Today, Federal Judge L.T. Senter disqualified the Katrina Litigation Group and associated attorneys from pursuing cases against State Farm. He further ruled that the Rigsby Gals could no longer be considered witnesses and that the evidence that they stole from State Farm would be inadmissable. This is an earthshattering development in that ongoing litigation.
From the Memorandum
MEMORANDUM OPINION ON MOTION TO DISQUALIFY
MEMBERS OF THE KATRINA LITIGATION GROUP AND ASSOCIATED COUNSEL
The Court has before it the second motion  of State Farm Fire and Casualty
Company (State Farm) and the motion  of E. A. Renfroe & Company (Renfroe) to
disqualify the attorneys and law firms of the former Scruggs Katrina Group (SKG) and
the associated firm of Hesse & Butterworth P.L.L.C. (and other attorneys associated as
counsel for the plaintiffs by these firms) from representing the plaintiffs in this action.
For the reasons set out below, these motions will be granted.
The SKG Joint Venture was formed to litigate property damage claims following
Hurricane Katrina. This action was filed by the original members of the SKG. The
motions   of Richard Scruggs (Scruggs) and the other attorneys of the
Scruggs Law Firm, P. A., to withdraw as counsel in this case have been granted. The
motion  of Mike Moore of the Mike Moore Law Firm, L.L.C., to withdraw as
counsel has also been granted. The other members of the SKG joint venture, the
Barrett Law Office, P.A. (Barrett); Nutt & McAlister, P.L.L.C. (Nutt); and the Lovelace
Law Firm, P.A. (Lovelace), remain as counsel of record. These remaining joint
venturers have associated Hesse & Butterworth, P.L.L.C. as counsel for the plaintiffs.
When Scruggs and two other members of the Scruggs Law Firm withdrew as
counsel of record in this case, Barrett, Nutt, and Lovelace regrouped and formed the
Katrina Litigation Group (KLG). The members of the KLG have undertaken to
represent the plaintiffs in this case and in a large number of other cases against State
Farm and Renfroe now pending in this Court.
State Farm and Renfroe have moved to disqualify the members of the KLG on
the grounds that Scruggs, acting on behalf of the SKG, engaged in unethical conduct
that is sufficiently egregious to justify disqualification of the other SKG joint venturers in
order to preserve the integrity of the judicial process and to assure public confidence in
the litigation of this case and the other similar cases now pending in this Court.
State Farm and Renfroe have charged Scruggs with two basic types of ethical
misconduct and with conflicts of interest, all of which relate in one way or another to the
relationship between Scruggs and the SKG and two former Renfroe employees Cori
and Kerri Rigsby (the Rigsby sisters). State Farm and Renfroe allege 1) that Scruggs
participated and encouraged the Rigsby sisters to wrongfully appropriate and disclose
confidential documents in which both State Farm and Renfroe had a legitimate right to
confidentiality; and 2) that Scruggs paid the Rigsby sisters a substantial sum in
furtherance of Scruggs’s efforts to encourage the misappropriation of these documents.
State Farm and Renfroe have alleged additional acts of misconduct relating to other
witnesses and to the plaintiffs’ counsel having obtained documentary and physical
evidence without following the established procedure for the use of out-of-state
subpoenas in the discovery process.
I have determined that disqualification is required because Scruggs, acting in
furtherance of the SKG joint venture, paid the Rigsby sisters a substantial sum of
money (a consulting fee of $150,000 per year) despite Scruggs’s knowledge that the
Rigsby sisters were material witnesses in connection with many hurricane damage
claims that were likely to become the subject of litigation. While Scruggs made the
arrangements for these payments, the other members of the SKG joint venture knew or
should have known that the payments were being made, and I am of the opinion that
their failure to take timely and reasonable remedial steps or to object to this
arrangement amounts to a ratification of Scruggs’s actions. While the other ethical
misconduct alleged by State Farm and Renfroe are substantial, the payments to the
Rigsby sisters are, in and of themselves, sufficient to warrant disqualification.
It is apparent to me, from my review of the deposition testimony of the Rigsby
sisters, that there was no legitimate reason for these payments and that the “consulting”
work that ostensibly justified these payments was a sham. Even if this were not the
case, the performance of legitimate work that is closely related to a matter in litigation
cannot justify an attorney’s payment of a substantial sum of money to a non-expert
material witness. Payments to non-expert witnesses are specifically limited to statutory
witness fees; reasonable expenses actually incurred for mileage, meals, and lodging;
and reasonable compensation for time lost from work while attending a trial or testifying
by deposition. (Opinion No. 145 of the Mississippi State Bar Ethics Committee, March
11, 1988). The payments Scruggs made to the Rigsby sisters bears no reasonable
connection to any work they performed or to any of expenses they incurred in testifying.
These payments were clearly improper. N.L.R.B. v. Thermon Heat Tracing Services,
Inc., 143 F.3d 181 (5th Cir.1998); Golden Door Jewelry Creations, Inc. v. Lloyds
Underwriters Non-Marine Ass’n, 865 F.Supp 1516, 1526 (S.D.Fla.1994); Rentclub, Inc.
v. Transamerica Rental Fin. Corp., 811 F.Supp 651, 653 (M.D.Fla.1992), aff’d 43 F.3d
1439 (11th Cir.1995); Wagner v. Lehman Bros. Kuhn Loeb Inc., 646 F.Supp 643
Even though the payments to the Rigsby sisters originated with Scruggs, the
other members of the joint venture were aware or should have been aware that the
payments were being made and did nothing to prevent their continued payment. In
these circumstances, all of the other members of the original SKG are responsible for
this breach of ethics. Those whom these firms have subsequently associated must
also be disqualified to prevent the appearance of impropriety in the remainder of this
litigation. See MRPC 5.1(c) (“A lawyer shall be responsible for another lawyer’s
violation of the rules of professional conduct if: (1) the lawyer orders or, with knowledge
of the specific conduct, ratifies the conduct involved . . . or . . . knows of the conduct at
the time when its consequences can be avoided or mitigated but fails to take
reasonable remedial action.”); See American Can Co. v. Citrus Feed Co., 436 F.2d
1125, 1128-29 (5th Cir.1971).
The payments made to the Rigsby sisters require the disqualification of the
successors to the SKG and those whom they have added as associates from further
participation in any litigation in this Court against State Farm and Renfroe arising from
property damage attributable to Hurricane Katrina. The motions to disqualify will be
granted. An appropriate order will be entered, and the plaintiffs in all cases affected by
this disqualification shall be allowed a period of forty-five days in which to retain new
counsel or to notify the Court of their intention to proceed pro-se. For good cause, this
period may be enlarged at the discretion of the United States Magistrate Judge
assigned to the case. The plaintiff’s failure to retain new counsel or to inform the court
of the intention to proceed pro-se will make a case subject to this order eligible for
dismissal without prejudice. The attorneys subject to disqualification by the terms of
this order shall send, via United States mail, postage prepaid, a copy of the opinion and
order in this case to each client affected by this ruling.
The Rigsby sisters will be disqualified as witnesses in any actions now pending
on this Court’s docket against State Farm or Renfroe in which the SKG or the KLG has
represented the plaintiffs, and any documents supplied by the Rigsby sisters to the
SKG or the KLG or its associates shall also be excluded from evidence unless the
plaintiffs can show that the documents were obtained through ordinary methods of