Rigsby Sisters

Kerri Rigsby and Cori Rigsby (Moran) are sisters who worked for eight years at the E.A. Renfroe Company and were managers overseeing catastrophe claims adjusters before their resignation. The sisters claim State Farm ignored or minimized wind damage to avoid payments. Over the course of several months, the sisters amassed thousands of pages of documents related to State Farm's activities. According to court documents, the sisters took the documents without authorization. Their work in regard to these documents is the subject of ongoing legal action. Eventually, their story went public when ABC's 20/20 show aired it in August 2006. In 2008, Judge Senter of the U.S. District Court of the Southern District of Mississippi found that the sisters and their attorneys had acted unethically when the Scruggs Katrina Group paid the sisters to testify, and barred them from testifying or using any of the documents that were taken.

Judge Senter's order

On April 4, 2008, Judge Senter [http://www.insurancecoverageblog.com/archives/first-party-insurance-judge-senter-disqualifies-katrinaless-litigation-group-ousts-rigsby-sisters-as-witnesses-in-southern-district-of-mississippi.html disqualified the Rigsby sisters from testifying] :

::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 (5 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 (N.D.Ill.1986).

::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 discovery.

The Documents

The sisters say they ultimately obtained about 15,000 pages of claims records. Their collection of these documents is the subject of ongoing legal action. Their former employer has filed suit in Alabama asking that the court order the return of the documents. The suit claims the sisters took the documents without permission or authorization.

The Rigsby sisters alleged this was not an isolated incident, but a widespread campaign by State Farm to pressure engineers to issue certain types of reports to reduce State Farm's liability. State Farm representatives in Bloomington, IL, the home office, say what the women describe would be contrary to the company's claims practices.

E.A. Renfroe

E.A. Renfroe, the company that contracted with State Farm Insurance Co., sued the Rigsby sisters on September 1, 2006. It alleged in its lawsuit [ [http://www.law.com/jsp/article.jsp?id=1160471120066 E.A. Renfroe & Co. Inc. v. Moran; No. 06-1752 (N.D. Ala.).] ] that Cori and Kerri Rigsby broke the law when they turned over reams of internal State Farm records to attorney Richard Scruggs. Renfroe's lawsuit, filed in an Alabama federal court, accused the sisters of violating the Alabama Trade Secrets Act and breaching confidentiality agreements with the company. Renfroe successfully asked a judge to order the Rigsby sisters to return the documents they presented Scruggs and to bar them from continuing to disclose information. Scruggs's efforts to evade this order resulted in a charge of criminal contempt against him that was eventually dismissed.

In Court

November 2006

Attorney General Jim Hood's office argued the suit, "E.A. Renfroe & Co. Inc. v. Moran, No. 06-CV-1752," should be suspended until the Mississippi Attorney General's office completed its criminal investigation into post-Katrina insurance claims practices. They claimed the government's case could be compromised if the civil case continued.

Insurance Commissioner George Dale: Dale launched his own investigation of the insurance industry and began with State Farm because they were the biggest insurance company in Mississippi. Dale claimed he was spurred on by policyholder complaints aired on local television.

December 2006

Federal Judge William Acker Jr. requires the Rigsby sisters to return the documents to E.A. Renfroe.

January 2007

The Rigsby sisters testify for the Mississippi Attorney General before a Mississippi grand jury about what they saw while working as claims adjusters after Hurricane Katrina.

In Alabama, Judge Acker orders the sisters to show why they should not be held in contempt of his order in December 2006 as they had yet to turn over the documents. Acker also requires Scruggs and the Scruggs law firm to show why they should not be held in civil contempt.

In a court hearing on January 31st, E.A. Renfroe's attorney requested the Rigsby sisters and their representation face civil and criminal charges for their actions.

