Court refuses to bar high-profile lawyer from State Farm case

Posted on Mon, Nov. 19, 2007
By MICHAEL KUNZELMAN
Associated Press Writer

NEW ORLEANS -- A federal appeals court refused Monday to bar a prominent attorney from representing a Mississippi resident in a lawsuit against State Farm Fire & Casualty Co. over Hurricane Katrina damage.

State Farm failed to show the "extraordinary circumstances" that would call for disqualifying Richard "Dickie" Scruggs from the case, a three-judge panel from the 5th U.S. Circuit Court of Appeal ruled. The case is one of hundreds Scruggs' firm has filed against the Bloomington, Ill.-based insurer for denying policyholders' claims after Katrina.

State Farm accuses Scruggs of violating ethical rules for attorneys through his work with two sisters who helped the company adjust claims on Mississippi's Gulf Coast after the Aug. 29, 2005, hurricane.

The company claims Scruggs improperly used internal State Farm records he obtained from the sisters, Cori and Kerri Rigsby. Scruggs has said those records support accusations that State Farm fraudulently denied policyholders' claims after Katrina.

In a September ruling, U.S. District Judge L.T. Senter, Jr., in Gulfport, Miss., questioned why State Farm waited more than a year to seek Scruggs' removal from the case on those ethical grounds. Senter didn't take a position on the ethical violations, but refused to prohibit Scruggs from representing any policyholders with suits against State Farm.

State Farm challenged Senter's ruling, but the 5th Circuit upheld the judge's decision.

"Without deciding the contested issue of ethics, we are satisfied that Judge Senter has carefully weighed the balance between the need to ensure ethical conduct on the part of lawyers and other social interests, including litigants' right to choose their counsel," the panel said in a three-page ruling.

Scruggs, whose firm is based in Oxford, Miss., said he is grateful that the court rejected State Farm's "New York-style" legal tactics.

"This is what New York law firms do to each other routinely: try to disqualify each other," he said. "It doesn't work in New York. It shouldn't work here."

Scruggs' work with the Rigsby sisters also is the subject of a criminal contempt case in Alabama.

U.S. District Judge William Acker accused Scruggs of disobeying a court order to turn over all the documents he obtained from the sisters, who worked for a company that contracted with State Farm. After U.S. Attorney Alice Martin in Birmingham, Ala., declined to prosecute Scruggs, Acker appointed special prosecutors to handle the contempt case.

Scruggs was scheduled to be arraigned Tuesday in federal court in north Alabama, but all judges in that district have agreed to disqualify themselves from hearing the case. Scruggs had questioned whether they could be impartial because they work alongside Acker.

A federal appeals court in Atlanta is expected to appoint another judge in a different district to preside over the case.


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