Category Archives: Industry Developments

Oregon Enacts Major Changes to Environmental Insurance Laws

Oregon insurance and environmental contamination law has undergone major and far-reaching changes in favor of policyholders and landowners with the enactment of Senate Bill 814. The bill went into effect on June 10, 2013 after it was signed by Governor Kitzhaber. The bill had overwhelming support from the Oregon Legislature. In fact, it  passed both chambers of the Oregon Legislature with only two votes against. Importantly, SB 814 applies not only to new environmental claims, but to existing and even past claims, as long as no final judgment was entered on the claim before the bill became law.

The key changes from the new law include:

  • It gives policyholders a right to sue insurers for bad faith and to collect up to three times the actual damages for a number of reasons, including failing to quickly investigate or pay a claim, wrongfully denying a claim, delaying payments for policyholders’ lawyers and environmental consultants, refusing to engage in nonbinding mediation and failing to pay interest on money the insurer owes. This is a dramatic change from previous Oregon law, which did not allow bad faith lawsuits against insurers except in very limited circumstances. The right to sue for bad faith is sure to tip the scales to policyholders in many disputes against insurers, as occurred in Washington when its bad faith laws were expanded several years ago.
  • Policyholders have the right to retain independent counsel at the insurer’s expense in almost all pollution cases. This overrides the provision found in virtually all liability insurance policies that allows insurers to appoint counsel of their choice, usually without consulting the policyholder. “Independent counsel” means policyholders get to chose their own attorneys and that those attorneys represent only the policyholders’ interests and are not controlled or directed by insurers. The new law does not completely strip insurers of input in the selection of counsel, and policyholders and their attorneys will still have a duty to cooperate with insurers, but the effect of this provision will be a wider range of attorneys available to policyholders and a significant increase in the rates attorneys charge insurers.
  •  Provisions in liability policies that bar coverage for pollution on the policyholder’s or landowner’s own property cannot be enforced if that pollution presents any possibility of damaging a neighbor’s property or the state’s waterways and underground water. This “owned property” exclusion is sometimes, but not always, stated as a reason insurers should not pay the entire cost of a clean-up. This part of the new law makes it clear that when the pollution could migrate and cause future damage to wetlands, waterways or neighbors, it is part of the damage that insurers must pay for.
  • Insurers cannot rely on so-called “anti-transfer” clauses to prevent policyholders from settling with claimants and assigning their rights under the policy. In years past, when an insurer refused to provide a paid defense to a policyholder who was sued, policyholder defendants who had limited resources frequently settled with plaintiffs in return for an agreed judgment and rights to sue the defendant’s insurer. This practice almost totally stopped, however, after a 2006 Oregon Supreme Court case said insurers could enforce provisions in policies that voided such transfers and that prevented plaintiffs from being able to sue insurers directly until they had obtained a judgment in court. The new law allows such settlements and assignments of policy rights, even where an insurer is actually providing a defense. This goes beyond the law in most states that allow such assignments – those states usually say the insurer must have first breached the contract by wrongfully failing to provide a defense.

The new law is the latest amendment to several existing Oregon statutes known as the Oregon Environmental Cleanup Assistance Act – Oregon Revised Statutes 465.475 to 465.480. The previous provisions relating to insurance coverage were enacted in 1999 and were much more limited. Because the new law applies mostly to insurance policies that are 30 to 50 years old or more, many anticipate that the law will be challenged as an unconstitutional retroactive impairment of existing contracts. Both the United States and Oregon constitutions contain prohibitions on legislative modification of existing contractual obligations. These constitutional provisions were enacted due to the experience of the fledgling United States under the Articles of Confederation that preceded the national constitution. Under the Articles of Confederation, state governments frequently favored debtors by passing laws that voided contracts after the creditor had performed under the contract.

The proponents of SB 814 said that the bill is constitutional because  it does not take away all value of the insurance policies from insurers, the public policy behind the law is more important than the rights being taken away, and  insurance is a highly regulated field where insurers expect significant oversight and involvement by state regulators and legislators.

Proponents also say the law’s “savings clause” makes it constitutional. That clause says that any part of the law that conflicts with “the intent of the parties” is void. This language, proponents claim, “saves” the law from being unconstitutional because it can never truly bar enforcement of the sections of an insurance contract discussed above if it is clear that the insurance company and the policyholder agreed on the meaning of terms and conditions in the policy. However, insurance policies are standard form contracts where insurers and policyholders seldom negotiate over what is in the policy and what it means. This leads to frequent disputes between insurers and policyholders, and requires courts to interpret what the policy’s terms mean. When Oregon’s Supreme Court says what certain language in a policy means, that settles the issue for others who have exactly the same dispute, because insurance law is governed by state rather than federal law, and the Oregon Supreme Court is the final arbitor of state law. But few disputes are exactly the same as the one in a particular court case, insurance policies and language change over time and often change from insurance company to insurance company. Small changes in language, or the addition of new sections of the policy, mean a court might make a different decision in another case.

Insurers are certain to challenge the new law on many different grounds, but it remains the law until a court rules otherwise. If the new law stands, it will fundamentally alter the relationship of insurers and policyholders for many environmental claims. Remember, however, that the new law applies only to environmental cleanup cases, and not to any other kind of liability claims. 

This is a brief overview of the portions of the new law that will most directly affect policyholders and landowners. The law contains other provisions that will also be significant in many cases, but many of these are more complicated and won’t go into all of them here. Here is a link to the press release from the Oregon Legislature on this new law. The press release is not within its particular spin, of course. 

I testified about this bill in the Oregon House and have analyzed its provisions pretty carefully. This is a very, very significant change for Oregon, a state that essentially had no bad faith law (except for excess verdicts) and where the tripartite relationship has long reigned. It won’t be long before we see this bill come up in environmental matters across the state, and I suspect the boundaries of what environmental contamination consists of will also be tested.  If anyone has any questions about the bill and its effects, feel free to contact me.  


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The Gods of the Copybook Headings

Book Review: The Fall of the House of Zeus: The Rise and Ruin of America’s Most Powerful Trial Lawyer, by Curtis Wilkie

As I mentioned in my review of another book about ScruggsKings of Tort , I’m going to read and review this book as well. But I get bored doing things the same old way, and so I’m going to try something new: live blogging a book. As I read along in the book I’ll make observations and comments on the pages I’ve read, and bump this post up to the top of the blog with new updates. 

