Katrina and Scruggs developments, January 24

A few things to catch up on that happened while I was out sick, a few new things.

— First, AG Jim Hood on Friday moved to dissolve the temporary restraining order State Farm obtained against him last year that prohibits him from continuing with his criminal investigation of the insurer.

Hood has been a prisoner of his office for months now, reduced to a sort of Capt. Queeg-like state, mumbling about going after makers of fake contact lenses while clacking ball bearings in his hand.  But apparently he’s decided on a jail break — he’s trying to bust right out of that injunction and get back to where he once belonged, when he was riding high with his confidential informant and the Rigsby sisters.  A real golden oldie, straight from the Nostalgia File.  I half expect to see Hood at a press conference dressed up as Elvis, playing Blue Hawaii on an 8-track player and holding a lighter aloft in tribute to better days gone by.     

I read the AG’s memorandum in support of his motion, and here’s what I don’t get: the point of the memo is that, under the Younger doctrine, federal courts should not restrain state prosecutions unless there is "great and immediate" irreparable injury beyond the normal injury from being prosecuted in good faith.  The AG tries to load up the description of the doctrine so that it sounds impossibly crazy that this standard could ever be met:

The ‘bad faith’ exception, is not merely a finding of bad faith, but rather bad faith joined with harassment, an absence of cause to prosecute, and great irreparable injury. (Memo, p. 7).

It’s not so crazy, though, that all those criteria might be fulfilled.  Aren’t they all just the same thing?  For example, if the Non-Prosecute Agreement Hood signed with State Farm is enforceable, and so far the judge has indicated it is, then there is an absence of cause to prosecute because Hood  contractually waived his right to do so.  Prosecuting someone in violation of an agreement not to prosecute might also be said to constitute harassment and bad faith, and if so, it would certainly also lead to great irreparable injury.  So I saw the brief kind of like someone who comes up to tell you some purportedly outrageous story about the antics of a neighbor, but the story doesn’t deliver the goods and you think to yourself, what’s the point of this and when will it stop?

The government’s January 16 subpoena to the Scruggs Law Firm in the criminal contempt prosecution in northern Alabama is something, isn’t it? The subpoena asks for:

  • All correspondence and e-mails from the firm to Jim Hood or his assistant, Courtney Schloemer, about the Renfroe v. Rigsby lawsuit, Judge Acker’s orders in the case, and the  claim file documents the sisters took.
  • Communications from the law firm to the U.S. Attorney’s Office for the Southern District of Mississippi about the same stuff, plus the False Claims Act "whistleblower" lawsuit called Ex rel. Rigsby (this is the one where the Rigsby sisters claim the right to some fantastic sum as a percentage of blowing the whistle on alleged insurance company fraud).  
  • Copies of all correspondence with the Rigsby sisters and their mother prior to February 2006, when the sisters claim they hired Scruggs as their lawyer for the "whistleblower" lawsuit, and copies of all contracts and agreements between the Rigsbys and Scruggs.
  • Telephone records of calls between the firm and Hood or Schloemer.

There’s a lot more, take a look at it.  Looks like prosecutors are thinking there are some inconsistencies in the version of events offered by Scruggs, Hood, the Rigsbys and others.  Interestingly, they want to further scrutinize Hood’s conversations with Scruggs after Acker ordered Scruggs to return the documents the Rigsby sisters took. Instead, Scruggs and Hood spoke and Scruggs wound up sending his copies to Hood in an attempt to fall under a "law enforcement" exception to Acker’s injunction. (Remember, Hood already had his own copies of the documents and didn’t need Scruggs’).  Here’s a copy of the government’s motion to compel the Scruggs Firm to comply with the subpoena. 

Scruggs’ attorneys yesterday filed a motion to strike the special prosecutors’ motion to compel.  Scruggs claims they have no authority to prosecute him for a variety of reasons that never have made much sense to me — you can read about them yourself in this copy of the motion to strike

— I’m sure I must have linked to this sometime over the last week, but just in case I didn’t, here’s the new scheduling order in USA v. Scruggs (Mississippi Version).  Significant dates include the new trial date of March 31, a March 17 deadline for plea agreements to be submitted, and a February 11 deadline for pre-trial motions. Not a whole lot of time for motion practice, especially considering how many irons Scruggs’ lawyers have in the fire.  Here’s a copy of the official trial notice.

