State Farm sues Mississippi AG Hood

I did a triple take when I saw this news -- State Farm has sued Jim Hood.  Yes, that is correct.  Hood has, depending on your point of view, been breathing down the neck of State Farm for improprieties in Katrina claims handling, or abusing the legal system with trumped up investigations to serve as campaign fodder.  Hood has investigated State Farm, and he has sued State Farm too.  Now State Farm is suing Hood.  What's next, will I find out State Farm is suing Dickie Scruggs?  No, wait, they're probably enjoying watching his criminal prosecution too much to worry about that.  Maybe Scruggs will sue Hood for failure to protect his "confidential informant."  Maybe Hood will hire some outside counsel who are also big campaign contributors and direct  them, on behalf of Hood, to sue himself for doling out state legal contracts to campaign contributors.

Here's an AP story by Mike Kunzelman on these unusual developments.  Here's an excerpt:

State Farm's lawsuit claims Jim Hood reopened a criminal probe of the Bloomington, Ill.-based company and its employees "for the purpose of harassment" and to coerce the insurer into settling civil litigation spawned by the Aug. 29, 2005, hurricane.

State Farm says Hood agreed in January to end his office's criminal probe as part of a settlement agreement that called for the company to reopen and possibly pay thousands of policyholder claims. The company also says it paid Hood's office $5 million to cover the costs of his investigation.

The lawsuit is under 42 USC Section 1983, that old standby of Reconstruction that allows one to sue in federal courts those who deny federal civil rights under color of state law.  State Farm is suing Hood for allegedly violating a Non-Prosecution Agreement of January 27, 2007, in which he agreed to end his criminal investigation into State Farm's Katrina claims handling in exchange for a $5 million payment of investigatory costs.  This agreement was part of a global settlement of insurance claims against State Farm involving the Scruggs Katrina Group and some 36,000 Mississippi policyholders, which was to culminate in certification of a class action and immediate settlement of the same.  That class action certification and settlement, however, were shot down by Judge L.T. Senter Jr., who said there were issues with the commonality of claims in the putative class, and that procedural fairness of the settlement process was lacking.

After that civil settlement fell apart, various things happened:  Dickie Scruggs got mad and begin filing additional cases against State Farm on behalf of policyholders, State Farm formed an agreement with Mississippi Insurance Commissioner George Dale to reevaluate the 36,000 claims anyway under a different process, and Hood sued State Farm for allegedly breaching the agreement, even though it was Senter who had stopped the settlement agreement from being carried out.    Hood also began another criminal investigation of State Farm, causing a grand jury subpoena to be issued for numerous documents in connection with his stated belief that State Farm and other insurers improperly shifted payments for wind damage to federally backed flood insurance policies.

That brings us up to date, more or less.  On September 13, State Farm filed a sealed lawsuit against Hood and moved for a temporary restraining order and a preliminary injunction stopping Hood from continuing his investigation, calling Hood's continued  prosecution "a bad faith act."  Click here for a copy of the complaint in the lawsuit.  Click here for a copy of State Farm's memorandum supporting its motion for a TRO.   This is quite an imaginative strategy -- I was commenting to someone the other day that it is quite possible that, to one in Hood's position, it appears that he has a free hand as a state official and cannot be touched by the federal courts.  That same day, September 13, Hood was served with the summons for the complaint -- you can bet he was other than a happy camper. 

The next day, September 14, federal judge Keith Starrett granted the TRO, finding that State Farm had a likelihood of success on the merits of the lawsuit and faced a danger of irreparable harm that outweighed any threatened injury to Hood. Click here for a copy of Judge Starrett's order.  The injunction, per Judge Starrett's order, was to expire September 29 unless extended.

State Farm filed an amended complaint on September 18.  Click here for a copy.  The complaint alleges Hood was violating State Farm's First Amendment right of free speech by attempting to coerce settlements of civil litigation in which State Farm had meritorious defenses, that Hood used improper influence to try to coerce State Farm contractor E.A. Renfroe into dismissing litigation against the "whistleblower" Rigsby sisters (remember, that litigation is the one in which Hood and Scruggs allegedly spoke about circumventing federal judge William Acker's injunction, and which resulted in the criminal prosecution of Scruggs), and that Hood has subjected State Farm to unreasonable searches and seizures in violation of the Fourth Amendment.  Again, the complaint alleges that Hood is pursuing these actions "in bad faith and for the purpose of harassment."

Now, although this complaint is 25 pages long, I would highly recommend that you read it.  It lays out an eye-popping litany of alleged abuses by Hood, working in conjunction with Scruggs for their mutual benefit.  One of the most interesting threads in the complaint is that Hood allegedly used the "whistleblower" Rigsby sisters as stalking horses to wrongfully take State Farm claims documents from Renfroe, and that this constitutes an unreasonable search and seizure. This complaint also makes an explicit charge that Hood and Scruggs teamed up for improper purposes and that Hood crossed ethical lines by helping out Scruggs in civil litigation.

