I did a triple take when I saw this news — State Farm has sued Jim Hood. Yes, that is correct. Hood has, depending on your point of view, been breathing down the neck of State Farm for improprieties in Katrina claims handling, or abusing the legal system with trumped up investigations to serve as campaign fodder. Hood has investigated State Farm, and he has sued State Farm too. Now State Farm is suing Hood. What’s next, will I find out State Farm is suing Dickie Scruggs? No, wait, they’re probably enjoying watching his criminal prosecution too much to worry about that. Maybe Scruggs will sue Hood for failure to protect his "confidential informant." Maybe Hood will hire some outside counsel who are also big campaign contributors and direct them, on behalf of Hood, to sue himself for doling out state legal contracts to campaign contributors.
Here’s an AP story by Mike Kunzelman on these unusual developments. Here’s an excerpt:
State Farm’s lawsuit claims Jim Hood reopened a criminal probe of the Bloomington, Ill.-based company and its employees "for the purpose of harassment" and to coerce the insurer into settling civil litigation spawned by the Aug. 29, 2005, hurricane.
State Farm says Hood agreed in January to end his office’s criminal probe as part of a settlement agreement that called for the company to reopen and possibly pay thousands of policyholder claims. The company also says it paid Hood’s office $5 million to cover the costs of his investigation.
The lawsuit is under 42 USC Section 1983, that old standby of Reconstruction that allows one to sue in federal courts those who deny federal civil rights under color of state law. State Farm is suing Hood for allegedly violating a Non-Prosecution Agreement of January 27, 2007, in which he agreed to end his criminal investigation into State Farm’s Katrina claims handling in exchange for a $5 million payment of investigatory costs. This agreement was part of a global settlement of insurance claims against State Farm involving the Scruggs Katrina Group and some 36,000 Mississippi policyholders, which was to culminate in certification of a class action and immediate settlement of the same. That class action certification and settlement, however, were shot down by Judge L.T. Senter Jr., who said there were issues with the commonality of claims in the putative class, and that procedural fairness of the settlement process was lacking.
After that civil settlement fell apart, various things happened: Dickie Scruggs got mad and begin filing additional cases against State Farm on behalf of policyholders, State Farm formed an agreement with Mississippi Insurance Commissioner George Dale to reevaluate the 36,000 claims anyway under a different process, and Hood sued State Farm for allegedly breaching the agreement, even though it was Senter who had stopped the settlement agreement from being carried out. Hood also began another criminal investigation of State Farm, causing a grand jury subpoena to be issued for numerous documents in connection with his stated belief that State Farm and other insurers improperly shifted payments for wind damage to federally backed flood insurance policies.
That brings us up to date, more or less. On September 13, State Farm filed a sealed lawsuit against Hood and moved for a temporary restraining order and a preliminary injunction stopping Hood from continuing his investigation, calling Hood’s continued prosecution "a bad faith act." Click here for a copy of the complaint in the lawsuit. Click here for a copy of State Farm’s memorandum supporting its motion for a TRO. This is quite an imaginative strategy — I was commenting to someone the other day that it is quite possible that, to one in Hood’s position, it appears that he has a free hand as a state official and cannot be touched by the federal courts. That same day, September 13, Hood was served with the summons for the complaint — you can bet he was other than a happy camper.
The next day, September 14, federal judge Keith Starrett granted the TRO, finding that State Farm had a likelihood of success on the merits of the lawsuit and faced a danger of irreparable harm that outweighed any threatened injury to Hood. Click here for a copy of Judge Starrett’s order. The injunction, per Judge Starrett’s order, was to expire September 29 unless extended.
State Farm filed an amended complaint on September 18. Click here for a copy. The complaint alleges Hood was violating State Farm’s First Amendment right of free speech by attempting to coerce settlements of civil litigation in which State Farm had meritorious defenses, that Hood used improper influence to try to coerce State Farm contractor E.A. Renfroe into dismissing litigation against the "whistleblower" Rigsby sisters (remember, that litigation is the one in which Hood and Scruggs allegedly spoke about circumventing federal judge William Acker’s injunction, and which resulted in the criminal prosecution of Scruggs), and that Hood has subjected State Farm to unreasonable searches and seizures in violation of the Fourth Amendment. Again, the complaint alleges that Hood is pursuing these actions "in bad faith and for the purpose of harassment."
Now, although this complaint is 25 pages long, I would highly recommend that you read it. It lays out an eye-popping litany of alleged abuses by Hood, working in conjunction with Scruggs for their mutual benefit. One of the most interesting threads in the complaint is that Hood allegedly used the "whistleblower" Rigsby sisters as stalking horses to wrongfully take State Farm claims documents from Renfroe, and that this constitutes an unreasonable search and seizure. This complaint also makes an explicit charge that Hood and Scruggs teamed up for improper purposes and that Hood crossed ethical lines by helping out Scruggs in civil litigation.
On September 19, State Farm moved to extend the TRO. Click here to read the supporting legal memorandum. State Farm also requested expedited discovery including depositions of Scruggs, Hood and Courtney Schloemer, one of Hood’s assistants who was involved in communications with Scruggs regarding Judge Acker’s injunction in the Rigsby-Renfroe litigation in Alabama.
On September 21, Hood filed a motion requesting Judge Starrett to recuse himself, on the grounds that he had had Katrina claims involving State Farm, his insurer. Click here to read the motion. Judge Starrett, to avoid even the impression of impropriety, on October 10 agreed and also transferred the case from Hattiesburg to Judge David Bramlette in Natchez. Read the judge’s order here.
Not surprisingly, with this large case pushed into his court, Judge Bramlette on October 16 extended the TRO to November 5. The case was assigned to Magistrate Judge Michael Parker, who issued this order November 2 directing Hood to appear personally on November 7 at the second day of hearings on State Farm’s request for a preliminary injunction. The first day of the hearing was apparently held November 1.
Here is a copy of Judge Parker’s November 2 order to unseal the case, citing the public’s interest in knowing what is going on here.
This all comes out shortly before Mississippi’s general election, in which Hood is standing for re-election against challenger Al Hopkins. What does it mean for Hood? In many quarters of the state, being sued by State Farm would be seen as a badge of honor. On the other hand, the lawsuit raises some compelling issues about Hood’s use of his office and especially his cooperation with Scruggs. Stay tuned for more developments.
UPDATE: I’m informed I had the location wrong for Judge Bramlette. He is not in Jackson, but rather in Natchez. I originally said Jackson and have made the correction above.