I’ve stayed away from reading other reviews of this book to try to come at it uninfluenced by the opinions of others, although of course some people have expressed orally or in email some of their general opinions, favorable and unfavorable. 

Notes on the title, preface and first few pages of Chapter One    

Fall of the House of Zeus? Right, I know, Dickie Scruggs was called Zeus in college because of his amazingness, or some such. I thought the book’s title might be ironic, but after reading this far, I’m guessing it’s not. Right before the preface, there is a quote from The Iliad about Zeus the cloud-gatherer laying on invincible hands, and his queen being afraid, and the rest of the gods being troubled in the House of Zeus. Now, Zeus wasn’t above engaging in a few capers himself and shared much of the cupidity and caprice of humans, but with about a billion times more power. So it’s not as if Scruggs is being promoted as a candidate to expand the Holy Trinity to a foursome.  Still, I’m getting a strong vibe here that the Zeus metaphor isn’t contrapuntal. 

The preface, in fact, sets out on a pro-Scruggs track that suggests a title for the Latin edition of this book might be Summa Apologia Scruggsicum.  Or possibly a sequel to Milton’s Paradise Lost, where the author this time "attempts to justify the ways of Scruggs to men." Whereas, the whole Scruggs saga suggests to me a different sets of gods: the Gods of the Copybook Headings versus the Gods of the Market Place.  Indeed, I think the Gods of the Copybook Headings were decidedly unamused with Scruggs. 

The preface sets out a world in which little people are in essence yoked up to pull sledges while top-hatted swells with Mr. Peanut monocles and walking sticks crack whips on their backs, and it is necessary for trial lawyers to graciously step up and do their stuff to stop the victimization because of a "vacuum created by a lack of government regulation."  Why, if only government were larger, more intrusive and more intent on controlling every facet of life, then it would be unnecessary for folks like Scruggs to bring down Big Tobacco. Except that he didn’t. All Scruggs and others, including Congress, did was to give the tobacco cartel an iron grip on the market by creating barriers to entrance, and in return the tobacco companies forked over protection money to trial lawyers and set up slush funds for use by state politicians. All of which they get back through customers in cooperation with those wondrous government regulators. Meet the new boss, same as the old boss; four legs good, two legs better, and all that. Scruggs as the best friend of the helots since the great liberator, Epaminondas, is a bit hard to read without tasting a little bit of throw-up in the back of your mouth.

That taste grows stronger at the end of the preface with this passage that describes a conversation between the author and Scruggs (I haven’t mentioned yet that Wilkie is an unabashed friend of Scruggs):

As I was leaving the room where we met, he folded his hands and asked, "When all this is over, are you going to be able to tell me how I got mixed up with these guys?"  

I have tried.

Excuse me? How did Scruggs get mixed up with all these bad boys? Let me check the title of the book again. Oh yeah, Rise and Ruin of America’s Most Powerful Trial Lawyer. I thought we were talking about Zeus here. Just a few pages earlier, didn’t it say this: "Scruggs first drew blood from the asbestos industry and then brought Big Tobacco to its knees . . . . he was locked in an epic struggle with his most formidable opponent to date — the American insurance industry . . . ."   

Um, how come one minute he’s the most powerful trial lawyer in the country and is up on Olympus kickin’ some tobacco, asbestos and insurance a$$, but then the next minute he’s a victim? Isn’t the better question how "those guys" got mixed up with him? Now, let me make a guess here — we’re going to hear some Poorer-Than-Thou talk. That is, we’re going to read a fair amount about Scruggs’ being poor when he was a kid and consequently he overcompensated about money and control and winning at all costs. With the point being the same one as in the great line in West Side Story: "Hey, I’m depraved on account I’m deprived!" If so, try and sell that to Officer Krupke because I’m not buying. 

OK, we’re off to an inauspicious and ill-omened start. I hope I’m wrong about what else the book is going to say — or leave out. But I bet I ain’t. 



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WSJ editorial: With email revelations, it’s another wonderful day in the neighborHood

Another great editorial from the Wall Street Journal, which long ago saw that Dickie Scruggs and Jim Hood, despite claiming to be clothed with righteousness, were walking around with no pants.  The backdrop of this opinion piece is the cache of emails that came from a document subpoena by State Farm in Ex rel. Rigsby, the False Claims Act lawsuit that was supposed to be the centerpiece of the Scruggsification of Katrina litigation, applying that special mix of Scruggs’ secret sauce: "whistleblowers, "  folks making off with "insider" documents, add some sweet potatoes, stew it all up with mighty blasts of hot air and do a little home cookin’ in your friendly local magic jurisdiction.   

Before I talk about the WSJ piece and those emails a little more, I want to point something out about this Rigsby lawsuit.  This is the one most people call the Qui Tam, but I don’t, because that sounds like some kind of toenail fungus,  so I prefer to call it by its given name.  The sand ran out in the timer on the Rigsbys’ 15 minutes of fame some time ago, and I feel sorry for them that they invested all their capital in shares of Scruggs, Inc. right before the doors got padlocked.  Somehow they became convinced that wearing a gasoline suit and playing with matches was a great idea.  It’s sad, really.  What I want to point out is this — after the emails became public, and after I wrote about them here, I looked up the ruling by the federal judge in the District of Columbia that resulted in the Rendon Group being forced to give the emails to State Farm. 

About three years ago I wrote a chapter in the Appleman on Insurance Practice Guide (shameless plug) about the attorney-client and work product privileges and so I like to think my knowledge in this area of the law is somewhat above average.  I was thinking, why weren’t these emails, or at least some of them, protected as work product or by the attorney-client privilege?  Not saying they would have been, but I wasn’t clear as to why not.  

