Insurance Law

Katrina and Scruggs developments, January 24

By David Rossmiller

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. 

Full post as published by Insurance Coverage Law Blog on January 24, 2008 (boomark / email).