Scruggs Nation, Day 21: State Farm files motion to disqualify former Scruggs Katrina Group

State Farm has moved to disqualify the remaining law firms of the former Scruggs Katrina Group from a key Katrina case for alleged "numerous egregious ethical violations."  PACER reveals that the motion was filed yesterday in Glenda Shows v. State Farm, which is a RICO case the SKG filed against the insurer earlier this year.  After reading the motion and supporting memorandum, I suspect that we may see a similar motion getting filed in at least some other SKG-State Farm cases in coming days.

You may remember that State Farm, earlier this year, moved to disqualify Scruggs, his law firm and the entire SKG from certain Katrina litigation based on alleged ethical violations on grounds similar to the ones alleged in the new motion — paying material witnesses under the guise of making them "litigation consultants," working in concert with the state Attorney General to force civil settlements with the threat of criminal indictment, hiring insiders to illegally take documents, creating a phony storyline about the importance of these documents while allowing no one to see them to contest this storyline, abusing subpoena power, and the like.

The prior motion did not succeed, although courts did not rule on its merits.  Instead, Judge L.T. Senter Jr. said State Farm waited too long to bring the motion, that granting it would prejudice Scruggs clients, and that State Farm therefore had waived its right to bring a disqualification motion.  The Fifth Circuit, on November 19, denied State Farms petition for a writ of mandamus requiring Judge Senter to change his ruling.  The new motion, of course, does not seek to disqualify Scruggs himself or his law firm, because they withdrew from Katrina litigation following the indictment of Scruggs and two other key members of the firm.

The Shows case appears to have been chosen for this motion because the previous motion had been brought in McIntosh v. State Farm, a Katrina case that was well-developed at the time the motion was made, a large part of why Senter gave an adverse ruling.  In Shows, in contrast, the first case management conference is just being held.  

With that background, first Ill list the most relevant pleadings, and then give a few observations.

  • Here is a copy of the motion.
  • Here is a copy of the supporting legal memorandum.
  • Here is a copy of the declaration of Charles Wolfram, a very well-known expert on attorney ethics. 

The list of the reasons State Farm believes the SKG should be disqualified is given above.  You can read it for yourself in the memorandum — a scan of the table of contents will take you right to where you want to go.

But there are a few facts listed in the memo I would like to highlight.  After following Katrina litigation very closely for more than a year now, I keep thinking nothing more is going to surprise or shock me, and I am always wrong.  One thing that shocked me was one of the entries in the notes of Brian Ford, an engineer who had done a key engineering report on the property of Thomas McIntosh — remember that his report was rejected by State Farm because the report said the damage to the property was due to wind only, because I am coming back to this point.  The SKG and others say this is evidence of State Farms fraud — that it changed engineering reports to get the conclusion it wanted — uncovered flood damage — and also that it avoided its obligation to pay wind damage and instead pushed the damage onto federally backed flood insurance.  Again, please remember this, because I am coming back to it.

Now I have seen some of Brian Fords redacted notes before.  I wrote about them in this post earlier this month.  But Judge Robert Walker on December 12 required Ford to turn over the unredacted notes, and wow, there was a lot of stuff missing from the redacted version.  I know this because Exhibit 36 to the State Farm motion is a good chunk of his unredacted notes, and you can see them by clicking here.  

Look on the page with the Bates stamp Ford 0012 in the lower right corner.  At the top of that page, Fords notes recount an apparent conversation between Special Assistant Attorney General Courtney Schloemer and an SKG attorney: "they agreed that a criminal conviction could help civil cases." If you dont believe me, you go read it for yourself, thats what it says!  An assistant to Jim Hood discussing with a private litigant the potential indictment and conviction of the other party and how that might aid that litigant.  If the Ford notes accurately reflect what happened, that is outrageous. (NOTE: my guess would be this conversation contemplated an indictment of a State Farm official, not Dickie Scruggs).

Recall also that Schloemer is implicated in the dealings involving Hood and Scruggs, whereby Scruggs sent his copies of the Renfroe documents taken by the Rigsby sisters to Hood, in what Judge William Acker said was a deliberate violation of his order to turn them over to Renfroes lawyers. (Hood had his own copies and didnt need Scruggs).  After Hood and Scruggs had a conversation about this plan immediately after Acker issued his injunction on December 8, 2006, Schloemer on December 12, 2006 sent a letter to Scruggs saying she was "not comfortable that the protective measures put in place by the Court will be effective in keeping these documents out of the grasp of State Farm" and asked Scruggs to send the documents to Hood, which he did that same day. See Ackers criminal contempt order, page 8. 

One could also point out the problems of hiring material witnesses like the Rigsby sisters as litigation consultants of the SKG at $150,000 per year with no set duties or hours, and of attempting to hire Brian Ford in a similar role while simultaneously offering him as a witness.  Incidentally, on the same page of the Ford notes, Ford 0012, just a few lines from the top, it says that Schloemer did not want Ford to become a paid consultant until after he testified before a grand jury. This is merely what Ford says in his notes, so its not absolutely sure to be true.  Well find out, Ford is being deposed again next month in the McIntosh case, probably to talk about what the previously redacted notes say. What if what he says in the notes is accurate? Then what? Do you see a problem with such conduct by a state official? I do. 

One final point.  Look on page 33 of the memorandum in support of the motion.  This makes a point I had not really thought of in this way before. Kerri Rigsby, one of the Katrina stars who has been discussing insurer fraud for the past 17 months, is the one who approved a federal flood payment for the McIntosh property.  I either did not know that, or forgot it.  So if McIntosh is supposed to be an example of fraudulently pushing flood payments so that the insurer didnt have to pay wind damage, Kerri Rigsby herself was responsible.  Also, the original Brian Ford engineering report on that property, and I have read it so I know this is true, mentions wind only and no flood damage.  So now remember that the Brian Ford report and what happened to it is also held out as an example of insurer fraud, because its conclusions were later changed by a second engineers report that found both wind and flood damage. 

Do you see the problem here? If the Brian Ford report was correct and only wind damaged the structure, then why was Rigsby approving a flood payment to the McIntoshes?  If the flood payment was fraud, then why did Rigsby approve it? If Rigsby was correct, then why didnt Fords report mention flood?  

If you are new to this, see my post of a few days ago re-evaluating the role and significance of the Rigsby sisters. 

Lastly, what does the Prisoner of High Street think of all this? No one knows, because hes not talking.  Where in the World is Jim Hood? 


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