Scruggs files RICO claims against State Farm, others

Attorney Dickie Scruggs filed a lawsuit yesterday that revealed State Farm is deeply implicated in the cover-up of the true story of the assassination of President Kennedy, is responsible for high gas prices, possesses secret stockpiles of Ebola virus for use on policyholders and has been plotting a coup to overthrow the government of the United States in conjunction with Mississippi Insurance Commissioner George Dale. Oh, hang on a second, that isn’t what the lawsuit actually said. Instead, it  makes RICO claims against State Farm and other entities, including Scruggs nemesis E.A. Renfroe. About as far-fetched, but not the same thing.

For some reason Dale was not named as a defendant in the 103-page complaint, although as I read along I half expected to stumble upon some gratuitous allegation such as this: "Plaintiffs also hereby allege that Insurance Commissioner Dale can and should be evermore likened to a pig with lipstick,  said lipstick being applied in the first instance and at all subsequent times by his master and owner, State Farm."   

However, I never did find that in the complaint, despite abundant room to have fit it in. Here’s a pdf of the complaint for you to read for yourself, but it’s quite long, so let me summarize the key parts for you as follows: 

Blah blah blah RICO blah blah blah blah RICO blah blah blah, yadda yadda yadda, RICO blah blah blah RICO yadda yadda.

Entertaining legal theater? Yes.  Shrewd maneuver to turn attention from Judge Acker’s order referring Scruggs to the U.S. Attorney’s Office in Alabama for prosecution of criminal contempt? Perhaps.  Lawsuit with any chance of success? Nope. I’d give the odds on this suit resulting in a verdict against State Farm as somewhere in this range: between zero and not a chance in H-E-double hockey sticks. 

Now, Scruggs is a master of leverage, an unparalleled showman and an amazingly resourceful  lawyer who always has something up his sleeve. He reminds me of that scene in Beyond Thunderdome where they make Mel Gibson deposit his weapons in Bartertown, and he keeps pulling out a seemingly endless stream of pistols, derringers, knives, sawed-off shotguns and what have you.  This complaint, however, smacks of a Wag the Dog scenario — some trumped up malarkey to fool the gullible, the naive and those who are not really paying attention.

After State Farm on Tuesday filed its motion to disqualify Scruggs from the McIntosh case based on alleged ethical violations, I saw that Scruggs announced a press conference set for the next afternoon. I don’t know what I expected, but whatever it was, it wasn’t this.  I must say, I am more than a little disappointed. This complaint has the look of something that is more concerned with winning the news cycle than being credible, and has the smell of what some might say is fear.  It’s full of a bunch of retreads and rejects from other cases, including yet another appearance by those absurd engineering company e-mails that feature a guy who can’t read very well and who is clueless to the point of not understanding what sex "Ms." refers to.  Talk about putting lipstick on a pig.  A lot of the rest of this has been recycled too: Lecky King, Fifth Amendment, wind damage, bad faith, E.A. Renfroe, etc. etc. This is like coming to Thanksgiving dinner and finding a table full of leftovers: a couple spoonfulls of dried up green beans here, some milk past its expiration date there, some stuff over there that may have been potatoes at one time, some bread with the moldy parts torn off, a half-eaten burrito with bite marks on it. 

I know a little bit about RICO claims and the elements of RICO, have been involved in a few RICO cases, done some RICO briefing — not saying I’m the biggest authority in the world, I’m just saying. Like I know French well enough so that just because you say coup de grace and omelette du fromage doesn’t mean I’m going to believe you when you say you’re from Paris. OK, so let’s read this succinct observation about RICO claims by former U.S. district court judge Susan Getzendanner: 

The majority of civil RICO cases involve common place commercial controversies, the facts of which reveal an ordinary business relationship gone sour. These mercantile melees are recharacterized by resourceful attorneys to conform with the requirements of RICO: adding a few allegations of the use of the mails or wires in furtherance of a fraudulent scheme, describing how the mail or wire fraud offenses form a pattern, and explaining how the defendants conducted the affairs of an appropriate enterprise. Thus transmogrified, the ordinary state law fraud or contract action becomes a federal ‘racketeering’ case, threatening treble damages, costs, and attorney’s fees. Not only is this transformation unfair to the typical commercial defendant, but it also burdens the dockets of the federal courts and multiplies the legal costs for both sides in otherwise straightforward litigation.

Susan Getzendanner, Judicial "Pruning" of "Garden Variety Fraud" Civil RICO Cases Does Not Work: It’s Time for Congress to Act, 43 VAND L REV 673, 674 (April 1990).

A couple things you should know about a RICO claim. First, because a civil RICO claim has its origins in a federal criminal statute, the offenses alleged must be indictable as federal crimes. Second,  RICO does not concern businesses that commit bad acts against you, it concerns legitimate businesses infiltrated and controlled by criminal organizations that commit bad acts against you.  Therefore, you have to allege an actual organization or at least an association in fact that is outside the structures of the infiltrated businesses, and you also have to allege that the criminal conduct consists of something more than folks just doing their jobs for the infiltrated businesses — otherwise it is merely an allegation of garden variety fraud or even something less than that. Furthermore, the complaint must allege an extrinsic hierarchy that has a function and purpose beyond the commission of the alleged criminal acts.  I don’t see these elements, among others, satisfied in the complaint, leading me to conclude this thing might get flushed in part or in whole on a Rule 12(b)(6) motion.  There’s more that I could say, but you get the idea, this post is long enough.

By the by, here’s a National Underwriter story on developments with quotes from both sides. Here’s another from the Associated Press.

UPDATE: I noticed I originally said Monday was when State Farm filed its motion to disqualify, I’ve corrected it to read Tuesday.   One thing I miss about journalism: copy editors to fix stuff for you.  



Filed under Industry Developments

5 Responses to Scruggs files RICO claims against State Farm, others

  1. Hurricane Katrina litigation update

    As I mentioned to someone earlier today, writing about Hurricane Katrina litigation is my chocolate, I can’t stay away from it or get enough of it. Well, actually chocolate is my chocolate, but Katrina litigation is right up there with…

  2. Not all RICO civil lawsuits are frivolous. Sometimes, big companies, actually do very bad things and deserve to be punished for that conduct. There was a reason Congress decided to allow treble damages against these wrongdoers, and the courts’ attempts to limit civil RICO claims is not necessarily always a good thing.
    Jeanelle Lust

  3. Jeanelle, no doubt. I personally don’t recall offhand seeing any RICO claims that have had validity, but my memory may not be kicking in on this point. Mostly RICO appears to be a way to vastly multiply the difficulties of defending what is actually a breach of contract lawsuit. Others may, I realize, disagree, which is why they make vanilla AND chocolate.

  4. David
    We tried a RICO case to verdict in December 06 which is on appeal now. I can only tell you that the judge, the jury, my clients and my partner and I sure think its a good one. Hopefully the 8th Circuit will agree.
    Jeanelle Lust

  5. Texas Sweetheart

    State Farm has been committing crimes against insured for years. They have fraudulently increased premiums based on bogus information, have manipulated facts, etc. How ignorant of anyone to believe otherwise.
    I hope Scruggs wins this lawsuit. There’s good foundation for it.
    Incidentally, your comment for why he didn’t sue commissioner Dale, perhaps its because Dale has immunity under the law and the Supreme Court recently stated in Wilkie v. Robbins, et al., No. 06-219, Decided June 25, 2007. Basically, the court stated that if your the government, than you cannot be sued under RICO. It would be nice if you actually knew the law instead of pretending to know it.
    Ignorance is not bliss.