Hearing To Be Held To See If 'Whistleblower' Rigsby Sisters, Scruggs Law Group, Should Be Held In Contempt
You know you have become a public commodity when you have your own Wikipedia entry, as the Rigsby sisters of Katrina claims adjusting fame do. It's a pretty good and thorough entry too. I looked it up because of this story by Anita Lee of the Sun Herald about the Rigsby sisters, Cori and Kerri, who have been hailed by some as whistleblowers, and sued by their employer, E.A. Renfroe, Inc., for taking State Farm claims adjusting documents from Renfroe and giving them to Dickie Scruggs, an attorney who represents hundreds of Katrina plaintiffs.
Renfroe is an independent company that was hired by State Farm to do claims adjusting, including in Katrina cases. The sisters took copies thousands of documents they claim show that State Farm engaged in fraudulent claims adjusting. They then gave these documents to Scruggs, who also made the sisters his consultants. The two had confidentiality and non-disclosure agreements with Renfroe, which sued them for breach and injunctive relief in the U.S. District Court for the Northern District of Alabama. Here's a pdf of the amended complaint.
The court granted Renfroe's request for a preliminary injunction, and required the sisters and Scruggs to return all copies of the documents to Renfroe. However, Scruggs apparently sent one batch of materials to Mississippi Attorney General Jim Hood, in response to Hood's request for them that came after the court's order. The court then granted Renfroe's request for an order requiring Scruggs and the sisters to show cause why they should not be held in contempt. Scruggs and the sisters were ordered to file their positions on the matter with the court, which they did, and Renfroe responded to the briefs. The court denied a motion by the sisters to dismiss the case or join State Farm as a party, and rescheduled the show cause hearing from February 27 to March 21. This is going to be a fine hearing to watch.
Because you might be interested, here are pdfs of some other relevant stuff in the case:
The court's January 19 memorandum opinion granting Renfroe's request for a show cause hearing.
Scruggs' brief in response to the court.
The brief of the Rigsby sisters in response to the court.
Now, even if you don't read these, one thing you don't want to miss is the nasty letter Scruggs sent to State Farm, claiming it reneged on a deal to get the Renfroe case dismissed as part of a larger settlement of Katrina cases and claims. State Farm sent a letter back saying no such deal existed and pointing out State Farm is not a party to the case and does not control Renfroe.
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David Rossmiller continues to have good coverage of E.A. Renfroe & Co.'s seeking criminal contempt charges against Scruggs for his violation of a protective order. Earlier: Mar. 19 (and Rossmiller Mar. 6)....
This story fascinates me because I do not understand why Renfoe is pursuing it. Possibly they are trying to make an example of the sisters to help ensure other employees do not do this in the future. The negative for Renfoe and State Farm is that this story has “legs” in that it makes the national media each time there’s a development and each story portrays Renfoe and State Farm in less then desirable light and reinforces “shady” or less then honest handling of Katrina claims which is the last thing State Farm wants since they are in a PR campaign to prevent further erosion of the public’s view of their actions. It seems to me that State Farm would be putting all the pressure it could bear on Renfoe to end this episode unless they too are looking down the road and thinking that if the sisters are severely dealt with then it may prevent future actions like this. Do you see another possible scenario?
Besides insurance litigation, I also do other types of commercial litigation, and a frequent area of disputes are non-compete and confidentiality agreements. I have been involved in a number of these, including a couple right now, and I have represented both sides: seeking enforcement and resisting enforcement. These agreements are very important to companies. In Renfroe's shoes, I can easily see them wanting to take this all the way to the conclusion, especially since there doesn't seem to be any dispute that the sisters breached their confidentiality agreement signed with Renfroe. As a company processing the confidential insurance claims of people, you can't have employees who get to decide what the take to the press, other insurers, lawyers or even the claimant. There are processes available for disclosure, such as civil discovery. Renfroe, I suppose, needs to vindicate that principle.
As for State Farm, they are not Renfroe and they truly don't control Renfroe. However, I see no percentage for State Farm to try Gestapo tactics on Renfroe to get them to lay off the lawsuit, Renfroe is winning. Renfroe got an injunction that forced return of the documents, in essence the judge saying Renfroe is likely to succeed on the merits of its lawsuit. Better than that from State Farm's perspective, Dickie Scruggs himself may be held in contempt of court. You think a little confetti will fly in Bloomington, Illinois if that happens? Better believe it. Here's a guy rampaging around accusing State Farm of acting like Genseric the Vandal, and a judge may find he willfully violated a court order. I will tell you, as a lawyer, this is something that lawyers fear, and if they don't, they are not paying attention to reality. You do not mess with the authority of a federal judge. I practice mainly in federal court. I was once in a case where an opposing insurer violated the judge's order to attend a settlement conference, and on my motion she fined them $25,000 as a sanction, which is a large fine in federal court. My motion had been to default them as a sanction and declare the case decided against them. The judge did not go that far, but there is precedent for doing so.