Results

In February 2007, Mississippi state senators Dawkins and Williamson submitted a resolution, " [http://billstatus.ls.state.ms.us/2007/pdf/history/SC/SC0574.htm Mississippi Senate Concurrent Resolution 574,] " ,to the state legislature commending the Rigsby sisters for their actions. The resolution died in committee and the Rigsbys garnered no formal recognition by the legislature.

Media Coverage

* [http://www.parentadvocates.org/index.cfm?fuseaction=article&articleID=7119 25 AUG 2006 - Sisters Keri and Cori Rigsby Speak Out About State Farm Insurance Fraud - Parents Advocate]
* [http://blogs.abcnews.com/theblotter/2006/08/state_farm_insi.html 28 AUG 2006 - Exclusive: Whistleblowers Say State Farm Cheated Katrina Victims - ABC's The Blotter]
* [http://www.insurancejournal.com/news/southeast/2006/08/29/71776.htm 29 AUG 2006 - Sisters Were Whistleblowers in Katrina Claims Handling Case - AP]
* [http://www.sunherald.com/mld/sunherald/15589526.htm 23 SEP 2006 - 'I felt like we were being unfair' - Biloxi Sun Herald]
* [http://www.sunherald.com/mld/sunherald/15609309.htm 26 SEP 2006 - Firm wants sisters silenced - Biloxi Sun Herald]
* [http://www.insurancejournal.com/news/southeast/2006/09/27/72850.htm 27 SEP 2006 - Adjuster Sues Sisters for Releasing State Farm Files - AP]
* [http://www.nola.com/newslogs/topnews/index.ssf?/mtlogs/nola_topnews/archives/2006_10_23.html 23 OCT 2006 - Miss. homeowner says State Farm coerced him into statement supporting company - AP]
* [http://www.sunherald.com/mld/sunherald/16015084.htm 15 NOV 2006 - AG: Suspend civil suit - Biloxi Sun Herald]
* [http://www.al.com/business/birminghamnews/index.ssf?/base/business/1165918616236720.xml&coll=2&thispage=1 12 DEC 2006 - Judge requires return of documents - The Birmingham News]
* [http://www.insurancejournal.com/news/southeast/2007/01/23/76104.htm 23 JAN 2007 - Ex-State Farm Adjusters Tell Miss. Grand Jury of Katrina Claims - AP]
* [http://www.al.com/business/birminghamnews/index.ssf?/base/business/1169547452286400.xml&coll=2 23 JAN 2007 - Judge seeks women's defense - The Birmingham News]
* [http://www.nola.com/news/t-p/capital/index.ssf?/base/news-4/117013975620580.xml&coll=1 30 JAN 2007 - Lawsuit in Miss. stands in contrast to La. - Times Picayune]
* [http://www.sunherald.com/mld/sunherald/business/industries/insurance/16639995.htm 07 FEB 2007 - State Farm pays Scruggs' clients - Biloxi Sun Herald]
* [http://www.legalnewsline.com/news/contentview.asp?c=192155 03 MAR 2007 - Scruggs' contempt hearing set for Wednesday]
* [http://news.yahoo.com/s/ap/20070616/ap_on_re_us/katrina_state_farm_1 15 JUN 2007 - Judge wants Katrina lawyer prosecuted]
* [http://blogs.wsj.com/law/2007/06/15/judge-recommend-feds-prosecute-scruggs-for-criminal-contempt/ 15 JUN 2007 - Judge Recommends Feds Prosecute Scruggs for Contempt]
* [http://www.sunherald.com/news/breaking_news/story/80354.html 19 JUN 2007 - State Farm wants Scruggs disqualified from policyholder lawsuit]

External links

* [http://abcnews.go.com/2020/ ABC's 20/20]
* [http://www.publicintegrity.org/katrina/filter.aspx?cat=8 The Center for Public Integrity - Katrina Watch]
* [http://www.earenfroe.com/default.aspx?id=157 E.A. Renfroe Company]
* [http://www.scruggskatrinagroup.com/ Scruggs Katrina Group]
* [http://www.statefarm.com/ State Farm]