— Now on the McIntosh v. State Farm case. My goodness, when I look at the docket of this case lately it looks like a pit full of snakes, there is some new and nasty motion nearly every day.  I guess I don’t have the energy to describe all these, other than to say if there is a Litigation Hell, this is  what it will look like.    

The case, in which State Farm is seeking to disqualify the remaining firms of the former Scruggs Katrina Group for alleged ethics violations, was going to come to trial February 25, until lawyers for the McIntoshes asked for a continuance.  Judge L.T. Senter Jr. granted the motion for a continuance last week in this order. Looks like the new trial date will be in July or August.

There is a lot of interesting stuff on the docket, one of which is this motion by the Rigsby sisters to quash State Farm’s subpoenas to Dickie and Zach Scruggs on the grounds the subpoenas will infringe on attorney-client communications.  I should also link to this response by Mike Moore, the former Mississippi AG, giving his perspective on his involvement in Katrina litigation, why he is not a member of the SKG and why he should not be disqualified.  A pretty good, lively narrative about his role and involvement with Hood and Scruggs, well worth a read.  It was followed the same day by Moore’s motion to withdraw.

— Lastly, for today, here’s a link to the Mississippi Bar’s latest on the allegations that Steve Patterson, indicted along with Dickie Scruggs, Tim Balducci and others, had been engaging in the unauthorized practice of law.   It’s got a very good timeline, except for one thing — it leaves out the date of the now famous Balducci "man crush" letter.  You want to keep the readers with you through the whole parade, you gotta throw ’em some candy once in a while. 



Filed under Industry Developments

16 Responses to Katrina and Scruggs developments, January 24

  1. Tim

    Rumors abound about developments today, we shall see.
    Of course everything Scruggs has touched now has a smell to it, which got me to wondering about a sweetheart deal with the MDA arising out of the same mess.
    You remember when Scruggs negotiated his big settlement with State Farm (the one the fee dispute arose from with Jones). He also negotiated with the State (Governor or AG’s office) that his clients did not have to pay back the MDA grants ($150,000.00) because the damages were not separated (complete poppycock) between damages to home and general damages. That’s potentially $150,000 x 640 claims = 96,000,000.00 of taxpayers money isn’t it.
    Many people had to pay back their grants. They were livid when the Scruggs deal was announced. Some wrote the Governor a letter but got no response.
    Anita Lee, July 24, 2007
    The Scruggs Katrina Group asked MDA for clarification regarding grant money after reaching a settlement agreement in late January for 640 State Farm Fire and Casualty Co. policyholders, attorney Zach Scruggs said.
    MDA published a change to the HUD-sponsored grant program in February without public comment or formal submission, the document says, because it was not a “substantial amendment.”
    “We have excellent news,” Scruggs announced Feb. 24 on the SKG Web site. “SKG clients who took part in the recent 640 settlement with State Farm are not required to repay money they received from the Mississippi Development Authority. This is in large part due to the efforts of Gov. Barbour’s office.”
    MDA’s executive director, Gray Swoope, had notified attorneys by letter a day earlier. “Because these settlements involve claims beyond structural damage and do not include a specific payment for structural damage … ” the letter said, “Your clients are not required to repay any of these funds to MDA.”
    This may be an interesting issue in light of the issues being raised and since Anita Lee raised the question last summer its certainly appropriate to raise it in light of the current developments

  2. Connor Cogswell

    Did you notice Michael Rasmussen signed the motion to compel as “Attorney for the defendant”?[!]

  3. WISam

    Welcome back! I love parades, and am thankful for the candy you are throwing! So many thoughts…I have been trying to keep up with info while you were under the weather, and have not been able to get the comprehensive coverage you provide. This was throwing the lifeline to a drowning person.
    Methinks Mr. Moore & Mr. Hood doth protest too much. Why would Moore put time and effort into outlining his ‘pro bono’ role and the myriad of reasons there is no conflict, and then withdraw. Also, there were too many things in his response that smelled just a little off.
    As to Hood, it almost seems his motion is a desperate tactic to get the attention off of his relationship to Scruggs et al, and his failure to take any action against any of them, and make him once more seem to be the crusader for the ‘little person’ against big, bad insurance.
    Again welcome back, you were missed whether it was for Scruggs Nation or other insurance issues. As others have posted, you are a wonderful writer…I too await the book.

  4. David Rossmiller

    Connor, I noticed the same thing, it’s on the pleading twice.

  5. Mississippian

    Oh dear God, Welcome Back! Its like there is air to breathe again!

