Scruggs Nation, Day 49

Is a picture worth a thousand words? Here's a photo that a Mississippi friend of Insurance Coverage Law Blog took of the Scruggs Law Firm in Oxford yesterday morning, dead potted plants and all.  (Used by permission. Copyright is held by the photographer, who is known to me, but who wishes to remain anonymous to y'all at this time). 

Now, let's start with an account of yesterday's hearing in the case that launched a thousand shifts at my computer terminal, Jones v. Scruggs.  The report  from ICLB's correspondent on the scene is so good I will reproduce it below with only slight edits:

Hearing on Motion to Quash Subpoenas - January 14, 2008, 9:30 a.m.

Before Judge Coleman

 

Attorneys:

Jones attorneys: Grady Tollison, Roy Percy & Cameron Ables

Scruggs, et al attorneys: Cal Mayo & Pope Mallette (for Scruggs and Scruggs Law Firm); Larry Moffett, Shea Scott Ken Rutherford & Trey Byars (for Don Barrett, Barrett Law Firm, Nutt & McAlister, and Sparky Lovelace)

 

On the Motion to Quash Subpoenas - Dickie Scruggs, Zach Scruggs, Sid Backstrom, Meg McAlister, Judge Lackey:

Defendants' Arguments:

  • Pursuant to MRCP 45, a subpoena can be quashed if it would result in an undue burden. The Mississippi Supreme Court has articulated a set of factors (although Defendants didn’t consult multiple factors or balance anything; just said that the subpoena’s burden would be undue). On the other hand, plaintiff will not suffer prejudice if the defendants are not forced to testify at this time. Defendants argue that the attempt to force these individuals to testify at this time is simply plaintiffs’ effort to “out” this.
  • Defendants argue that three of the subpoenaed witnesses are scheduled to go to trial in six weeks on the exact same matter, and to force them to comply with a subpoena at this time would be to equivalent to a mini-criminal trial. They would be forced to defend the same allegations of the criminal matter.
  • Discussion of the assertion of the Fifth Amendment. Zach Scruggs and Sid Backstrom aren’t parties to this lawsuit. If they are forced to testify and take the Fifth, no negative inference may be drawn from this. No benefit to plaintiff if they invoke.
  • Testimony not relevant - two issues: (1) the scope of their testimony is an issue for arbitration; (2) parties entered into an agreed order in April not to pursue discovery pending the arbitrability ruling [Defendants argue that they haven’t waived their right to an arbitration ruling; they argued that they have not done anything inconsistent with the desire to arbitrate, which, Defendant’s argue, is what the MS Supreme Court looks at to determine waiver. Defendants argue that plaintiff is trying to make a connection between the Nov. 28 indictment and a waiver of arbitration]; when determining whether this case should proceed to arbitration, the court considers a snapshot at the time the demand was made (back in March 2007), can’t consider post-litigation facts.
  • Rebuttal: no case cited for the proposition that post-litigation actions have created an invocation of the judicial process - those things that would be considered an invocation of the judicial process are those things that happen IN the courtroom. This is a criminal investigation.
  • Rebuttal: not relevant to this litigation. Forcing testimony would place an undue burden on the parties who will be defending themselves six weeks from now; potential jurors will read that individuals have asserted their Fifth Amendment rights.

Plaintiff's Arguments:

  • Prejudice to Plaintiff. “Whether or not it is a crime, is irrelevant. It is an outrage…We are all ashamed.” Argued that plaintiff had been cheated out of money, for more than a year, cheated out of his day in court, and the court should have no sympathy. Plaintiff has suffered prejudice by the delay.
  • Plaintiff countered in response to Defendants’ argument that this is within the scope of the arbitration agreement, that conduct during litigation is for the court to decide.
  • The relevance of the evidence that would be presented involves a substantial invocation of the judicial process.
  • Plaintiff argued that defendant’s bribery attempt is an admission that the defendants’ motion to compel has no merit. Cited Madge v. State for this proposition.
  • Plaintiff argues that it is entitled to an adverse inference or testimony.  

Court inquired if anyone had ANY opinion from ANY court that has addressed this issue of bribery/attempted bribery and the connection to a waiver of arbitration. No one had anything to offer. Determined that this is a matter of first impression.

The highlights -- and lowlights -- for our correspondent.

