Scruggs Nation, April 5: the fall of the Scruggs Katrina Empire

Regarding yesterday’s news of the disqualification from Katrina cases of the Katrina Litigation Group, the entity derived from the former Scruggs Katrina Group and containing three of the original five firms, what will happen now?  It’s hard to overstate how big a development in Katrina litigation this is.  Remember as we discuss this ruling that, in addition to disqualifying the remaining KLG firms from Katrina litigation in the Southern District of Mississippi, he barred the Rigsby sisters as witnesses and also barred the use of the documents taken from State Farm.  A huge development.  

One thing we should expect is a motion in the False Claims Act case, Ex rel. Rigsby, which is also in the Southern District.  That motion, I would expect, would be to dismiss the case entirely, because it is founded on the stolen documents — in that the government has not intervened in the lawsuit, it is nothing more than an ordinary lawsuit, and the same arguments would apply to it as to the McIntosh case where Judge Senter issued the disqualification order.  If the Rigsby documents can’t be used in any of the KLG cases in the Southern District, why should they be able to be used in the False Claims Act case? 

The motion, I would guess, would have an alternative request that, if the case is not dismissed, the lawyers should be disqualified. The lawyers are not the KLG lawyers, but rather Chip Robertson, Mary Winter, Todd Graves and so forth, the same people who represented Zach Scruggs in the criminal charges against him.  You may remember that Kerri and Cori Rigsby have testified to meeting in a trailer in Pascagoula with those lawyers and Dickie Scruggs on March 11, 2006.  Here is a copy of Kerri Rigsby’s deposition from November 20, 2007, a deposition I have posted a number of times.  Read a few pages starting on page 21 of the transcript.  You will see that she acknowledges that she and Cori were both in the trailer around 2 p.m. that day, which is the time State Farm has determined, from a check of computer records, that Cori and/or Kerri began accessing from a laptop the claims files of policyholders, most of whom were clients of Scruggs, in virtually the same order they were listed on the McFarland complaint that incorporated the claims of a huge bunch of policyholders. By the way, here is a copy of Cori’s deposition from November 19, 2007, I’ve also posted this before. 

Now, given the constituency in the trailer, you can see some potential issues with this, can’t you? In that deposition, Sid Backstrom asserted attorney-client objections to almost all questions dealing with what happened in the trailer — although actions themselves are seldom protected communications.  Did the attorneys present look at some of the files online?  Let’s remember who some of the people in trailer were.  Chip Robertson, whose name appears as counsel of record on the False Claims Act complaint, was a former chief justice of the Missouri Supreme Court.  If Todd Graves, who also appears as counsel of record on the complaint, was the Todd in the trailer, he was at the time U.S. Attorney for the Western District of Missouri, and was until he left office on March 24, 2006.

We don’t know, from the depositions, exactly what if anything they did or exactly when they were present in the trailer.  But if they were, does it strike you as odd, to put it mildly, that they would have wanted to have anything to do with a covert operation where claims adjusters were acting as undercover agents to surreptitiously gain access to documents in this manner? Does not this scene — if in fact this is what happened — strike you as both ludicrous and spectacularly questionable? It’s hard to picture a more bizarre scene than high-powered lawyers meeting with two corporate spies in a trailer for these purposes.  And didn’t anyone pause to think that of course the access to the computer files left a record like footprints across a freshly painted floor?  I would have trouble believing any of this if it were not in the depositions, and if there were not other evidence that has been supplied in exhibits to filings in McIntosh and other cases.  You lawyers out there, ask yourself, would you have been found in a trailer with the Rigsby sisters the same day they — still employees of E.A. Renfroe in good stead and still active in Katrina adjusting and cases — were accessing claims files?  Does it seem to you OK to obtain documents for litigation in this manner? 

Why has it taken this long to get to this point? Litigation has rules.  What good are they if this is what happens?

