Lawyers representing State Farm Insurance policyholders in Mississippi suing the insurer over Hurricane Katrina damage claims have been dismissed from the case. Citing ethical concerns, U.S. District Judge L.T. Senter Jr. in Gulfport dismissed a group of attorneys affiliated with Richard “Dickie” Scruggs, the well-known lawyer who pleaded guilty last month to conspiring to bribe a judge. Judge Senter has given plaintiffs involved in the State Farm lawsuits 45 days to retain new lawyers.
State Farm was one of the largest insurers on the Gulf Coast when Katrina made landfall there in 2005. Thousands of homes were reduced to rubble by wind and the massive storm surge created by the hurricane. Normal home owners policies do not cover damages from flooding, only wind. But in the case of Katrina claims, many home owners accused State Farm and other insurance companies of attributing damage to flooding, when in reality it was caused by wind, as a way to avoid paying the full value of claims. Some insurance companies initially made offers to settle claims for only pennies on the dollar, sparking thousands of lawsuits along the Gulf Coast.
Judge Senter barred attorneys working with Scruggs from representing Hurricane Katrina victims in Mississippi because of what the judge deemed to be “improper payments” made to Cori and Kerri Rigsby. The two sisters were employed by E.A. Renfroe & Co., an Alabama-based firm that State Farm contracted. The sisters supplied Scruggs with piles of documents they had secretly copied while employed by Renfroe. Scruggs touted the sisters as whistleblowers, but hired them as consultants and agreed to pay them $150,000 each. Payments to non-expert witnesses are limited by law, Senter said. “The payments Scruggs made to the Rigsby sisters bears no reasonable connection to any work they performed or to any expenses they incurred in testifying,” the judge wrote. “These payments were clearly improper.”
While Scruggs had withdrawn from the State Farm litigation following his indictment on bribery charges late last year, members of his legal team went on to form the Katrina Litigation Group and continued representing plaintiffs in the Hurricane Katrina lawsuits. But the judge said that any attorney affiliated with Scruggs shared in the responsibility for his ethical lapses, as they were aware of the payments to the Rigsby sisters and did nothing to stop them.
Senter’s ban applies to Barrett Law Office, Nutt & McAlister, the Lovelace Law Firm and Hesse & Butterworth and also applies to any cases against Renfroe, the firm that employed the Rigsby sisters. The judge also said the documents that the Rigsby sisters gave Scruggs can’t be used as evidence unless the plaintiffs lawyers can show they were obtained through “ordinary means of discovery.” Neither of the sisters will be allowed to testify for the plaintiffs.
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