Federal Judge Beer dismisses Katrina 'whistleblower' suit in Louisiana; how this case fits in with USA v. Dickie Scruggs
The hijacking appears to be over. The Branch Consultants v. Allstate, et al. "whistleblower" lawsuit alleging massive insurance company fraud was dismissed Wednesday by Judge Peter Beer, of the Eastern District of Louisiana. When Mississippi attorney Dickie Scruggs learned of the Branch Consultants lawsuit after it was unsealed earlier this year, he hit the roof -- prosecutors pursuing a criminal contempt of court charge against Scruggs said he felt the Branch Consultants case was an attempt to "hijack" his own whistleblower case against insurers, which was filed on behalf of his clients, the Rigsby sisters. (See footnote 1 of this recent filing by the prosecutors where the word appears in quotes).
It appears to me Scruggs did not actually use the word hijack, at least in pleadings I have read in the Rigsby lawsuit, which is called Ex rel. Rigsby and was filed in April 2006, while the Rigsbies were still working on their jobs for E.A. Renfroe and Co., processing State Farm Katrina claims. Whether he used the actual word or not, it plainly is a fair characterization of his reaction, as you can see by reading the legal memorandum he filed May 29, 2007, asking that Ex rel. Rigsby be unsealed so he could get the case moving after it had been sitting for more than a year. Click here to read the memorandum. Here's an excerpt from the brief:
On or about April 30, 2007, the Department of Justice sent a copy of its stay request and asked relators [the Rigsby sisters] to consent to a stay. Relators, unaware of the Louisiana case and the Branch Relator's efforts in that case to unseal it, believed it was in their best interests to cooperate with the government. After insisting on a provision that would enable them to challenge the stay every four months, Relators agreed in a separately filed pleading on May 22, 2007. Later that same day Relators learned for the first time of the existence of the later filed action, learned that Judge Beers [actually, Judge Beer is singular, not plural] in Louisiana had let the matter go forward out from under the seal, and that the Relators in that action were prosecuting the action full bore. The Rigsbys took immediate steps to protect their interests in this litigation.
The brief also says this:
But here, there is real prejudice to the Relators if this case remains under seal or is stayed. First, they will be unable to properly defend themselves against the retaliatory action filed in Alabama [the lawsuit by Renfroe against the Rigsby sisters alleging breach of their confidentiality agreements for taking documents from Renfroe and giving them to Scruggs]. Second, the relators in the later-filed Branch action could push their case forward and reach a settlement with the defendants there that bars this earlier-filed action (which is a jurisdictional bar to much of the Louisiana case).
So, is that the reason Judge Beer dismissed the Louisiana case, because Scruggs and the Rigsby sisters filed their claims first? According to this story by Mike Kunzelman of the Associated Press, who is extremely reliable, the judge merely issued an oral ruling from the bench, apparently dismissing the case on procedural grounds. One procedural ground could be that the court has no jurisdiction because a lawsuit was filed earlier over the same thing, as alluded to in Scruggs' pleading and explained in this handy guide to qui tam False Claims Act lawsuits -- both the Ex rel. Rigsby and Branch Consultants cases are qui tam lawsuits.
I've written several prior posts about the Branch Consultants case. Click here for the first post about the unsealing of the case -- this post has the added feature of an extended argument in the comments between me and Brian Martin, policy director for Rep. Gene Taylor of Mississippi. Click here for a second post, about Judge Beer filing his own motion requiring or requesting, I was never clear which, that the government explain why it had not intervened to prosecute the case. This post also discusses what appears to be for all the world a media interview Judge Beer gave about this case, which is something I have never heard of being done by a federal judge regarding a case he is presiding over. Click here for a third post, where the government said Beer had no power to issue a show cause order to the U.S. Attorney's Office. And here is yet another post, where Judge Beer withdrew his show cause order.
