Ala. Judge Asks Criminal Contempt Prosecution of Katrina Lawyer

June 18, 2007

A federal judge in Alabama wants a prominent lawyer involved in a Hurricane Katrina insurance case charged with criminal contempt for what he said was circumventing his order to give up documents secretly copied by two whistleblowers.

U.S. District Judge William M. Acker Jr. asked the federal prosecutor in Birmingham last week to prosecute Mississippi attorney Richard F. Scruggs and his firm. If the request is denied, Acker said he will appoint another attorney to handle the prosecution.

Acker ruled that Scruggs "willfully violated'' a Dec. 8, 2006, preliminary injunction that required him to deliver all documents about Bloomington, Ill.-based State Farm Insurance Co. that two workers at a claims adjusting firm secretly copied after Katrina.

Scruggs, the brother-in-law of Sen. Trent Lott, R-Miss., is suing State Farm on behalf of hundreds of Mississippi residents.

The workers, Cori and Kerri Rigsby, were heavily involved in processing claims for State Farm and have said they copied thousands of pages of records to back up their allegations that State Farm wrongly denied claims after Katrina.

E.A. Renfroe and Co. Inc. fired the sisters after learning of their actions, and filed the lawsuit Acker ruled on June 15. The Rigsbys, from Ocean Springs, Miss., gave the documents to law enforcement agents and Scruggs, who signed them each to a $150,000-a-year consulting contract.

"It is undisputed that Scruggs had in his possession the exact documents that fell within the scope of the injunction and that were and are the whole subject of the controversy,'' the judge wrote in his order.

Instead of complying, Scruggs promptly sent the documents to Mississippi Attorney General Jim Hood's office, Acker said. Hood sent the documents to Renfroe, but Scruggs requested a copy for himself, the judge wrote.

Acker called Scruggs' action a "brazen disregard'' of the court's order, calling it "precisely the type of conduct that criminal contempt sanctions were designed to address.''

Scruggs called the judge's actions "bizarre.''

"Our firm fully cooperated with the court's injunction. We did what was asked of us and the information that we turned over was strong evidence of fraud by the insurance industry,'' he said.

"We're going to vigorously oppose it and we are willing to accept what consequences this Alabama judge might impose for complying with his own injunction,'' Scruggs said.

Acker said Scruggs had argued that he did not violate the injunction because he had interpreted it to contain an express "carve-out for law enforcement.''

But the judge wrote: "To read the preliminary injunction to permit Scruggs to deliver the documents to Hood rather than to counsel for Renfroe is such a strained construction and so contrary to the injunction's clear terms as to lack any credibility whatsoever.''

Zack Scruggs, Richard Scruggs' son and law partner in Oxford, Miss., said they might appeal Acker's ruling.