State Farm To Judge: Boot Scruggs Off Case

State Farm launched a legal attack yesterday on an attorney representing thousands of Hurricane Katrina claimants, asking a judge to toss the lawyer and his firm off a case for alleged ethical violations, including the use of "stolen" State Farm documents.

The motion to disqualify Richard "Dickie" Scruggs, his Oxford, Miss. law firm and the Scruggs Katrina Group was filed in Mississippi three days after a federal judge in Alabama asked the U.S. attorney there to prosecute Mr. Scruggs for criminal contempt.

U.S. District Court Judge William M. Acker Jr. in Birmingham, Ala., issued the demand for prosecution for what the judge said was Mr. Scruggs's violation of his injunction against disclosure and misappropriation of State Farm documents.

The material was secretly copied by two former adjusters for E.A. Renfroe & Company--sisters Corri Rigsby Moran and Kerri Rigsby--who evaluated Hurricane Katrina State Farm claims in Mississippi.

A State Farm spokesman said the motion in Mississippi's U.S. District Court, Southern District, had originally been due for submission Friday, but when it was delayed by computer problems, material concerning Judge Acker's order was added over the weekend.

Mr. Scruggs said the insurer's filing "is a reaffirmation that State Farm is getting desperate."

State Farm filed its motion in a case brought by a Biloxi, Miss., couple--Thomas and Pamela McIntosh--who are disputing the insurer's engineering report concerning the amount of Hurricane Katrina damage to their home. Mr. Scruggs accused State Farm of filing the motion because the couple rejected a settlement offer.

According to the insurer, Kerry Rigsby worked on the McIntosh claim, and the Rigsby sisters "stole thousands of State Farm's confidential documents"--including an engineering report on the McIntosh case--and gave them to Mr. Scruggs.

Mr. Scruggs, "in turn, rewarded the sisters for their cooperation by paying them an annual salary of $150,000 each to serve as 'litigation consultants' for him and his associates at the Scruggs Katrina Group..."

Mr. Scruggs said the sisters were hired only after State Farm, through their "captive surrogate" Renfroe, fired them and they had been paid "more than that to cheat people on the Gulf Coast."

The State Farm filing says that Mr. Scruggs violated Mississippi Rules of Professional Conduct by holding private ex parte meetings with the sisters, when they were legally represented by State Farm while working for the firm.

According to the insurer's memorandum, Mr. Scruggs violated rules by using methods to obtain "stolen confidential documents" as evidence that violated the legal rights of a third party and State Farm.

The insurer also argued Mr. Scruggs is prevented from representing a party in a proceeding where he is likely to have to testify. In the McIntosh case, State Farm said he has knowledge of exculpatory facts that bear directly on that claim.

Mr. Scruggs said he began representing the sisters when they consulted him about the legality of the work they were doing.

"There is nothing unethical about what we did," he said, noting that the firm had cooperated with the government to verify attempts by the insurer to push losses onto the federal flood insurance program "and cheat homeowners."

State Farm said in its papers it did not make its move lightly, but deposition testimony, public statements and other evidence shows Mr. Scruggs committed "repeated ethical violations and traduced the Federal Rules," making State Farm's attorney "duty bound to bring these issues to the attention of the court."