Remember also the Scruggs RICO suit filed in June 2007. (See this post for a copy of the complaint). Will State Farm now move against this lawsuit?  It is founded in essence on these now- barred Rigsby documents, and in a series of bizarre developments and excesses throughout the Katrina Follies, this lawsuit stands out as almost freakishly excessive.  Only in the perfect storm of media pro-Scruggs rah-rah, unhealthy cooperation and assistance from state and federal prosecutors, and passivity on the part of the courts and legal community, could this lawsuit fail to be denounced roundly. If you read the post linked above in this paragraph, you will see that at the time I did denounce it with satire. I do not mean to give myself much credit or imply any great act of courage on my part by saying this, I say it only to point out the otherwise deafening silence that prevailed.  You may also wish to note this lawsuit was filed just after Scruggs was referred by Judge Acker for prosecution of alleged criminal contempt of court. (A charge that has since been dismissed).  If it has any merit than as a distraction and as leverage against State Farm, this has escaped my attention.

Remark upon where we are compared to one year ago.  At that time, I was writing that State Farm should not be sitting back and accepting these developments, but should instead pursue an aggressive counter-strategy.  I do not intend to imply that what happened later was as a result of what I said, merely that it was obvious to me as an observer that things were happening that were seriously wrong. Katrina litigation had become, as Scruggs said it would months earlier, not a legal battle but a political and public relations battle.  He said it himself in a recorded interview.  But courts are not an episode of Boston Legal, no one should be able to write a script where one side is given super powers and the other side has to walk around with lead weights. 

Some lawyers in Mississippi, and these would be people with no love for State Farm or insurance companies whatsoever, have said to me that this type of conduct — let’s call it Scruggsism — was an immense disservice to policyholders in the long run, an unwarranted seizing of the brand of policyholder litigation for Scruggs’ own purposes, and one which has cast disrepute on worthy claims and on honorable policyholder lawyers. And in this view, Scruggs is anathema because he turned State Farm into a sympathetic figure.  Maybe.  I neither praise nor denounce State Farm, I only hold a mirror up to nature, and describe what I see as best I can.  And what I see is a stunning turnaround in fortunes, brought about by Scruggs’ own excesses, that enabled a decisive counterattack, one that produced a complete rout. 

If I have time, I will comment more on the specifics of Judge Senter’s ruling yesterday.  For now, one should ask what is different about the circumstances now and when Judge Senter denied the previous State Farm motion for disqualification of Scruggs in September 2007?  Here is a copy of the original memorandum in support of the motion to disqualify, filed in June 2007.   You can compare it to the later memorandum, the successful one, filed on January 3, 2008.   And here is a copy of Renfroe’s memo in support, filed the next day.  

You can see from reading these memoranda that both times, State Farm based its motion for disqualification in part on the $150,000 annual payments to the Rigsby sisters for what Judge Senter said yesterday were "sham" consulting arrangements.  State Farm, both times, based its motion in part on Scruggs’ use of the sisters as agents to take documents through non-conventional means while they were working for State Farm.  So what is different? You will remember that the previous motion was denied not because it had no merit — Judge Senter specifically did not rule on that — but because State Farm had known of the conduct for more than a year before bringing its motion, thereby waiving its objections.  Yet the second motion, of course, was filed even later than one year after much of the conduct was known.

In his opinion from yesterday, Judge Senter cited the more recent depositions of Cori and Kerri Rigsby, and it is true that these depositions contained more answers, and showed such a stark picture of improper conduct that it could not be overlooked.  I said the same in this post from December 2007 on the need to re-evaluate the role of the Rigsby sisters.  See also this post from a few days earlier (look near the bottom).  Much of the conduct was not as fully known last September as it is now, and although Judge Senter did not say so, objections to the conduct should not be waived, because the conduct is an ongoing and continuing course of affairs.  In other words, it happens again all over again every day.  The post-September depositions of the Rigsbys, of Brian Ford, and of Lee Harrell, make this more apparent.   All of these things, and more, by the way, are posted on my blog.  If you play around with the search feature and are willing to invest some time, you will find a lot of stuff. 