1.  The proffered testimony of Judge Lackey via Tollison:

a. Lackey was the one who came up with the $40,000 figure for the offered bribe;

b. Defendants wanted to delay proceedings in an attempt to wait the Jones, Funderburg firm out. Defendants believed that Jones was having difficulties financially, and that he would be forced to settle if the proceedings dragged on very long.

c. Balducci told Lackey that when he was ready to take off his robe, Lackey would have a place at the Balducci firm if he wanted.  

2. The plaintiff's weak argument: basically just appealed to emotion and said that the system had been undermind and they deserve testimony.

3.  The ruling: wasn't grounded in any law (because the parties all admitted that they had nothing directly on point).  Sustained the motion to suppress the testimony, and disallowed anything that goes to the alleged conspiracy to bribe.  The judge stated that a bribery attempt is not literally tantamount to a waiver of arbitration.

4.  The judge: hard to hear and mumbles.

There you have it, a great report from the courtroom. Many thanks to our correspondent, who earns a year's free subscription to this blog. I'm told by another reliable source that, on the key question of whether the case is going to arbitration or litigation, the judge in essence said the case was headed to arbitration when he got it, it is ripe for arbitration, and that is where it is going, period.  Same result that Scruggs allegedly paid good money for, and now he gets it for free! (Not counting legal fees, of course). What a strange world we live in.

One brief excerpt from yesterday's Clarion Ledger story on the hearing before we move on:

Lackey wasn't permitted to testify, either, but Oxford lawyer Grady Tollison said if he were, he would testify Balducci approached him in March 2007 about ruling in Scruggs' favor.

Lackey said as he was getting ready to put on his robe, Balducci said he could have a place in his law firm after he stepped down from the bench, according to Tollison, who is representing the lawyers suing Scruggs over the legal fees.

Tollison said Lackey was so upset by this offer that he reported the matter to federal prosecutors.

After this initial offer, Balducci called back and said he wanted the judge to merely delay the dispute because the plaintiff, Jackson lawyer John Jones, was having financial problems.

In a subsequent meeting, Lackey, who by now was cooperating with the FBI, said he was "just a country judge, had some financial difficulties and needed $40,000," Tollison said. "He will testify that that was his figure."

Tollison said Lackey quoted Balducci as saying that would be no problem, but it might have to come in payments.

(In)justice on the installment plan.  At least Balducci didn't have to pay any vigorish.  

UPDATE: Here's a copy of Judge Coleman's decision regarding arbitration.  He's favoring it, but holding his ruling until he decides Jones, Funderburg's motion for sanctions -- the motion was made due to the bribery scandal. 

-- In light of the unveiling of the guilty plea yesterday of bribery conspirator Steve Patterson, it is worth revisiting the Wall Street Journal story of more than a month ago about the Dickie Scruggs Christmas party.  The story had this paragraph:

As for the man considered Mr. Scruggs's chief accuser -- the considerably less-well known Mr. Balducci -- many people in these parts are contemptuous. "He has some sort of complex," said Deborah Patterson, the wife of Steven Patterson, Mr. Balducci's business partner, who was also indicted in the case.

I wrote about the story in this post.  At the time I said, and said repeatedly afterward, that a strategy to portray Balducci as some sort of wannabe, rogue, freelance briber was weak. It's looking weaker by the day, don't you think?  If he was freelance, then so were Langston and Patterson.   Dang, Scruggs has gotta control his people better and make better personnel decisions! What's the defense, produce a tape with Scruggs dictating to his secretary like this? "Memo: new law firm guideline -- no bribes without discussing it with the head honcho. . . . wait, strike that, doesn't sound good. Just put no bribes. New item: find seminar on how to better monitor personnel and recognize signs of rogue behavior like improbable success in litigation.  Item: hire industrial psychologist, test everyone, get rid of anybody with a complex. Last item: go on Amazon, find book Informers in Your Midst, 10 Telltale Signs from Constantly Asking You To Speak Up to Wearing an FBI Sweatshirt."

-- I see on the PACER docket that Zach Scruggs, despite signing a waiver that allows Tony Farese to represent both him and Joey Langston, has retained another attorney, Todd P. Graves, of Missouri. (Originally got the wrong name, as commenters pointed out, I've changed it). 

UPDATE: Here's a link to some information on Graves, a former U.S. Attorney for western Missouri.  Here's a Washington Post story mentioning him, he was one of the U.S. Attorneys sacked by the Bush Administration in the scandal that occupied everyone's attention for so long.  As some readers have observed to me, if one were contemplating making a deal with prosecutors, this would be a good guy to have close. 