Now, before continuing, let’s take a pause and put a section here that is just for the people who aren’t die-hard, shrieking, soccer-hooligan-like fanatics of this saga.  These folks, whom we will henceforth refer to as "normal people," might find useful an overview of this, just of whiff of Secret Sauce.  If so, the judge in D.C. gave a pretty good summary here, and after this brief intermission we will return to our regularly scheduled programming:

The complicated story begins with the Rigsby sisters, who, while working as claims adjusters for E. A. Renfroe & Company, a contractor for State Farm Mutual Insurance Company (“State Farm”), found information that they claim showed that StateFarm was defrauding the United States in the manner in which it was processing the claims that the insureds were making for damage to their homes and businesses caused by Hurricane Katrina. Several law firms in Mississippi then began to investigate and prosecute claims by those insureds against State Farm. The Rigsby sisters also brought a qui tam action against State Farm in Mississippi. The law firms in Mississippi hired The Rendon Group, Inc. (“TRG”), a Washington D.C.-based public relations firm, which apparently had the obligation to create a favorable public atmosphere for the lawsuits that the Scruggs Law Firm, P.A. (“Scruggs”) and other law firms who were bringing or going to bring in relation to Hurricane Katrina. The atmosphere became a lot less favorable to the Rigsbys and the law firms when an Alabama court was convinced that the Rigsby sisters had illegally taken from State Farm the documents upon which the law firms were predicating their claims against State Farm. Additionally, there was an apparent public disclosure that the Rigsby sisters had accepted a large amount of money from Scruggs for their services as plaintiffs. To make it all the more interesting, Richard “Dickie” Scruggs, the head of Scruggs, has since gone to jail for bribing a judge in what I can only hope is an unrelated matter. The Scruggs law firm has since dissolved.

That’s the judge’s summary of what all the hoo-ha is with the Rigsbys.  Now, more about the privilege issue.  When I read the judge’s decision, it was not what I thought I would see.  I thought somehow the privilege of the Rigsbys might have been waived by being disclosed to outsiders, or some such.  But no.  In fact, the Rigsbys’ own lawyers couldn’t assert privilege because they couldn’t review the documents that arguably were subject to privilege for fear of being tainted and disqualified by the same mess that got their previous lawyers disqualified. That’s what it’s come to, folks.  This Scruggs-Katrina thing started out as a blitzkrieg of armored columns and right now it looks about like Jed Clampett,  Granny, Elly May and Jethro driving up the street in their truck. Here’s a pdf of the ruling so you can see for yourself.   

The Rendon Group, the public relations firm Scruggs hired to stage manage what was to be his latest triumphant business venture, tried to step in and assert privilege, but that’s about like you taking advice from your mother-in-law during a fight with your spouse, it’s not going to happen.  The Rendon Group had no standing  —  they had no basis to assert attorney-client privilege because they never had an  attorney-client relationship with anyone.

All right, so that’s enough about the Rigsbys for now. We set out to talk about that WSJ editorial, so let’s do that for a while.  

The editorial mentions, in recounting how Mississippi Attorney General Jim Hood worked with Scruggs and other trial lawyers to come up with a Kobayashi Maru scenario for insurance companies in the state, how Hood had denied to the WSJ that he ever colluded with Scruggs.  Of course, there were some prior indications that other Hood’s denial was subject to potential other interpretations  But then those Rendon emails came out and Whoops!  Hood, and a number of other people, must feel like someone walking down the hospital hallway with one of those surgical gowns that has no back to it.  Turns out Scruggs’ own PR firm, Rendon, worked on "cleaning up" Hood’s prose for a letter he wrote to be published in the Journal.  Ouch.  Is that the best they could do?

You know, the judge in D.C. ordered the release of only part of what State Farm asked for in the subpoena to Rendon, and he may change his mind and order Rendon to give up more.  The Ex rel. Rigsby trial is set for December, let’s hope there is some reason the rest of these emails will come out.   If this fragment holds this much treasure, imagine the untapped riches in the rest.  Plus, these emails are some of the most hilarious material in the whole Katrina Follies.  I mean, it was obvious the master plan went drastically awry and that things got FUBAR’d up beyond all repair, but I had no idea this gang was so inept.  Some of these people, they should have been wearing floppy shoes, baggy pants and curly orange wigs, and walking around beeping each other’s red noses. 

Also, thanks to the Journal for the kind words about me —  "did the nation a service."  That is high praise indeed.  I know I was read throughout the Scruggs Nation, which is a subset of the actual nation consisting of various folks whose minds are inexorably wrapped around this story, including Scruggs skeptics and opponents, lawyers and others who know Scruggs or know of him, people in Mississippi and the South, folks involved in Katrina litigation, various Scruggsites and Hoodian sycophants who love to hate on me, and so forth.  But it’s nice of them to give me an upgrade, as it were, to the nation as a whole.  I certainly felt the whole Katrina story was not only fascinating but important enough for me to give up not only all my free time but a lot of sleep for a couple years.  Plus, let’s face it, it’s pure comedy gold. 

UPDATED: After I hit the publish key, I thought, I hope someone doesn’t take the last sentence wrong.  There certainly was nothing funy about the hurricane or the destruction it brought.  By the Katrina Follies, I refer only to the goofballery that characterized so many revolutions of the Scruggs-Hood axis.  That’s where I walked onto the scene. 



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Scruggs Nation: the Secret Lives of PR Flacks

After a year’s hiatus, I’ve been looking for the right time to start blogging again.  This is that time. The sun, which never sets on the Scruggs Nation, shines ever so brightly once again.

I mean, I can’t pass up a moment like this one, where there is a golden cache of emails out there in the public record, a used-to-be secret hoard of communications between the inner Scruggs circle and the PR firm that was supposed to stage manage his triumph in Hurricane Katrina litigation.  What could go wrong with that plan?

I apologize in advance to readers who are not well-versed in Scruggsmania, or those who have forgotten some of the names or sequence of events. In this post, I won’t have the time to give a total recap and will have to assume that the reader has a background in what I’m talking about.

These emails are attached to this post at the Y’all Politics blog, and yesterday blog proprietor Alan Lange called me and said they were a must-read.  Here’s a link directly to the emails. Alan said these were required reading particularly since a fair number of these emails are about me and my Scruggsblogging.  Well, I read every single one of them and my reaction is . . . what’s the word I’m looking for here? Yowza! Crikey! Or maybe even Holy Cow!  

With this new information coming to light, I might have to re-evaluate. I thought at the time this was a pretty sophisticated bunch, the Scruggs PR operation, but these emails make me wonder.  Look, I’m not naive about PR people — as a rule, to their clients’ faces they are utter, shameless sycophants that would make Toadie from the Road Warrior look like Winston Churchill in comparison, but behind their clients’ backs they snark on them mercilessly, Joan Rivers style. So you expect to see some stuff like that in emails, particularly when they have to deal with a rather challenging bunch like the Scruggs gang.  But I was surprised to see Dickie dissed, and my oh my but the Rigsby sisters get less respect than Eleanor Rigby.