Maybe in law circles being held in contempt of court is a big deal. Even if Scruggs is fined let's say $25,000 that's nothing to him. Right now on the Gulf Coast Scruggs is being talked about as if he's part of State Farm and he is being referred to as a Robber Barron and such. The fact that the purposed settlement he reached with State Farm had two different payment schedules depending upon whether or not he was your lawyer did not sit well with the coast people.
But in my view if Renfoe, and rightfully or wrongfully State Farm will be tagged with them on this, decide to continue to pursue this and let's say Scruggs is held in contempt, I believe it will reverse his negative trend in people's eyes. He will then be portrayed as breaking the law to turn over incriminating eveidence about State Farm and Renfoe to the MS AG. Not exactly something that will be looked at as bad by people on the Gulf Coast or non lawyers throughout the US. I believe the opposite will happen and his public image will only improve because he allowed his professional image to take a hit to fight wrongs being inflicted by State Farm.
Take it from someone who is on the ground on the Gulf Coast, Dickie Scruggs nor the MS AG are not the most popular people around this place since the settlement proposal was announced. I think the fact that Mr Hood has tried to distance himself from the settlement by saying he knew Judge Senter would correct the wrongs helps support this. He even went so far as to take shots at the Scruggs firm by saying they were not a match for the New York negotiator that State Farm sent down to the coast. It will be ironic if Renfoe and State Farm in their attempt to harm Dickie Scruggs' reputation actually results in helping Scruggs "legend" grow. Additionally I do know that any media attention given to the "Sisters" regarding copying the documents is positive for them and extremely negative to State Farm. Just seems to me the Renfoe and thus State Farm are trying to prove how tough they are by punching themselves in the face, to this I say keep punching State Farm, keep punching.
Being held in contempt is a huge deal to a lawyer and no one in his right mind wants a contempt citation, no matter whether he can afford a sanction or not. The insurance company that was sanctioned in the case I spoke of can afford a lot more money than Dickie Scruggs, but that $25,000 sanction is an enduring stain, and one that gave me a lot of leverage over them.
It's interesting folks say Scruggs, who did more than anyone to demonize State Farm and create an atmosphere where his clients got a better deal, is in with State Farm. Dickie Scruggs is an attorney hired to represent his clients. As far as I can see, he did that well and outmaneuvered State Farm frequently. State Farm won some rounds against him, but overall he at least fought them to a draw and probably I'd give the decision to him on points. But he has no obligation at all to non-clients, and if anyone believed he was acting philanthropically, they do not pay much attention to the practice of law or to whom lawyers owe a duty. I doubt Scruggs would think it is any kind of plus to be held in contempt of court, he doesn't need any more publicity, certainly not something that could lead to the loss of his law license or a suspension from practice. The brief his group filed in response to the show cause order was obviously one written with A-plus effort.
Some kind of mythology has grown up around these stolen documents, the less that is proven about this supposed conspiracy, the more people believe it. I'm not saying it's not true, but I'm pretty open-minded and nothing about what I've heard about these documents strikes me as particularly damaging. Renfroe can't let someone break their confidentiality agreements and walk off with documents. There haven't been any criminal charges, no indictments, in fact Hood dropped all that. I heard talk about these documents and others relating to State Farm's claims adjusting practices, but it's more the stuff of popular discourse than figuring into the trials or settlements.
Hood, I can't decide about him. I kind of like his ability to keep plowing straight ahead no matter whether it makes any sense or not. It surprises me that all this publicity-seeking he has done would lead some of the electorate, in an election year no less, to lump him in with State Farm.
As far as Scruggs not being a match for Skadden Arps, he negotiated two deals, one that got his clients out of litigation with money in their pocket and another that, although the judge rained on it, would have compensated a lot of people who State Farm said already had been fully compensated. Again, this surprises me that people would think he did not do well.
You especially do not mess with the authority of Judge Acker. Even though he is around 80, he is incredibly sharp, and tolerates no guff from attorneys. Going in front of him for contempt would be like a child going in front of his father after being caught in a bad lie. Glad its not me, but wish I could be in there to see it.