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Legal Commentary

: FORTUNE Legal Pad

State Farm v. Scruggs updates (Introduction)

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With former super-lawyer Richard F. “Dickie” Scruggs now serving a federal prison term for conspiring to bribe one state judge, and a federal grand jury reportedly looking into whether he conspired to bribe a second one (see also here), State Farm?s lawyers have been relentlessly pursuing a parallel crusade to expose and civilly punish Scruggs for a long laundry list of other alleged wrongdoing.

State Farm’s accusations stem from how Scruggs allegedly conducted hislast great litigation campaign, in which he accused State Farm and other insurers of improper claims-handling practices along the Mississippi Gulf coast in the wake of Hurricane Katrina. (Scruggs’s bribery conviction stems from an attempt to influence a lawsuit peripheral to that campaign. in which co-counsel were arguing over how to divvy up attorneys fees.)

My best effort to untangle Scruggs’s assault upon the insurers –which often seemed like a15-ring circus — was contained in this feature story I wrote for Fortune in April.

But lots has happened since then, particularly over the last two months when I and, probably you, were on vacation. You may have already seen references to some of these developments — including two new depositions from two colleagues and social friends of the State Farm “insiders” who worked with Scruggs, Kerri and Cori Rigsbys – on the invaluable Yall Politics and Insurance Coverage Blog sites, but I will try here to put that new evidence in some context, add some original reporting, and mention a few things that look important to me that haven’t been noted yet.

Since Internet publishing solons keep telling me that nobody reads more than 700 words at a stretch on the Web (a devastatingly ominous message for someone who does what I do for a living), I?ll try to break this update into palatable, bite-sized pieces, each dealing with a different issue.

In overview, in theunsettled remnants of the suits against State Farm that were originally brought by Scruggs (now being handled by other counsel, obviously), State Farm now alleges that Scruggs manufactured portions of his case against State Farm; induced State Farm insiders to violate their contractual duties; illegally broke into State Farm?s password-protected computer database; tampered with his own witnesses? or clients? computers to destroy evidence; compensated witnesses in unethical ways; violatedone court’s injunction; and violated another court’s confidentiality orders.

Scruggs’s criminal counsel, John Keker, declined comment for this article, and Scruggs himself invoked his Fifth Amendment right to remain silent when asked about State Farm’s accusations at a civil deposition in July. (He also invoked the Fifth when asked for his date of birth, so his assertions of privilege in this context really should not be seen as admissions to the specific allegations State Farm is making.)

While one judge has already found Scruggs in civil contempt for violating an injunction (a ruling now on appeal) and another has found that he did, in fact,compensate witnesses unethically, most of State Farm’s other accusations remain far from proven.

I’ve broken this update into these six topics:

Part I: Key witness will finally testify

Part II: When Kerri met Dickie

Part III: Was there a third insider?

Part IV: Computer funny business

Part V: “Trailer Lawyers”

Part VI: Violating confidentiality orders

Full post as published by FORTUNE Legal Pad on August 25, 2008 (boomark / email).

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