And I do think that at the beginning of Katrina litigation the PR people in conjunction with Scruggs did a really nice job of managing the news cycle.  And I have to say that when I read things such as chief Scruggs PR flack Ainsley Perrien calling me "irresponsible and offensive," that’s OK. I mean, what else is she supposed to say to her clients? It’s a tough job she had.  I’m sure in person she is a perfectly pleasant professional and I wish instead of kvetching about me and assuming I was some hireling living off State Farm’s payroll she would have called me up to give me her point of view, and if she asked I would have been happy to tell her why I was doing what I was doing: I found the Katrina story to be fascinating human drama and it became a hobby to blog about it. It was just a pure accident.  And I could have told her that all these hilariously Inspector-Clouseau-like schemes revealed in the emails that were supposed to silence or counter my blogging wouldn’t have any effect, but I certainly would have listened to and valued her perspective if offered in good faith.  How does the maxim go? "A man convinced against his will is of the same opinion still." 

Some of these schemes are: (and to be fair, not all of these were hatched or necessarily endorsed by Perrien, some of them came from Zach Scruggs or the Scruggs(less) Katrina Group)

  • Serving a subpoena duces tecum for my "blog records" aimed at finding out who my sources were and intimidating people, which they refer to as "snitches" or "squirrels,"  from communicating with me.
  • Creating astroturfed, fake blogs that would be pro-Scruggs and/or attack me.
  • Submitting a ton of fake, astroturfed pro-Scruggs comments to my posts.
  • Investigating me in an attempt to dig up dirt and/or expose me as a complete idiot or paid lackey of the ruling class.
  • Complaining to media reporters who interviewed me and quoted me.

In my view, these are are all foolish and ineffectual ideas.  Let’s explore the reasons:

  • I would have quashed a subpoena as harassing and irrelevant to any case in which it was issued,. To be valid, the subpoena would have had to issue under the authority of the U.S. District Court for the District of Oregon, and so I would have fought it in Portland. I also would have used Oregon’s media shield law to keep from revealing any sources — I was a newspaper reporter back in the day, and bloggers are every bit as much journalists as print and broadcast media. 
  • I guess one man’s "snitch" is another man’s "whistleblower," eh? And vice versa. For folks who were so involved in promoting the "whistleblower" Rigsby sisters, you would think they would get the nomenclature right.
  • Almost all my information came from public records like court filings so the sources were pretty obvious.
  • You can fake all the astroturf blogs you want, but since it was a pure accident I happened along at the time I did, I couldn’t be replicated or reverse engineered. 
  • Swarms of pro-Scruggs comments under the posts, written by some rent-a-mob? How pathetic is that?  You think I don’t know who writes those comments? I saw very few of these kind of comments, in any event.
  • I guess they didn’t find the dirt. Whew!!
  • As someone who worked for a metropolitan daily newspaper for eight years, I can state with great certainty that telling media people whom they should talk to is a good way to make yourself look weak, weasely and untrustworthy, and goes a long way toward totally discrediting yourself. 
  • The internet is a marketplace. People read what they want to read. Good and entertaining posts are in demand, mindless shilling and hack writing are not.

In many ways, this is stuff lawyers and professional PR people should know.  It’s kind of odd that they didn’t, don’t you think? They didn’t know what to make of blogging, like it was a completely alien life form. It’s kind of like when the Aztecs first saw Cortes and his crew on horses, they couldn’t figure out what they were looking at.

Let’s look at a few of the things these people said:

  • Page 238 of the pdf, a July 29, 2007 email from Zach Scruggs to Ainsley Perrien. "What do you think about setting up someone to blog against him directly, refuting statements he makes. I will write the blog if someone else can actually do it. I don’t want to do it directly because it drags me down to his level, but it should be done."  I have always liked Zach Scruggs, I wish he had only sunk as far down as my level.
  • Check out page 337, a heated email from Zach to Perrien dated November 12, 2007, where he says "we need someone else (a lawyer) who dedicates his life to attacking Rossmiller’s blogs on us," and demands that Perrien come up with a concrete plan to stem a flow of bad publicity from a variety of sources that is "making us look like criminals."  Remind me, how did that plan work out?
  • Look at page 240, Perrien’s response to Zach. She talks about chewing out the Associated Press reporter who interviewed me, bemoans the fact that Zach won’t blog and talks about putting another blogger on the Scruggs Katrina Group website that is "very aggressive like rossmiller w our side of the story. We could do that today."  She had to know it wasn’t that easy. I mean, she had to, right, she was just shining him on? If wishes were horses, beggars would ride.
  • Same email, she says to Zach: "We were just meeting Friday and Saturday over the rossmiller blogger issue and decided to implement our own person to go after him. Once ap started quoting him I hit the roof." Come on, two days of meetings about me? I don’t believe that for a second. This is all a pose, this roof-hitting. And who is this person they implemented to go after me? Whoever it was, someone forgot to tell me, I never noticed and apparently neither did anyone else. In any event, this plan either never materialized, was attempted but FUBARed up beyond all repair, or happened but failed in spectacular New Cokeian fashion. 
  • Page 350 has another November 12 email from Zach to Perrien. I really like this one, Zach is a good writer, if he had blogged more like this it would have been something to behold.  The email is a long rant about how unqualified I am and yet the media is giving me all kinds of credibility, and then there is this great line: "Other than staying at a Holiday Inn Express last night he has no basis to be able to opine on any of this stuff . . . . EXPOSE HIM!"   One reason I like this so much is about four months before this email was written I was back in the small town in North Dakota where I grew up at a school reunion and a girl I went to high school with introduced me to her husband. She mentioned I was a lawyer and he said, "Yeah, and you stayed at a Holiday Inn Express last night too." He thought we were putting him on, didn’t believe I was really a lawyer, I mean, it’s natural, not that many lawyers from a small town, right? It was a pretty good laugh. I guess he expected that lawyers wear a suit at all times.
  • Page 375 has a January 3, 2008 email from Perrien to someone whose name is not familiar to me (maybe he stayed at a Holiday Inn Express the previous night). Speaking of me, she says, "FYI — this is the blogger that is driving us nuts."  She talks about training some blogger who was going to take me on.  In one of the earlier emails, there was some reference to "Anna Marie" and "Cottonmouth," whom I take it were in some way being encouraged to indulge in pro-Scruggsianism and possibly take me on. If I ever knew, I no longer remember who these people are.  Can anyone help me out?
  • Starting on page 378, there is a lot of interesting stuff, from February 2008 and there is an entire post I wrote about Mississippi AG Jim Hood testifying in court.  This was my favorite post evah and I see it drove the Scruggs Katrina Group, to quote Ainsley Perrien, "nuts." I know these are just private musings and people under pressure blowing off steam, so I don’t take it personally or that seriously, what they are saying.  These things they are talking about like "pop[ping] this jerk w a subpoena," subpoenaing my "ass" to see who was paying for my "poison," delving into my firm’s internal records, shutting down my "ass" and my "little snitches" too. Page 397 contains a plan that was ill-thought-out and I’m sure after emotions cooled the author realized its flaws.
  • Page 405 has a great email from Perrien to the Scruggs Katrina Group people, it’s part of the same thread. This is a classic instance of someone trying to act like they are going along with some kids who are going to TP the teacher’s house or Dippity Doo his car door handles while actually saying stuff that will tend to get them to think twice about it.  This email is so great the only way it could be any better is if it was covered in chocolate. Remember now, Ainsley Perrien has been in the PR business for decades, deals with the media all the time, and she says goofy stuff like "would it be a freedom of speech issue? Would he try to take that stance? I don’t think there is a lot of precedence on this.  Going into unchartered territory can be time consuming.  On the other hand we need to show our teeth.  This would certainly get coverage and raise the issue of how bloggers impact litigation. They are not journalists and can’t be protected as such, I would think, given the obvious bias."
  • Wow! She is totally putting these guys on, right? I mean, this is a seasoned professional, she knows you don’t need a little "press" tag in your hat or a government-issued badge to be a journalist, right?  She knows that opinion columnists write obviously biased pieces and that they are protected just the same as the "neutral" people, correct? She’s aware of the First Amendment, state media shield laws, anti-SLAPP suit laws, not to mention the fact that she thoroughly researched me and knew I know media law very well and am also a litigation lawyer by trade, right? And she knew this would have been a total fiasco and about the last thing this bunch needed at the time, right? I mean, secretly she is thinking, this gang doesn’t need to be taking anyone on, they need to be running for the tall grass, isn’t she?  In reading through these 400-plus pages of emails, I really liked this lady, I’m sure she knows what she is doing.  Like when she asks whether they are going to serve me with a subpoena when I arrived in Mississippi for the Mississippi State Insurance Day forum, that was only to point out how stupid it would have been and how I would have stood on that stage where I spoke waving that subpoena, and how they would have been the laughingstock of the (Scruggs) nation. I like how at the end, right after giving this half-hearted line about how they should call her if she can be any help putting the flaming bag of dog poop on the teacher’s porch, she pretends to be one of the cool kids by adding, "Rossmiller is irresponsible and offensive to me." Well played, Ainsley!
  • Page 425 has this great plaintive all-caps wail type of thing going on, and page 428 more fantasizing about subpoenaing my "blog records," whatever that is. 
  • Page 434 has about the first sensible thing I read in these emails, it says "Be prepared for him to come at us with both barrels if we do that.  Those guys are dangerous and we might be walking into a lion’s den." To which I say, Amen! You don’t know the half of it, brother.
  • Page 438 has this thing from lawyer Don Barrett that says "We must be very careful here," and essentially shuts down Operation Ass Subpoena. 
  • However, page 442 has some more foolishness about how some guy they were training up was going to go after me on some blog, some guy named Norm.  Whoever this was, I’m sorry, but I don’t remember this happening. If you actually went after me, Norm, no offense intended by not remembering.
  • Near the end of the emails, Perrien asks someone, in response to a post I wrote about the Trailer Lawyers, "What are the Trailer Lawyers?" (This, by the way, was after I had been to Mississippi, where I noticed my ass was not served with a subpoena while there).  This sudden lack of enthusiasm for the fight, this lack of attention to detail, disappoints me.  Ainsley, my friend, it is not "what," but "who," for the Trailer Lawyers you know well by their given names, but the names the rest of us know them by are these: Trailer Chip and Trailer Tony, Trailer Todd and Trailer Mary.  It says so right here.  And, Ainsley Perrien, let’s close this post with this requiem that brought me great sadness to write, for with this the Trailer Lawyers slowly pulled their double-wide off into the sunset. Sing it with me, to the tune of Don McLean’s American Pie:  (I admit it needs updating, it was written two years ago).

Bye bye Trailer Lawyer pie,

Drove my trailer to the courthouse but the judge said bye bye

Them Snake Farm boys was laughing while we cried

Singing this will be the day your case dies,

This will be the day your case dies. 

Now for five months, we’ve been on our own

Since Scruggs got knocked off his lawyer throne.

But that’s not how it used to be.

When the Rigsbys sang for ABC,

With some quotes they borrowed from Dickie,

And some files that came from piracy.

And as we reached the motion stage, 

My hands were clenched in fists of rage,

No story we could tell,

Could break that Snake Farm spell.

And as our briefs climbed higher in the fight,  

We just couldn’t seem to get it right, 

I saw bloggers laughing with delight,

The day the Qui Tam died.

And they were singing,

Bye bye Trailer Lawyer pie,

Drove my trailer to the courthouse but the judge said bye bye

Them Snake Farm boys was laughing while we cried

Singing this will be the day your case dies,

This will be the day your case dies. 





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Rigsby update: forgotten but not gone

For those who remember the heady Katrina litigation days of the Ride of the Rigsbys — appearing on ABC’s 20/20, acclaimed as alleged whistleblowers — these times are very different for the sisters. They’ve slipped in the celebrity rankings to a most unenviable category: forgotten but not gone.  The inevitable next stage?  Jointly occupying a corner box in the New, New Hollywood Squares, I suppose, hosted by John McEnroe or some such.

Contestant: I’ll take the Rigsby Sisters for the block.

McEnroe: Kerri and Cori Rigsby. What famous tourist attraction features more than 200 kinds of reptiles?

Rigsby Sisters: Snake Farm!!

Contestant: I’m going to disagree.

McEnroe: The correct answer is the San Diego Zoo. Circle gets the square.  By the way, Rigsby Sisters, you’ve answered either "Snake Farm" or "State Fraud" to every question this week. 

