Katrina Lawyer in Contempt, Judge Says; Special Prosecutors Appointed

A day after the Birmingham, Ala., U.S. attorney declined prosecution of a noted Hurricane Katrina plaintiffs' attorney for allegedly violating a federal judge's order, the judge appointed two special prosecutors to pursue criminal contempt charges against the lawyer.

Judge William Acker of the U.S. District Court for the Northern District of Alabama named Birmingham lawyers Charles E. Sharp and Joel A. Williams to prosecute prominent Mississippi attorney Richard "Dickie" Scruggs for allegedly defying his order to turn over hundreds of documents secretly copied by two aspiring whistle-blowers whom formerly represented and now employs.

Judge Acker's order came on the heels of Birmingham U.S. Attorney Alice Martin's refusal to prosecute Scruggs or his firm, the Scruggs Katrina Group.

Scruggs and his firm are representing hundreds of Gulf Coast homeowners against their insurers in claims for Hurricane Katrina damage.

The two whistle-blowers, sisters Cori Rigsby Moran and Kerri Rigsby, admittedly copied reams of State Farm's documents on Katrina-related claims while working for E.A. Renfroe & Co., an Alabama insurance adjusting firm that handled State Farm's Mississippi property claims.

Judge Acker ruled June 15 that Scruggs, to whom the sisters gave the material, willfully violated a preliminary injunction requiring that he deliver the documents to Renfroe's attorneys.

The judge then referred the matter to Martin, asking the U.S. attorney to prosecute Scruggs for criminal contempt.

The dispute over the documents arose in Renfroe's lawsuit against the Rigsby sisters filed in the Birmingham federal court Sept. 1, 2006.

Renfroe alleges that the women violated confidentiality agreements signed during their employment, the company's code of conduct and Alabama law by copying and disclosing the documents.

Renfroe accuses the sisters of attempting to help Scruggs build cases against State Farm.

Scruggs hired the women as consultants in July 2006 after they resigned from Renfroe, and he represented them against the adjuster prior to its lawsuit.

Renfroe asked for a preliminary injunction against Scruggs and the sisters, attempting to prevent the continued disclosure and dissemination of the documents.

In their opposition the Rigsby sisters said their actions were justified since they were trying to expose alleged criminal fraud by State Farm in its handling of Katrina claims.

Judge Acker granted the preliminary injunction Dec. 8. He ordered Scruggs and the sisters to immediately turn over all the leaked documents to Renfroe's counsel.

However, in light of a criminal investigation of State Farm by Mississippi Attorney General Jim Hood, the judge issued a protective order requiring that Renfroe's attorneys refrain from giving the documents to their client or State Farm.

Scruggs then turned the documents over to Hood rather than complying with the order to send them to Renfroe's counsel.

Hood subsequently sent the documents to Renfroe's attorneys, but Scruggs requested copies for himself.

Scruggs argued that he did not violate the December injunction because the court order carved out an exception for turning over the documents to law enforcement.

He cited a letter from Hood's office that said it "was not comfortable that the protective measures put in place by the court will be effective" in keeping the documents from State Farm.

But Judge Acker ruled that his Dec. 8 order contained no law enforcement exception and that Scruggs' actions were not justified.

"Taking Scruggs' word for it, he was arrogating to himself the right to substitute his judgment for the court's judgment," the judge said. "That spells 'defiance.'"

Judge Acker refused to take action against the Rigsby sisters, finding that they were "controlled" by Scruggs.

U.S. Attorney Martin wrote the court a letter July 25 saying she refused to file any charges after undertaking "a dispassionate assessment of the propriety of criminal charges."

Martin's one-paragraph letter cited Young v. United States, 481 U.S. 787 (1987), which gives federal judges authority to appoint special prosecutors in contempt cases, but she provided no reasons for her decision not to bring charges against Scruggs.

"We believe that the U.S. attorney's letter says all that needs to be said about this matter, and it would be inappropriate for us to say anything more at this time," Scruggs' son and law partner Zach said in a July 25 statement.

Not to be deterred, Judge Acker appointed Sharp and Williams as special prosecutors the next day, directing them to sever the criminal charges from Renfroe's civil suit and create a charging document so that the court may assign the case to another Birmingham federal judge.

To comment, ask questions or contribute articles, contact West.Andrews.Editor@Thomson.com.