On September 12, 2007, Judge L.T. Senter, Jr., sitting in the federal district court in Mississippi, denied a motion filed by State Farm Fire and Casualty Company to disqualify Richard ("Dickie") Scruggs, his law firm, and other attorneys and firms in the Scruggs Katrina Group from representing plaintiffs in the case of McIntosh v. State Farm Fire & Casualty Co. If successful, it would have effectively disqualified these attorneys from all of the 170 lawsuits in which Scruggs and the Scruggs Katrina Group presently represent State Farm insureds.

State Farm's motion to disqualify alleges that Scruggs had unauthorized contact with Cori and Kerri Rigsby, two former employees of E.A. Renfroe and Co., Inc. (a company which provided assistance to State Farm in adjusting and processing claims) who allegedly secretly copied documents that prove State Farm and E.A. Renfroe committed fraud in wrongfully adjusting or denying claims for Katrina-related damage. As discussed here, a lawsuit is pending against the Rigsbys in the Northern District of Alabama on this issue, and a criminal contempt proceeding against Scruggs is pending regarding his handling of these documents. State Farm’s motion alleges that Scruggs and his firm violated ethical rules and engaged in professional misconduct.

State Farm’s motion was denied on the grounds that State Farm waived its claim by not filing its motion until more than one year after State Farm learned of Scruggs' and his law firm's alleged actions. The court, however, did not comment on the merits of State Farm's claims.

In the opinion, Judge Senter, who is also presiding over much of the Katrina-related coverage litigation in Mississippi, stated that "having seen first hand the ability and the willingness of State Farm to work with Scruggs and his firm to reach reasonable settlements of the claims of State Farm policyholders during the past eighteen months, I am unwilling to now deprive many of the remaining State Farm claimants of their choice of attorney based on conduct that was known to State Farm and that State Farm has not seen fit heretofore to challenge."

We will continue to monitor Katrina-related developments and provide updates at InsureReinsure.com.