Last week, a federal appellate court affirmed the denial of a motion filed by State Farm Fire and Casualty Company (“State Farm”) 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. (We discussed Judge Senter’s September decision here.) Click here to read the Fifth Circuit’s opinion.
State Farm sought the disqualification on the grounds that Scruggs' ex parte communication with Cori and Kerri Rigsby, two independent claims adjusters of E.A. Renfroe and Co., Inc, a company which provided assistance to State Farm in adjusting and processing Katrina-related claims, and their receipt of confidential claims-related documents from the Rigsby sisters, were violations of the rules of ethics and an act of professional misconduct. Judge Senter, the same district court judge deciding many of the Katrina-related coverage disputes, reasoned that because State Farm had known about Scruggs’ alleged improper conduct while it negotiated with Scruggs in the other suits but made no complaint, it had waived its claim for disqualification.
In its petition for appeal to the Fifth Circuit, State Farm argued that the district court’s refusal to disqualify Scruggs was a legal error and that its own delay in seeking disqualification did not justify the denial of the motion because State Farm’s claims implicate the public perception of the legal system. The Fifth Circuit rejected this argument and held that State Farm failed to demonstrate the extraordinary circumstances required for the appellate court to order a lower court to disqualify counsel. The appellate court further noted that denial of a motion to disqualify is rarely grounds for such an appellate court order, as it would deny a litigant’s right to choose their counsel.
We will continue to monitor Katrina-related developments and provide updates at InsureReinsure.com.