last week, citing ethical breaches.

U.S. District Judge L.T. Senter Jr., in Gulfport, Miss., also disqualified two key witnesses in the lawyers’ cases from testifying against State Farm or their former employer, a firm that helped the Bloomington, Ill.-based insurer adjust Katrina claims.

Senter’s April 4 rulings cited improper payments that Scruggs, who pleaded guilty last month to conspiring to bribe a judge, made to Cori and Kerri Rigsby.

Scruggs hired the Rigsby sisters as consultants and agreed to pay them $150,000 apiece after they gave him reams of internal State Farm records that they secretly copied while they were employed by E.A. Renfroe & Co., an Alabama-based firm that State Farm contracted.

Senter said there was no legitimate reason for those payments and that the sisters’ consulting work was a “sham.” Payments to non-expert witnesses are limited by law, Senter said.

“The payments Scruggs made to the Rigsby sisters bears no reasonable connection to any work they performed or to any expenses they incurred in testifying,” the judge wrote. “These payments were clearly improper.”

Scruggs withdrew from representing dozens if not hundreds of policyholders in cases against State Farm after he was indicted on judicial bribery charges in November 2007.

Members of the Scruggs Katrina Group formed a new legal team – the Katrina Litigation Group – to continue working on many of those cases.

However, Senter said all members of the original Scruggs Katrina Group are responsible for Scruggs’ breach of ethics because they were aware of the payments to the Rigsby sisters and did nothing to stop them.

Senter’s prohibition applies to lawyers from the Barrett Law Office, Nutt & McAlister, the Lovelace Law Firm and Hesse & Butterworth and also applies to any cases against Renfroe.

Senter’s order doesn’t specify how many policyholders are affected by his rulings, but he gave them at least 45 days to hire new lawyers or risk having their cases dismissed.

The judge also said the documents that the Rigsby sisters gave Scruggs can’t be used as evidence unless the plaintiffs lawyers can show they were obtained through “ordinary means of discovery.”

State Farm spokesman Phil Supple said the company is “very pleased” by Senter’s ruling.

“State Farm has always been interested in resolving these claims and has willingly participated in mediation, legal settlement negotiations and the (Mississippi Insurance Department) claim reevaluation program,” Supple said. “Judge Senter’s ruling today changes nothing – we are still willing to work with our customers to resolve our differences and move forward.”

Don Barrett, lead attorney for the Katrina Litigation Group, and a lawyer for the Rigsby sisters didn’t immediately return calls for comment Friday evening.

Scruggs, whose brother-in-law is former Sen. Trent Lott, R-Miss., made millions from asbestos and tobacco litigation. His work with a corporate whisteblower in the tobacco litigation was portrayed in the 1999 film “The Insider,” starring Al Pacino and Russell Crowe.

After suing State Farm for denying policyholders’ Katrina claims, Scruggs touted the Rigbsy sisters as whistleblowers and said they were helping him build cases against the insurer.

Scruggs pleaded guilty last month to conspiring to bribe Circuit Judge Henry Lackey for a favorable ruling in a dispute over $26.5 million in attorneys’ fees from a mass settlement of Katrina suits. He faces up to five years in prison and will lose his law license.

State Farm had accused Katrina Litigation Group lawyers of other ethical violations, such as using the threat of criminal prosecution by Mississippi’s attorney general to coerce State Farm into settling claims.

“While the other ethical misconduct alleged by State Farm and Renfroe are substantial, the payments to the Rigsby sisters are, in and of themselves, sufficient to warrant disqualification,” Senter wrote.

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