A month from prison, Scruggs still bickering over attorneys fees

John O'Brien Jul. 8, 2008, 10:20am

OXFORD, Miss. (Legal Newsline) - Undeterred by the results of his previous efforts, famed plaintiffs lawyer and soon-to-be federal prisoner Richard "Dickie" Scruggs has again sued another law firm over a fees dispute.

It's at least the fourth time Scruggs has been involved in such litigation, and the outcomes have not been pretty for the Mississippi attorney who took on the tobacco industry in the 1990s.

  • A dispute over Hurricane Katrina fees landed Scruggs five years in prison after he pleaded guilty to trying to bribe the presiding judge;

  • A dispute over asbestos litigation fees cost Scruggs $17.5 million; and

  • Another dispute over asbestos fees is currently the subject of a federal investigation.

    The latest one, filed Thursday in federal court, concerns an agreement from Scruggs to pay D.C. firm Zuckerman Spaeder to represent the "whistleblower" sisters, Kerri Rigsby and Cori Rigsy Moran.

    Scruggs' vehicle for grouping Katrina claims against insurance companies, a handful of law firms that formed together to create the Scruggs Katrina Group, is the actual entity responsible for paying Zuckerman, Scruggs claims. His Scruggs Law Firm should not have a larger amount to pay than the other firms it partnered with, the suit says.

    "Scruggs Law Firm has no responsibility greater than the other members of SKG to pay any indebtedness of SKG, including, but not limited to, the alleged amounts owed to Zuckerman," the complaint asks a judge to declare.

    "Scruggs Law Firm has paid to Zuckerman in full any and all indebtedness for which it could be held liable."

    Zuckerman stopped representing the Rigsbys in a case brought by their former employer E.A. Renfroe & Co. in March, citing non-payment. Renfroe worked with State Farm Insurance Cos. on Katrina claims after the 2005 storm.

    A Dec. 2006 order from federal judge William Acker told Scruggs to return confidential insurance documents obtained through the Rigsbys. The sisters were sued by Renfroe for their actions.

    Instead, Scruggs gave them to Hood, who had sued five insurance companies -- including State Farm -- over their handling of Katrina claims. He also pursued a criminal case against State Farm, while campaign contributor Scruggs formed the SKG.

    Acker recommended to U.S. Attorney Alice Martin that Scruggs be prosecuted for contempt, but she declined. Hood had written Martin, urging her not to file charges because Scruggs was acting as a confidential informant for his office. Acker then appointed three special prosecutors to file an indictment.

    Florida federal judge Roger Vinson dismissed the charge in February, citing a lack of jurisdiction over Scruggs because Scruggs was not the sisters' attorney. Had that not been the case, Vinson wrote he still would have dismissed the charge because of an exception in the order that allowed for giving of the documents to a law enforcement official..

    Recently, Acker found Scruggs in civil contempt, as well as the Rigsby sisters, disagreeing with Vinson's prior reasoning. He also said Scruggs and Hood were co-conspirators and called Hood "a so-called law enforcement official." Hood promised action against Acker.

    After Scruggs' November indictment for conspiring to bribe a state judge, his firm withdrew from the SKG. The remaining members -- Nutt & McAlister of Ridgeland, Miss., Barrett Law Offices of Lexington, Miss., and Lovelace Law Firm of Destin, Fla. - renamed themselves the "Katrina Litigation Group" but were later disqualified from all Katrina cases because of Scruggs' decision to pay the Rigsbys $150,000 salaries to be "consultants" for the group.

    "Zuckerman continued to provide legal services to the Rigsbys and submitted additional invoices for its legal services after Scruggs Law Firm's dissociation from SKG," the suit says.

    "Scruggs Law Firm received some of those invoices and promptly forwarded them to the Katrina Litigation Group."

    Zuckerman's last invoice says it is owed more than $1.7 million.

    "Subsequently, Zuckerman began demanding payment directly from Scruggs Law Firm and/or Scruggs, personally and individually, for all or part of the amounts allegedly owed," the suit says.

    Scruggs says his firm has no contract with Zuckerman - only the SKG does. He also claims Zuckerman's rates are exorbitant.

    "Zuckerman reflects hourly rates as much as four times the customary fees for the legal work it allegedly performed," the suit says.

    One line of the complaint, authored by attorneys J. Cal Mayo and Pope Mallette, reads, "Scruggs is not and has never been a member in SKG."

    Scruggs first made a name for himself in asbestos cases, representing shipyard workers. After that, his work led to the 1998 Tobacco Master Settlement Agreement, which has an estimated worth of $246 billion for the 52 participating territories and states. The case, and Scruggs' work, was depicted in the Al Pacino/Russell Crowe film "The Insider."

    More than 600 of SKG's cases were settled early in 2007, earning the SKG $26.5 million in attorneys fees. Former partner John Griffin Jones filed suit against Scruggs, claiming his firm was shortchanged when the money was divided.

    Scruggs admitted that he gave the go-ahead for attorney Timothy Balducci to offer $50,000 to Lafayette County Circuit Court Judge Henry Lackey for a ruling that would have sent the dispute to an arbitration panel. Balducci pleaded guilty in November to the scheme, and his business partner Steven Patterson, a former state Auditor, soon followed.

    Lackey contacted the FBI soon after Balducci's first mention of a bribe. Scruggs agreed to a maximum prison sentence of five years, pleading guilty to a conspiracy charge while the other five were dropped.

    Last month, he received that five-month sentence, while son Zach received 14 months and Scruggs Law Firm attorney Sidney Backstrom received 28 months.

    Dickie Scruggs, 62, and Backstrom, 39, will be incarcerated Aug. 4.

    Also possibly on the horizon for Scruggs are charges from a fees dispute in Jackson.

    Hinds County Circuit Judge Bobby DeLaughter presided for years over a dispute between Scruggs and former partner William Roberts Wilson, Jr. The two had teamed up on asbestos cases and disagreed over the amount of fees Wilson was owed after he sold his interest in the enterprise.

    A special master recommended DeLaughter rule Wilson was owed $15 million, but DeLaughter instead decided in 2006 that Wilson was already paid in full when Scruggs gave him $1.5 million. A second former partner, Alwyn Luckey, had been given $17.5 million after his case.

    Booneville attorney Joey Langston, who represented Scruggs in the latter part of the Wilson case and formerly employed Balducci, pleaded guilty to attempting to bribe DeLaughter with consideration for a federal judgeship. Scruggs' brother-in-law, then-Sen. Trent Lott, was able to make recommendations to President Bush.

    Ultimately, after what has been described as a "courtesy call," Lott gave his support to another candidate.

    Prosecutors in the Lafayette County case had planned to introduce evidence from the Hinds County case during Scruggs' trial under a federal rule that allowed for evidence of similar acts being presented.

    From Legal Newsline: Reach John O'Brien by e-mail at john@legalnewsline.com.

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