I saw this Anita Lee story in the Sun Herald about the latest on the Rigsbys.  The case brought against them by E.A. Renfroe, a State Farm contractor who did claims adjusting for the insurer during Katrina, a case in which they were utterly routed, is nearing final settlement.  Have I gotten totally out of touch, or are the names under the Rigsbys’ pictures reversed in the story? Not Anita’s fault, someone else other than the reporter does that kind of stuff at a newspaper.  You know your status is in free fall when they put someone else’s name under your picture.  In a month or two, folks won’t even get the Rigsby part right, the cutline under the picture will have the name of some other former celebrity of yesteryear, like, say, Gary Coleman of Diff’rent Strokes

The story has some pdf’s of stuff to do with the winding up of the Renfroe v. Rigsby case in Alabama federal court and an interesting filing from a few days ago in the False Claims Act case, Ex rel. Rigsby, in federal court in Mississippi, which to me appears to be tottering like a 90-year-old guy without his walker. Here’s that pdf.  Looks like more of the same old to me, the usual blah blah about the Brian Ford engineering reports on the McIntosh property and so forth.  You may remember these reports from the unusual detail that the first one attributed all the damage to wind, and strangely enough, Kerri Rigsby herself later wound up greenlighting the flood payment to the McIntoshes.  So there would seem to be some inconsistency there. As Gary Coleman might say, "What you talkin’ ’bout, Rigsbys?"

The filing seems to be a plea to be allowed to engage in discovery before a May 20 hearing on this case before Judge L.T. Senter Jr., and Judge Senter has already said this won’t happen — the basis for the case is supposed to be first-hand knowledge of the massive fraud the Rigsbys allege.  If you read the document, you can see the first-hand knowledge is pretty thin, just a couple of anecdotes. Didn’t see anything in there about Kerri Rigsby approving the flood payment, maybe that will be covered in the next brief. Or maybe the brief will say Gary Coleman approved the flood payment.

All right, so that’s it for this post, except for one more thing.  Let’s finish it off with the newest song I’ve added to my work-in-progress musical, The Katrina Follies.  This song, Don’t Ignore Rigsbys, as I posted about two days ago, appears in the second act, and is sung by the actors portraying Dickie Scruggs and Mississippi AG Jim Hood, to the tune of the Beatles’ Eleanor Rigby.

Ah, look at those two whistleblowers

Ah, look at those two whistleblowers

Don’t ignore Rigsbys

Picked out the fraud from the files where Snake Farm had it hid

That’s what they did

Met in a trailer, accessed computers and lawyers were there

Just ’cause they dared

All the whistleblowers, where do they all come from?

All the whistleblowers, where do they all belong?



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Insurance Person of the Year

Nothing like giving the readers a lot of advance notice before an ultra-high stakes award like this is finalized, right? I’m a bit tardy on this, but hey, it’s not like I’m on the advisory board of the Insurance Law Center and might have been expected to post on this more than a day before the contest ends . . . oh yeah, I am. 

Well, in any event, here is a link to the ILC’s Insurance Person of the Year voting, with four big categories: policyholder lawyers, regulators, judges and insurer-side lawyers.  In the last category, I’m surprised no one nominated Dickie Scruggs — he almost did more for State Farm and other insurers, in the long run, than they did for themselves. 

(By the way, I’m almost done writing my musical, The Katrina Follies. Here’s one of the latest songs I’ve written, Don’t Ignore Rigsbys, which is sung to the tune of the Beatles’ Eleanor RigbyThis song comes in early in the second act, sung by the actors portraying Dickie Scruggs and Mississippi AG Jim Hood). 

Ah, look at those two whistleblowers

Ah, look at those two whistleblowers

Don’t ignore Rigsbys

Picked out the fraud from the files where Snake Farm had it hid

That’s what they did

Met in a trailer, accessed computers and lawyers were there

Just ’cause they dared

All the whistleblowers, where do they all come from?

All the whistleblowers, where do they all belong?

Anyway, check out the link, if you care to.  You too can vote for your favorite!  As long as it’s one of the finalists listed.  A veritable Insurance People’s Choice Award.  And don’t worry, you’ve got . . . well, almost two whole days left, until March 18, to get your vote or comment in.




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Kodrin Katrina case: Fifth Circuit vacates punitive damage award against State Farm, upholds verdict of wind damage

Kodrin v. State Farm is one of the Katrina cases, which I wrote about previously here and here.  It was different from many Katrina cases in that, at least as far as what was presented to the jury, there was nothing to sort out about wind vs. water and what damage had been caused by each.  So this is not one of the cases where anti-concurrent cause language became an issue — although as I repeatedly talk about, under the facts of Katrina damage, anti-concurrent cause language should never have been an issue, because the facts of Katrina damage do not support analysis of the damage as caused by concurrent causes. 

I never get tired of saying this: I will be saying it in my speeches at the PLRB conference in Seattle later this month, and I probably will still be saying it when I am a little old man sitting in a rocker in front of the TV complaining about how the neighbor kids are so loud I can’t hear my programs and by the way, why doesn’t the milk wagon come anymore? No set of facts I have looked at — and I have looked at a lot of them — shows that any Katrina damage was caused by anything other than single forces working independently.  A lot of you may have heard this before, so you can skip the rant and jump down to a further discussion of Kodrin, but I think it bears repeating because this point is so easily lost in time.  Homeowners policies insure against damage to property, property has various elements.  Unless multiple concurrent forces cause the same damage to the same element of property, that is, unless they worked together to cause that result and unless it would not have occurred except for the combination, concurrent causes were not at work.

Kodrin is the ultimate in single causation questions: that’s all the jury heard, a dichotomy between the Kodrins’ claim that wind alone destroyed their house, and State Farm’s claim that flood alone destroyed their house.  This may sound like a strange set-up to you, until you look at the facts of the case: the whole neighborhood was hit by Katrina flooding, which washed the rest of the houses off their foundations and kind of pooled them in one location.  These homes, although severely damaged, were not utterly torn down and demolished.  The Kodrins’ home, among all of them, was the only one obliterated. 

This led them to,  as the Fifth Circuit put it in their opinion from a few days ago, "speculate" that a tornado destroyed the house.  Their claim was belied by their acceptance of the policy limits of their flood insurance.  I don’t say this to be a smart alec, but rather because I wonder about this flood payment in Kodrin and a number of other instances: did they give the flood money back or did they keep it? I ask this because the choice before the jury was all wind or all flood, and the jury found all wind. So what happened to the federal flood money?   

