NU Online News Service

After a federal judge rejected a proposed State Farm class-action settlement for Mississippi homeowners with storm-surge damage, which included provisions for more than $20 million in lawyers' fees, attorneys said it could be fixed to get it approved.

U.S. District Court Judge L.T. Senter Jr. said in a Friday ruling that besides failing to justify attorneys' fees for the class-action settlement, the proposal lacked information on a multitude of points and he could not call it "fair, just, balanced or reasonable."

Attorney General Jim Hood issued a statement saying he was "confident that Judge Senter will make the plaintiffs and State Farm fix the problems he has raised in his order."

The Scruggs Katrina Group of attorneys, who represented plaintiffs in the case, issued a statement saying they hoped the "judge's concerns can be quickly addressed. Our efforts and attentions will be placed on satisfying his questions and requirements. The prospect of a multiyear case-by-case litigation is in no one's best interest."

A State Farm attorney, Sheila L. Birnbaum in New York, according to McClatchey Newspapers, said she could "easily explain that this is in the best interest of the policyholders and the people of Mississippi. I don't want to see this settlement fall apart and there be no way to get money to these people."

The Scruggs group, in addition to working on the agreement for homeowners in the proposed class, also reached a final settlement for 639 homeowners, which reportedly will net them $26 million.

They said they would go forward this week "with the initial disbursement of settlement payments to the hundreds of families we represent apart from the proposed class."

Judge Senter said he had not been shown any evidence to determine plaintiffs attorneys involved in the proposed settlement had done enough work to justify getting a minimum of $10 million in fees, or any basis for calculating how they should receive up to $20 million.

The judge said he also lacked information as to the possible number of policyholders who might be covered by the class action, and could not determine how thinly spread among class members the minimum $50 million proposed payout would be.

According to a discussion of the settlement by Mr. Hood on Jan. 23, the proposed agreement covering policyholders in three coastal counties could include more than 1,000, and the eventual payout could exceed $500 million.

State Farm rejected many claims in that area, arguing the damage was caused by wind-driven storm-surge waters, and said policyholders' windstorm policies excluded flood damage.

Judge Senter ruled that before they could totally reject a claim, they had to prove flooding caused all the damage, and if not, pay any portion caused by wind damage.

The proposed class could reopen closed claims and accept a formula for immediate partial payment, or go to arbitration, or opt out of the settlement and sue using information they could obtain about their claims from case files State Farm would be required to provide.

Judge Senter questioned a portion of the settlement that, in addition to settling claims against State Farm, would end the possibility of lawsuits against the company's agents, adjusters and companies related to the insurer.

He questioned how arbitrators would be trained for the job and how their independence and neutrality would be assured. He also said nothing had been shown regarding the competence and impartiality of Poorman-Douglas Corp., the proposed claims administrator.

The scope of the settlement, he said, should be broadened to include other lawyers with similar suits already underway.

He also complained that the claims process was so involved that he judged it too complicated for a lay person to figure out without a lawyer.

Judge Senter said he was uncomfortable sending large numbers of policyholders into arbitration and depriving them of their right to trial by jury, and concerned that the settlement did not allow other litigants and their attorneys to comment on its fairness.

He also said he was worried that state court actions brought by Mr. Hood rely on an arbitration program "administered by this court. There is currently no such procedure in place, and there may never be such a procedure unless I am satisfied that basic standards of fairness are met."

Mr. Hood, who ballyhooed the proposed class agreement a few days ago, appeared to be trying to distance himself in his latest statement, saying "our office did not negotiate the terms of the proposed federal court class-action. In fact, our office had reservations about some of the terms of the class agreed to by the plaintiffs and State Farm."

Special Reports /

Judge Nixes State Farm Settlement With Fat Attorney Fees

Related Stories

Recommended For You