-- Lastly, here's a new order from Judge Biggers in the bribery case. Basically says the three remaining defendants who have not pleaded filed a sealed motion on Friday asking for a continuance of the trial date and to keep the motion sealed.  The court said the motion will be considered on Wednesday along with the defendants' prior discovery motion.

-- You know how they say it ain't over till it's over? From what I hear, it's a long way from being over. That's all for now.  Many thanks to all those who continue to contact me with information, you know who you are. Thanks for your trust and for taking the time to explain. 

 

 

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Ping sent from Overlawyered on January 15, 2008 3:53 PM
Yesterday's guilty plea by Booneville, Miss. attorney Joseph ("Joey") Langston in the attempted improper influencing of a Mississippi state judge would be major news even if it had nothing to do with the state's most...
Written By:shm On January 15, 2008 6:04 AM

In the picture- Christmas lights are still up!

Written By:Around Town On January 15, 2008 6:21 AM

Just a clarification: Chris Robertson is an associate at the Scruggs Firm. His entry of appearance was followed by a Motion for Admission Pro Hac Vice of Todd P. Graves.

Interestingly, Mr. Robertson joined the Scruggs Firm in the fall, and certainly must be living in a first year associate's nightmare.

Written By:nah On January 15, 2008 7:08 AM

read your link again -- robertson is a mississippi lawyer; the real scoop is todd graves coming in pro hac, from missouri.

Written By:Waverly223 On January 15, 2008 9:08 AM

Great stuff David - keep up the good work.

I'm not a criminal lawyer, but it seems Langston got a better plea agreement than Patterson did. Both pled to the same offense, but Langston got a 3-year "cap" on the sentence (not binding on the court obviously, but the deal, including Joey's agreement to testify truthfully, is off if the court doesn't accept it). The US Attorney made some concession to both to recommend a "downward departure" at sentencing (although the wording is slightly different, and I can't tell if that difference really matters) depending on the whether he or she considers their respective testimony to be of "substantial assistance". Patterson also got an agreement that the USA would also argue that he was a "minor participant" for Sentencing Guidelines purposes (I don't know if that is as valuable as a "cap" though).

More importantly, Langston got an agreement that he would not be charged with "any other offenses, related or unrelated" as of the date of the plea agreement, and an agreement not to seek divestiture of any of his assets. Patterson only got an agreement not to charge him with any offenses "arising from or related to the charges in the indictment" (presumably much narrower protection), no agreement on seeking divestiture of assets, and a requirement that he submit to a polygraph.

Are there any experts out there who can shed a little light on whether these differences are meaningful in practice, and if so why the deals are so different?

Written By:Sutpens100 On January 15, 2008 9:44 AM

"Taking his seat in his chambers, the judge faced the
opposing lawyers.

"So," he said, "I have been presented, by both of you, with a bribe."

Both lawyers squirmed uncomfortably. "You, Attorney A, gave me $15,000. And you, Attorney B, gave me
$10,000.""

The judge reached into his pocket and pulled out a check. He handed it to Atty A. "Now then, I'm returning $5,000, and we're going to decide this case solely on its merits!"

Written By:Insurance Coverage? On January 15, 2008 1:39 PM

I thought you were covering Katrina insurance coverage news?


http://www.sunherald.com/201/story/300425.html

Written By:Dixie K. Blankley On January 15, 2008 5:02 PM

Will someone please tell me what Balducci, Langston, and Patterson have to lose? It seems that they will only have to serve a measly three years or less, will not be charged with any other crime, will lose no assets from their ill-gotten gains, and after their time in the jug, will be multi-millionaires who can always get a job as a highly paid consultant or an even higher paid job in the lobbying business. It seems to me to be a very light penalty.

Written By:msman On January 15, 2008 5:21 PM

The ferns came down this afternoon!

Written By:Amazing On January 15, 2008 6:11 PM

I agree Dixie. Their punishment sounds like no big deal at all. All will be hunky dory once those short jail terms are done.

Written By:Fred On January 15, 2008 6:49 PM

I agree with Dixie and Amazing. I was real enthusiastic about the US Attorney when this thing first broke but I wish he'd show the same toughness in negotiating plea deals that he has in bringing charges in the first place.

I hate to say it, but the US Attorney is getting his lunch eaten in these plea negotiations. Especially Langston's sweetheart deal- he'll be jetting around in his private airplane in no time. Maybe we can all follow him on this website a few years from now "Langston's in Aspen- no, now he's in the Caymans"

If Scruggs doesn't do some serious time (e.g. 15 years), this whole thing will look like a farce.