The jury, as the first link above shows, felt the Kodrins had been treated unfairly and awarded them the maximum amount under the policy plus punitive damages under Louisiana law.   I’m not sure if I’m adding it up correctly, but it looks like the punitive damages were about $135,000, plus about another $140,000 in statutory attorney fees and costs, not a huge amount in the scheme of things, but the precedent was important to State Farm, I imagine. 

The challenge to the verdict on the damage itself, as opposed to the punitive damage portion, was a steep climb uphill — you have to show that the jury instructions were wrong and prejudicial, and stuff of that ilk.  Most of the time such challenges don’t succeed, and this one was no different.  Even though it wasn’t necessary for the court to parse out causes — because whether you believed it was wind or water that caused the damage, it was presented to the jury as an instance of single force causation — I was pleased to see the Fifth Circuit panel recognized that merely because flood destroys a house does not mean that covered wind damage didn’t previously occur.  This is the example they used, in footnote 15 on page 7:

It is important to distinguish between this dispute over which force totally destroyed a home and cases in which the parties disagree as to the causes of various damaged elements of a home. Distinct elements of damage would have to be considered separately. Flood damaged carpets, for example, would not bar recovery for a wind-damaged roof.

Now, this gives me some hope that this panel gets it when it comes to an understanding of the proper analysis to differentiate between single and multiple force damage: first determine what the loss is.  The example used, flooded carpets and wind-damaged roof, was a fairly common scenario in Katrina damage, but it really doesn’t present any analytical problems, only problems of proof.  The real test of understanding is the realization that the carpet itself, or the roof itself, could be damaged by two single forces that caused separate damage, one covered and one uncovered, and that this does not make them concurrent forces. 

A house is not a unitary phenomenon of property, it has constituent elements that themselves are property.  Constituent elements such as carpet, likewise, are not monolithic, but have various degrees of worth as property — merely because wind tears some pages out of a book does not make the book worthless, although its value might be lessened considerably.  There is still some value there when the book is destroyed by flood — the two forces worked separately to cause separate damage, and the damage from the first force still occurred and caused damage even though the second force would have taken all the value of the book away.  The key is would have: in the hypothetical I pose, that is not actually what happened, and so would have doesn’t matter.  However, as I said, it wasn’t necessary for the Fifth Circuit to consider that issue this time, and so they didn’t, and this is just as well, because explanations from the Fifth Circuit of Katrina causation analysis usually haven’t been that great.

Although the court left standing the jury verdict on property damage, it vacated the award of punitive damages.  The court said, in light of the evidence, there could be an honest dispute about what caused the damage to the Kodrin home.  Again here, I don’t know what happened with the flood payment, whether that was returned or not, or the precise circumstances under which it was applied for, paid and accepted, but the very fact of a flood payment creates an idea in my mind that there could be an honest belief that flood caused the damage. 

Here’s what  the court said about bad faith, when it exists and when it doesn’t: 

State Farm declared that it determined flooding was the more likely cause of the damage to the home because (1) the Kodrins’ neighborhood was inundated when a levee was overtopped during Hurricane Katrina, (2) the Kodrins’ home was just one house away from that levee, and (3) many other houses in the area were lifted off their foundations and destroyed by the floodwaters. The Kodrins themselves acknowledged that their claimed wind damage to their home was unusual in their neighborhood, advancing that a tornado must have caused the damage as their speculation why their home was the only one in the area destroyed by wind, not flooding. On these facts, we perceive no probative evidence that State Farm acted in bad faith. State Farm’s refusal to pay was with reason, even if the jury ultimately rejected that reason. The Kodrins have failed to prove otherwise; they essentially ask this court to find bad faith any time an insurer denies coverage and a jury disagrees. This would unduly pressure insurers to pay out claims that they have reason to believe lie outside the scope of coverage, solely to avoid penalties later. Such a rule would pervert the presumption that insurers act in good faith unless the insured proves bad faith, and this is foreclosed by Louisiana law.




Filed under First Party Insurance, Industry Developments

Scruggs Nation: Zach is back . . . to the halfway house

The Scruggs Nation has a fever, and the only prescription is more Scruggs. Well, OK, this news story is not about Dickie Scruggs, it’s about Zach Scruggs, not the same, I know, but it will have to do.  Seems like whatever happened with his reporting from prison to the halfway house, it’s not going to be a big deal.  

He was arrested in Oxford, Mississippi, after allegedly reporting late to the halfway house.  His lawyers say he was 15 minutes early instead, so there’s a discrepancy.  According to the story:

The Bureau of Prisons initiated an investigation after people reported seeing Zach Scruggs around Oxford on Feb. 24, the day he was to report to Tupelo. His wife, Amy, had picked him up at the federal prison, and they stopped and had lunch on the Square.

The Bureau of Prisons investigated what route Scruggs took from the prison as well as what he did while on the trip.

If he wasn’t late, it really doesn’t matter what route he took or what he did while on the trip, I would think. Well, anyway, who’s to say?  The world may never know.  The story says he was released from the Lafayette County jail on Monday and is now at the halfway house. 




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Abracadabra: anti-concurrent cause and the search for ‘illusory’ insurance coverage

I was looking through my Bloglines feedreader last night under my folder labeled "anti-concurrent cause," and saw this really good post from the Slabbed blog.   This is a fascinating discussion not only of Katrina damage, but of the theory of illusory insurance coverage.  It’s old, now, the post, from the nostalgia file, but it is still worth talking about.  

Now, as many of you know, in the course of my work I represent both policyholders and insurance companies, so I really don’t have a dog in the fight (apologies to Michael Vick, I know the metaphor might be a touchy subject), and I have no particular ideology when it comes to insurance.  I like insurance theory because it, in many ways, is like Plato’s Allegory of the Cave, in his Republic: it is merely a metaphor for the human condition and the limits not only of attempts to order and describe human behavior according to the logos — rational principles in harmony with the universe  — but also of the limits of human understanding.  The concept of causation, of which anti-concurrent cause theory is a part, and of ‘illusory’ coverage are just some of the shadows on Plato’s cave wall. 