Again, I give myself no credit for seeing these things as they were or for pointing them out.  Anyone else could have done the same.  My only question — why didn’t they, particularly the media?

Oh, I do have one other question.  Can we finally either drop the mandatory use of the word "whistleblower" before every mention of the Rigsby sisters, or place it in quotes, as I have long done?

UPDATE: I forgot one additional question.  How much longer is the investigation by the U.S. Attorney for the Southern District of Mississippi into allegations of insurer fraud in relation to pushing wind payments onto federal flood insurance, which has accounted for millions of dollars in taxpayer expenditures and which has produced no absolutely no results, going to continue? A new grand jury is going to be impaneled this coming week, and my understanding is the office intends to keep pursuing its elephantine investigation.  You’d think folks there were scared to pull the plug for fear of what some, like Trent Lott and Gene Taylor, would think, and out of fear over who will take the hit for a costly investigation with no results. 



Filed under Industry Developments

10 Responses to Scruggs Nation, April 5: the fall of the Scruggs Katrina Empire

  1. somslawyer

    Maybe you should do a global search and replace of “whistleblower” with “co-conspirator” everywhere it appears.

  2. wow

    The best post you’ve written! Thanks a lot for the hard work. It is amazing that the media, specifically those who tied themselves so closely to Mr. Scruggs et al have been silent.
    Motions to disqualify these others could very likely ensue if motions to dismiss are not granted.
    Thanks again Mr. Rossmiller. I hope you had a chance to have some sweet tea with Belle South while down south of the Mason-Dixon line. You yankee you.

  3. Nomiss

    As to your question of why no one else pointed out the way things were, particularly the media: As you’ve noted, Scruggs stated that the Katrina litigation would be as much a political and PR battle as well as a legal battle. Scruggs controlled the politics in Mississippi regarding the Katrina litigation, and he controlled the media with his PR campaign. As you know, often the politics and media are the same, and the media was trained to accept what Scruggs said without question.

  4. bothered

    Every lawyer ever associated with Scruggs in these cases and Scruggs himself is about to be hit with numerous lawsuits and bar complaints.

  5. brewski

    As i stated previously the powerful and connected such as a judge and senator received total policy limits for wind while water was the destructive force. Now the average person must go back to square one.We must have all of the settlement records unsealed to expose this unfair scam that benefits the few. UNSEAL THE RECORDS

  6. bothered

    If you know what the judge and the senator got from settlements with Nationwide, not State Farm, then why do you need the records unsealed. You got banned from folo for these unfounded off-the-subject remarks. David, take heed. Brewski misleads people to believe that State Farm ponied up on these settlements. The settlements were not with State Farm. The settlements were with Nationwide.

  7. M.Williams

    NOMISS, I guess there’s a reason that John Law began his career in Mississippi.
    MR.ROSSMILLER, I believe that since the Civil War, there’s only been one whistleblower, and that would be Daniel Ellsberg. Those quotes for Rigsbys were about as useful as the Enron girls, ya think?
    I look forward, NOMISS, to the unwinding political process. The formidable parts of the media have been run down, and I think there will invariably be a reasonable outcome. I hope so.

  8. Its hardly surprising the media barely gives this sort of thing much airtime, we all know that they dont like to publish anything too scathing as far as governmental criticism goes.
    Great post by the way, a really good insight into the whole debacle.


    Lott’s settlement was with State Farm. Judge Guirola had Nationwide.
    Does this mean the Louisiana qui tam case can now go forward? The Mississippi case was “small potatoes” compared to the Louisiana case. Even Judge Beer wondered why the US Attorney for the ED did not get involved.

  10. Judge Senter disqualifies Katrina lawyers, Rigsby sisters

    A fairly spectacular rebuke to the lawyers formerly allied with Dickie Scruggs in the hurricane litigation, as well as to the now-disgraced Scruggs himself: the judge has disqualified both the lawyers and the Rigsby sisters from participating in Katrin…