Not to upstage the news about the Branch Consultants case or Allan Kanner, the plaintiff attorney for the lawsuit, but let's be honest, Dickie Scruggs upstages just about everyone. So let's talk some more about Scruggs and the Rigsby sisters, and about how Ex rel. Rigsby fits into the picture. Ex rel. Rigsby, as mentioned, is a qui tam False Claims Act lawsuit that alleges Allstate, State Farm, Nationwide, USAA and others committed fraud on the government by paying off federal flood policies and not paying for wind damage covered under homeowners policies -- in other words, transferring their payments to federal flood insurance. These kind of lawsuits are filed in secret while the government checks them out to see if it is interested in pursuing the case. Apparently, neither Renfroe nor State Farm knew of this sealed lawsuit at the time the Rigsbies were taking documents from Renfroe and feeding them to Scruggs -- they quit their Renfroe jobs in June 2006 and immediately were hired as litigation consultants by Scruggs at salaries of $150,000 a year. (Maybe, in the future, yearly performance evaluations at Renfroe will include the question: "are you now or have you ever engaged in secret litigation against this company or the insurers it works for?") They apparently learned of the qui tam lawsuit before it was unsealed, however, through discovery in the Renfroe lawsuit against the Rigsby sisters.
So, it appears the special prosecutors going after Scruggs for alleged criminal contempt believe Ex rel. Rigsby played a large role -- the documents taken by the Rigsby sisters appear to be the basis for the allegations of the complaint. Both Scruggs and the Rigsby sisters would collect millions in fees if the lawsuit was ultimately successful. Take a look again at footnote 1 of the prosecutors' filing, the footnote I referred to at the beginning of the post. In it, the prosecutors say that the qui tam case "includes an amended complaint, which states that on December 8, 2006, Scruggs made a supplemental disclosure of information or document to the government . . . . This is the same date of Judge Acker's December 8, 2006 Order." (Emphasis was in the original).
Now, I saw in the electronic docket for USA v. Scruggs some time ago that the United States was going to be filing more of its evidence by the close of business Friday, and I waited for this stuff and it didn't show up in the docket Friday night, but I saw it and read it first thing Saturday, and I read that particular footnote probably about six or seven times, and I thought, what are they trying to say here? It appears they are saying this supplemental disclosure referred to is when Scruggs sent the Renfroe documents to his close friend, Mississippi Attorney General Jim Hood, who spoke with Scruggs right after the injunction was issued about a plan to send the documents to Hood so they wouldn't go back to Renfroe's lawyers as Judge Acker's order required. It appears the prosecutors are saying Scruggs was seeking to bolster his supposed reliance on the exception in the injunction for cooperating with law enforcement, by claiming that sending the documents to Hood was actually a supplemental disclosure of whistleblower materials to the government in the qui tam lawsuit.
If this is what they are saying, and if this is what Scruggs was thinking -- and that second one is a big if, because remember, these are just allegations by the government and while we can draw our own conclusions, the prosecutors have yet to prove their allegations or that any crime was committed -- then this is laughable, because Hood already had copies of those documents -- the Rigsby sisters printed them off over a weekend at their homes, and the AG's office sent someone to pick the documents up there. (For the third consecutive year, the Mississippi AG's office has been voted number one for curbside customer service among all 50 state AG's offices -- they will also deliver your dry cleaning and bring you Chinese takeout for a small additional charge)! But then again, nothing is too good for the clients of Hood's "confidential informant" (click here to read my post about when Hood sent a letter to the U.S. Attorney calling Scruggs that). Not to mention that Hood is an official with the state of Mississippi, and the federal government is the entity that decides whether or not to get involved in qui tam False Claims Act lawsuits.
UPDATE: Here is a story in the Times-Picayune by Rebecca Mowbray about the dismissal of the Louisiana case. The story says Judge Beer's decision to dismiss the case was indeed based on the fact the Scruggs-Rigsby lawsuit was filed earlier. Here is a copy of Judge Beer's order dismissing the Branch Consultants case. The order became available online this morning.
Federal Judge Peter Beer yesterday dismissed a Louisiana "whistleblower" lawsuit filed under the federal False Claims Act that alleged massive insurance company fraud on the government in Hurricane Katrina claims adjusting. Beer cited an earlier-filed,...