I’m sure that if you go looking for illusory coverage you can find or think of some examples, but as it is discussed in most case law, illusory coverage seems to me a particularly hard-to-pin-down shadow on the wall.  In some ways, the theory of illusory coverage is itself illusory, in other words, and I have great confidence that whatever it is and wherever it is, it is not found in anti-concurrent cause language in insurance policies, at least the way I explain anti-concurrent cause.  So I can’t agree with the premise presented, both by the author, nowdoucit, and quoted material from policyholder lawyer Chip Merlin, that anti-concurrent cause language is in any way ambiguous or illusory. 

The key to what I am saying here is that anti-concurrent cause is merely a causation analysis that is present in the contract and overturns the common law default analysis of efficient proximate cause, and another key is the realization that insurance policy language is full of special definitions and terms of art that are not necessarily the same as English.  This fact of life is because insurance policy drafters attempt to respond, in addition to the changes in the nature and amount of losses, to court decisions.  I don’t see anti-concurrent cause as actually removing any coverage from a policy, but even if it did, this is not a startling idea — exclusions do the same.  A causation analysis just defines the relationship between forces and coverage, it just tells how to apply the language and terms of the policy.   Anti-concurrent cause analysis may take some work to understand, but at it’s heart, it exists to keep uncovered damage from being covered, not the other way around.  Once you accept that, and it is difficult for many to accept, it is a direct route to realizing that the words "concurrently or in sequence," as found in anti-concurrent cause clauses, are words that are not nearly as expansive as might be imagined on first blush, but instead are pretty limited in application. 

I could go on and on about this — I have before and I will again.  I’m going to be speaking about Katrina damage, wind vs. water (in the Vegas line wind is currently a two-touchdown favorite for coverage) and anti-concurrent cause theory and application in Seattle later this month at the PLRB conference.  For reasons I don’t fully understand, I am actually speaking twice, they tell me, on March 24 and 26, I think are the dates.  If you’re there, come to one of the speeches and we can talk about these shadows on the cave wall. 



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End days for False Claims Act case alleging massive insurer fraud?

You might recall that one of the central talking points by certain people during the heyday of Katrina litigation was this: insurance companies committed massive fraud on policyholders and federal taxpayers by overstating flood damage that would be paid, up to $250,000, by federal flood policies, and understating wind damage that would be paid from the insurers’ own pockets.

To me this point was like one of those tiny cars in the circus where, paradoxically, a large number of clowns keep coming out of it.  As we’ve since learned, this strategy of claiming this type of fraud was arrived on just after Katrina happened, long before claims had even been adjusted.  Among the chief proponents of this view were, of course, Mississippi AG Jim Hood and his confidential informant, Dickie Scruggs.  They, of course, had their hallelujah chorus of such as U.S. Rep. Gene Taylor, Sen. Trent Lott and many others, all singing the Katrina Fraud Theme Song (which is sung to the tune of The Beatles’ Hello Goodbye):    

You say flood, I say wind

I say fraud, and you just grinned, grinned, grinned

Oh no! You say let’s steal, and I say get real

Let’s steal/get real

I don’t know why you say let’s steal, I say get real

Despite Congressional hearings and other such massive wastes of taxpayer money — hearings that included an assortment of dingbats and moonbats, not the least of which were some of the people on the Congressional committees themselves —  nothing came of all this Wagnerian screeching.  

Now, it has always seemed pretty clear to me that this strategy of claiming fraud on the nation’s taxpayers was simply a way to try to nationalize Katrina issues and put added pressure on insurers to pay more.  One of the legal offensives that supposedly would vindicate these accusations was a False Claims Act case filed by Dickie Scruggs and his "insiders," the Rigsby sisters.  You can ponder the words "False Claims Act" and decide for yourself what the false claims are in connection with this lawsuit: the insurers’ conduct or the allegations themselves. 

This case is the one that people who deal with these Katrina cases all the time refer to as "the Qui Tam," which in Latin of course means "Who’s Your Daddy?" I prefer to call it the False Claims Act case, because I hate to be ruled by the dead hand of Latin, or if I must use Latin, I call it by its name, Ex rel. Rigsby,  which sounds like a great name for a race horse.  This case, you may remember, featured secret meetings in beach trailers to access State Farm files from laptops, it featured the Trailer Lawyers — Trailer Chip and Trailer Tony, Trailer Todd and Trailer Mary — and it featured the flood payment in the McIntosh case, and for the quiz, all you really need to remember about that payment is this: Kerri Rigsby herself approved the flood payment. You heard that right. The only specific example cited in the lawsuit of fraudulent conduct is one where the supposedly fraudulent payment happened because of one of the plaintiffs, or as they call them in this type of lawsuit, "relators." Try to "relate" that fact to the overall allegations: Kerri Rigsby approved the federal flood payment to the McIntoshes.    

I was looking at the docket of this case, and there was an order by Judge L.T. Senter Jr. in mid-February, and here it is. This is a fascinating order, typically brief, well-written and to the point,  which to me appears a clear indication Senter may be getting ready to pull the chain on this thing. Here is what I saw as a key part of the opinion:

In their Amended Complaint, Relators identify two and only two specific instances in which they allege the submission of false flood damage claims: the McIntosh property situated at 2558 South Shore Drive, Biloxi, Mississippi; and the Mullins property situated at 6057 Pine Tree Drive, Kiln, Mississippi. The defendants assert that the Mullins property was not covered by a SFIP and that the SFIP payments made on the McIntosh property were fully justified in light of the flood damage there. McIntosh collected the statutory maximum SFIP coverage on his property, and the individual who supervised and approved this payment was one of the Relators.

My review of the material from the McIntosh case discloses that the McIntosh home was inundated with approximately six feet of water. The house was not reduced to a shell or left as a foundation only by the storm, so there was physical evidence from which the extent of flood damage could be reasonably estimated. Because this is a FCA case and because the McIntosh property is the only property covered by a SFIP and identified in the Amended Complaint, I believe it is appropriate to conduct a hearing on the pending motions to allow the parties to present evidence concerning the question whether the payment of the flood insurance limits in the McIntosh case was justified, as a matter of law.

The hearing will be equivalent to a summary judgment hearing, and the Rigsbys are not allowed to conduct discovery beforehand.  Instead, Judge Senter said he is interested to see what they know firsthand, because supposed firsthand knowledge of fraud by a whistleblower is at the root of False Claims Act lawsuits.   All in all, it looks like one of the last stars in the once glittering Scruggs/Katrina sky is ready to wink out. 



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