Judge Smacks Down Former Scruggs Katrina Group, Blows Whistle On Rigsby Sisters

In a stunning decision on Friday in Gulfport, Mississippi, US District Judge L.J. Senter disqualified the remaining partners of the former Scruggs Katrina Group (now renamed the Katrina Litigation Group) from any litigation against State Farm or its contract adjuster E.A. Renfroe in the Southern District of Mississippi. In addition, he disqualified Cori and Kerry Rigsby as witnesses in any such litigation and excluded from evidence any documents provided by them to the Scruggs Katrina Group (opinion, order). The particular case at issue was McIntosh v. State Farm, but the order gives plaintiffs in all such cases 45 days to retain new counsel. Senter held that Scruggs’ actions with regard to the Rigsby sisters were unethical and held all members of the original Scruggs Katrina Group responsible for Scruggs’ actions because they were aware of the payments to the Rigsby sisters and did nothing to stop them. From the opinion:

• State Farm and Renfroe have charged Scruggs with two basic types of ethical misconduct and with conflicts of interest, all of which relate in one way or another to the relationship between Scruggs and the SKG and two former Renfroe employees Cori and Kerri Rigsby (the Rigsby sisters). State Farm and Renfroe allege 1) that Scruggs participated and encouraged the Rigsby sisters to wrongfully appropriate and disclose confidential documents in which both State Farm and Renfroe had a legitimate right to confidentiality; and 2) that Scruggs paid the Rigsby sisters a substantial sum in furtherance of Scruggs’s efforts to encourage the misappropriation of these documents… I have determined that disqualification is required because Scruggs, acting in furtherance of the SKG joint venture, paid the Rigsby sisters a substantial sum of money (a consulting fee of $150,000 per year) despite Scruggs’s knowledge that the Rigsby sisters were material witnesses in connection with many hurricane damage claims that were likely to become the subject of litigation… It is apparent to me, from my review of the deposition testimony of the Rigsby sisters, that there was no legitimate reason for these payments and that the “consulting” work that ostensibly justified these payments was a sham. Even if this were not the case, the performance of legitimate work that is closely related to a matter in litigation cannot justify an attorney’s payment of a substantial sum of money to a non-expert material witness.

McIntosh v. State Farm is one of the cases which led to the fee dispute between the Jones, Funderburg law firm and the other Scruggs Katrina Group partners, which in turn led to the state civil suit which resulted in the federal bribery charges against Dickie Scruggs and his four co-defendants.

David Rossmiller at Insurance Coverage Blog has been following Katrina litigation since well before the bribery indictments. He has an excellent analysis here and raises a very interesting question about former US Attorney Todd Graves, who has appeared as counsel for Zach Scruggs in the bribery case. The AP story is here.