Written By:David Rossmiller On January 15, 2008 7:01 PM

Fred, I really hope that two years from now I'm not writing about Joey Langston anymore. If I am, I hope it's for a book, not this blog.

Written By:MORE COWBELL On January 15, 2008 7:24 PM

Why is the republican govenor from Florida hiring 3 trial lawyers to file a class-action lawsuit against the insurance industry? Doesn't he read this blog? Miami Herald reporting that Charlie Crist has hired a former US Attorney, a tobacco industry slayer from Tallahassee, and a prominent trial lawyer from Ft. Lauderdale. Better make sure he doesn't get Balduccied.

Written By:epynom On January 16, 2008 5:56 AM

David:

You should write a book. You have covered this 1000 times better than the print journalists. It is a great read.

Written By:Insurance Coverage? On January 16, 2008 7:42 AM

FLORIDA INSURANCE COMMISSIONER SUSPENDS ALLSTATE INSURANCE CO.

Wednesday, January 16, 2008

TALLAHASSEE, Fla. - Florida Insurance Commissioner Kevin McCarty today announced that he is suspending the certificate of authority of Allstate Companies to write new insurance in Florida until they fully comply with the subpoenas served Oct. 16 by the Office of Insurance Regulation (Office).

Today's decision by the commissioner follows Tuesday's action when he abruptly halted the scheduled two-day hearing into the Allstate Companies’ reinsurance program, their relationships with risk modeling companies, insurance rating organizations and insurance trade associations.

"In view of Allstate's ongoing, blatant disregard of our subpoenas, I have little choice but to take an action that will send a clear message about how seriously I am taking this issue," said Commissioner McCarty. "Suspending their certificate of authority to write new business in our state should make my point.

"If Allstate is willing to pay $25,000 per day in fines to a Missouri court for its ongoing failure to provide similar documents, it's obvious to me that it will take more than a monetary sanction to get them to comply with our subpoenas."

Allstate was to have provided all appropriate company documents related to the above topics at or before Tuesday’s hearing, but failed to do so. Instead, the Office received 51 pages of objections to the subpoenas.

The suspension applies to Allstate Insurance Co., Allstate Indemnity Co. and Allstate Property and Casualty Co., and it only suspends the companies from writing new business in Florida.

Existing policyholders will not be affected. Allstate must continue to service them and the companies must make all required statutory filings including, but not limited to, audited annual financial statements, quarterly financial statements and rate filings.

"The duration of the suspension is up to them," added McCarty. "It will be lifted when I am satisfied that we have received each and every document we need to properly investigate the important issues before us.

"It continues to trouble me that Allstate has not complied with our subpoenas and is not willing to explain to us their relationships with rating agencies, modeling companies and trade groups and how these relationships might have influenced the huge rate increases they have requested. This clearly cannot be in the best interests of Florida consumers."

This is the first time the Office has suspended a company for failure to "freely" provide documents as required by Florida law.

A copy of the subpoena is available to review.

Allstate Floridian Indemnity and Allstate Floridian Insurance Company have requested rate increases of 28.3 percent and 41.9 percent respectively. Encompass Floridian Indemnity requested a 38.4 percent increase, and Encompass Floridian Insurance Company requested a 39.7 percent increase.

Written By:Sop81_1 On January 16, 2008 7:47 AM

I too would like to see Mr. Rossmiller cover insurance issues again. Though I do not agree with Mr. Rossmiller's opinions on these cases this blog has raised awareness of insurance as an "important social device"* which is to his credit and that of his law firm.

Allstate was just suspended from Florida and there is a major case involving USAA here on the Mississippi Coast being tried as we speak (as linked yesterday by the user Insurance Coverage?).

The link to the Florida Department of Insurance Regulation press release suspending Allstate: http://www.floir.com/PressReleases/viewmediarelease.aspx?ID=2858

* - Chip Merlin (Noted Southeastern Consumer Insurance Litigator)

sop

Written By:boogiewoogieman On January 16, 2008 8:59 AM

I think it is apparent from the signifcantly increased traffic count on this blog, what most of us want to read about. David, keep up the incredible coverage of the Mississippi events. I now read you before the CL, WSJ, or USA Today.

Written By:Bama Insurance On January 16, 2008 9:08 AM

Where is our fearless leader today? Did the hitmen finally get to him after he exposed the wilted potted plants? :)

Written By:MORE COWBELL On January 16, 2008 5:28 PM

Is it just me, or does anyone else see PL Blake in the second window from the right. Looks like the character Grandpa from the Munsters TV show.

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