On September 19, State Farm moved to extend the TRO.  Click here to read the supporting legal memorandum.  State Farm also requested expedited discovery including depositions of Scruggs, Hood and Courtney Schloemer, one of Hood's assistants who was involved in communications with Scruggs regarding Judge Acker's injunction in the Rigsby-Renfroe litigation in Alabama.

On September 21, Hood filed a motion requesting Judge Starrett to recuse himself, on the grounds that he had had Katrina claims involving State Farm, his insurer. Click here to read the motion.  Judge Starrett, to avoid even the impression of impropriety, on October 10 agreed and also transferred the case from Hattiesburg to Judge David Bramlette in Natchez. Read the judge's order here.

Not surprisingly, with this large case pushed into his court, Judge Bramlette on October 16 extended the TRO to November 5.  The case was assigned to Magistrate Judge Michael Parker, who issued this order November 2 directing Hood to appear personally on November 7 at the second day of hearings on State Farm's request for a preliminary injunction.  The first day of the hearing was apparently held November 1.

Here is a copy of Judge Parker's November 2 order to unseal the case, citing the public's interest in knowing what is going on here.

This all comes out shortly before Mississippi's general election, in which Hood is standing for re-election against challenger Al Hopkins.  What does it mean for Hood?  In many quarters of the state, being sued by State Farm would be seen as a badge of honor.  On the other hand, the lawsuit raises some compelling issues about Hood's use of his office and especially his cooperation with Scruggs.  Stay tuned for more developments. 

UPDATE: I'm informed I had the location wrong for Judge Bramlette.  He is not in Jackson, but rather in Natchez.  I originally said Jackson and have made the correction above. 

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Ping sent from PointOfLaw Forum on November 3, 2007 10:15 AM
I've been following Hurricane Katrina litigation and politics for quite some time, and have seen many odd twists and turns, but this is the most unusual development yet: State Farm, which has been criminally investigated and civilly sued by Mississippi...
Ping sent from The IP ADR Blog on November 5, 2007 9:14 PM
(photo: Get Out of Jail Free Card by Mark Strozier)Because there are criminal penalties for copyright infringement, the question whether the Plaintiff can agree to withdraw criminal charges in exchange for a civil settlement is often raised in an IP...
Ping sent from Overlawyered on November 6, 2007 3:57 AM
Jim Copland explains what's at stake in elections today in Mississippi. And Copland's piece doesn't even include the latest news, that incumbent AG Jim Hood has been sued by State Farm, which makes some explosive...
Written By:Doug Iverson On November 3, 2007 12:07 PM

WOW, what a deal. I have often discussed Scuggs with my State Farm agent. The fact the TRO was granted and extended could bode well for State Farm. Very interesting complaint. $5,000,000 and Hood still wants more.

Written By:Layne On November 5, 2007 8:25 AM

Wow. . .this story just keeps getting more and more interesting. You are right in stating that State Farm's complaint is "eye-popping", and is well worth the read.

When all the dust is settled, someone needs to write a book on this. . .hint, hint.

Written By:David Rossmiller On November 5, 2007 8:41 AM

I was thinking more about writing a play, a musical, called The Katrina Follies. I'm working on the songs already. One number that is sure to take the roof off is called "The Data Dump," and features Scruggs, Hood and the "whistleblower" Rigsby sisters dancing amid a chorus line of Kinko's workers with huge copiers churning out paper in the background with claims file documents falling gently from the sky like snowflakes. The song's refrain: "When Scruggs calls the tune, everybody jump/ everybody love to do the data dump," and the Kinko's workers punctuate the refrain with a lively staccato beat on their whistles.

Written By:Pattie On November 5, 2007 11:47 AM

It would be very interesting to pull Senator Trent Lott into this discussion. He and his brother-in-law, Dickie Scruggs have declared that they will not rest until State Farm is out of business. Senator Lott has even gone so far as to use harrasement by the FBI. These guys will stop at nothing to get what they want.

Written By:David Rossmiller On November 5, 2007 12:02 PM

Trent Lott has about as much chance of putting State Farm out of business as he does of being "World's Most Eloquent Man."

Written By:doug On November 5, 2007 2:39 PM

The sad part is that in all these law suits it appears that the only real winners will be the attorneys and the losers are the policyholders who don't stand to gain, and the voters of Mississippi whose taxes are being used to defend Jim Hood.

Written By:David Rossmiller On November 5, 2007 3:46 PM

Hood's a lawyer, so he could defend himself for free and save the taxpayers a bundle! Still one day for challenger Al Hopkins to pick up on that campaign theme: "Real Lawyers Defend Themselves."

Written By:Carla On November 9, 2007 3:34 PM

Could anybody tell me who Jim Hood is using as his defense lawyer?????
David Rossmiller, you seem pretty well informed. Do you know who his defense team is in this case??? I would love to know!!!!!

Written By:David Rossmiller On November 9, 2007 5:30 PM

I am pretty well informed on this, but in this instance all I had to do was look at the signature on the bottom of Hood's pleadings in the case. Hood's counsel is J. Lawson Hester, of Jackson.

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