  6. Dixie K. Blankley

    With a continuing prayer for your good health, your being back is like a drink of cool water to an old lady dying of thirst. Thank you for all the research you do and for keeping us so well informed in this critical matter.

  7. thanatos

    Tim, your comment about the MDA and the former Scruggs Katrina Group is wrong. Once the situation was brought to the attention of the MDA, it was clear that the subrogation agreement in the grant closing papers was untenable. The MDA was only subrogating against payments for structural damage. If parties agree to settle a claim for 100,000 and the settlement funds are specifically paid in consideration for dismissing all claims in the complaint, including breach of contract, negligence, bad faith denial of insurance claim, etc., how is one to allocate the amount payable for the structural damage, especially when policy limits don’t correlate to the amount of the settlement? Should the MDA simply have come up with an arbitrary figure and demanded that amount for structural damage?
    And by the way, the subrogation policy is a general policy. It was never limited to clients of the former Scruggs Katrina Group. You can look on the MDA website and see for yourself.

  8. msbarfly

    OMG..knew you’d come back, but WHOA, MOMMA! I shared your little goody bag with some of the girls in the steno pool over at the State Farm office, but didn’t get to unwrap your assorted of happy face packages. Aroma, however, suggested delightful delectables indeed! Snuck a glance at your take on a thing or two and, am I dreaming or what? Sounds like a certain legal document just made the case for the enemy (oops, i meant “party opposite.”) Reminds me how handy 2-3 extra sets of eyes can be before the send button gets whacked with finger swoll all up with testosterone. (A little brainstormin’ with the partner on things like ANALYSIS AND ARGUMENT helps from time to time, too.) In all fairness, much slack is being cut on the typos and things, what with a nasty eye infection goin’ round. Doctors over at the med school were at a loss until a local GP linked it to unusally heavy influx of fake contact lenses.

  9. Tim

    The burden should be on the policy holder to show what was what and not MDA or better yet the taxpayers, OR all of us who suffered should be treated the same exact way and not have to pay MDA back.

  10. msbarfly

    Rossmiller: Don’t waste your time reading the next bar release. That bunch wouldn’t recognize a sense of humor if it got starched in their stuffed shirts. Now, me — scrolled right through looking for the MAN CRUSH, then promptly hit the RETURN BUTTON.

  11. Danielle Black

    Welcome back! Everything you say makes perfect sense.Thank you for all of your hard work. Keep it up.

  12. Silas

    Thanatos if I understand your logic, since the recipients of the MDA grants and the SF settlement couldnt come up with a number of what was owed back to the US taxpayer, then NOTHING is owed right? That sounds like EXACTLY what SF did in denying the homeowners claims because no wind damage could be proved. You sound ‘sensitive’ to the people in this predicament so -surely- you arent saying that is ethical are you??? If you are, then you are merely another hipocrite.

  13. IFA

    None of my clients had to pay back the grant money. I had nothing to do with it MDA just decided they didnt want money back. Of course, when I confirmed the grant details I wrote letter to my Goula clients who had 150k or less on damages and gave them details on plan and advised in was in their best interest to take the free money and not litigate the matter as most had signifant evidence of some water damage in their homes. Of course, Dickie got them paid again so what do I know. With so much death and destruction and people ruined ….What the hell good for them I guess. Certainly, they are in State Farms league od lies, deceit, and profiteering.

  14. Mississippi AG Hood

    Our own David Rossmiller is being disrespectful again. Won’t someone make him stop?…

  15. Waverly223

    I read Mr. Moore’s document, and I don’t know what to call it. The captions are in the third person, as if it were a legal pleading, yet there is no law cited whatsoever. The text is all first person as in an affidavit, yet it is not submitted under oath.
    As far as the substance, it goes to great lengths to suggest that it was State Farm linking the criminal and civil cases. However, as I recall from those long-ago ethics courses, it is the threat of criminal sanctions raised in the context of a civil case which crosses the line, and it appears that Mr. Hood was the party bringing criminal charges against a party with whom he was litigating in civil court. Mr. Moore seems to confuse State Farm’s attempt to resolve a criminal threat which had already been raised, with the original threat itself. The two are far from equivalent.
    Hard to believe this guy was the chief legal officer for the state.


    There is no such ethics on an Attorney General. He can threaten civil, or criminal, or both as he sees fit. He can file a civil or criminal suit at the same time, just by citing different statutes. He is the chief law enforcement officer and legal officer of the state, not just another attorney, like you or me.