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| '''Kerri Rigsby''' and '''Cori Rigsby''' are the whistle-blowers who proved to a Mississippi that State Farm committed fraud against the United States Government. The sisters claim ] ignored or minimized wind damage to avoid payments relating to ] (2005). The jury verdict was upheld by the U.S. Court of Appeals for the Fifth Circuit and then was affirmed 8-0 by the United States Supreme Court.<ref>{{Cite news|url=http://www.insurancejournal.com/news/southeast/2015/07/16/375318.htm|title=U.S. Appeals Court Rules for Whistleblowers in State Farm Katrina Fraud Case|date=2015-07-16|newspaper=Insurance Journal|access-date=2017-02-10|language=en-US}}</ref> The Rigsbys were managers who worked in Gulfport,<ref>{{Cite web|url=http://lewisbrisbois.com/newsroom/articles/fifth-circuit-opens-the-floodgates|title=Fifth Circuit Opens The Floodgates - Lewis Brisbois Bisgaard & Smith LLP|website=lewisbrisbois.com|access-date=2017-03-16}}</ref> Mississippi for a subcontractor hired by State Farm to adjust wind and flood claims after Hurricane Katrina.<ref>{{Cite web|url=https://www.law360.com/employment/articles/446443/state-farm-blasts-efforts-to-expand-katrina-fca-case|title=State Farm Blasts Efforts To Expand Katrina FCA Case - Law360|website=www.law360.com|language=en|access-date=2017-03-16}}</ref> They were the first to uncover a fraudulent scheme by State Farm to improperly categorize wind damage as flood damage. This mischaracterization was very important because State Farm had to pay for wind damage out of its own pocket under State Farm homeowner policies, while flood damage was paid by the federal government under FEMA’s flood policies.<ref>{{Cite news|url=http://ahhelaw.com/fifth-circuit-affirms-fraud-verdict-against-katrina-insurer/|title=Fifth Circuit Affirms Fraud Verdict Against Katrina Insurer - Adams Hoefer Holwadel, LLC|date=2015-07-16|newspaper=Adams Hoefer Holwadel, LLC|access-date=2017-02-14|language=en-US}}</ref> Their story went public when ] ] aired it in August 2006. | |||
| '''Kerri Rigsby''' and '''Cori Rigsby (Moran)''' are the American sisters who worked for eight years at the ] and were managers overseeing ] ] before their resignation. The sisters claim ] ignored or minimized wind damage to avoid payments relating to ] (2005). 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 ] ] 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 ] 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. | |||
| , a federal jury in Gulfport found State Farm guilty of committing fraud against policyholders during Hurricane Katrina by forcing engineers to change their reports. The Rigsbys’ landmark win was historic because they were the first to prove that an insurance company defrauded the government in FEMA’s National Flood Insurance Program.<ref>{{Cite news|url=http://www.npr.org/sections/thetwo-way/2016/12/06/504572603/supreme-court-upholds-hurricane-katrina-fraud-verdict-against-state-farm|title=Supreme Court Upholds Hurricane Katrina Fraud Verdict Against State Farm|work=NPR.org|access-date=2017-03-17|language=en}}</ref> | |||
| ==Judge Senter's order== | |||
| ==FEMA’s Federal Flood Program== | |||
| On April 4, 2008, Judge Senter : | |||
| Many homeowners who live in coastal areas have two insurance policies on their homes: (1) homeowners’ policies, which are underwritten by private insurers and cover damage from wind;<ref>{{Cite news|url=http://www.iii.org/article/what-covered-standard-homeowners-policy|title=What Is Covered by Standard Homeowners Insurance?|work=III|access-date=2017-03-13}}</ref> and (2) flood policies, which are underwritten by the National Flood Insurance Program<ref>{{Cite web|url=https://www.floodsmart.gov/floodsmart/pages/about/nfip_overview.jsp|title=About The National Flood Insurance Program {{!}} Risk of Flooding {{!}} NFIP {{!}} FloodSmart|website=www.floodsmart.gov|access-date=2017-03-13}}</ref> (“NFIP”) (a division of FEMA) and cover damage from flooding.<ref>{{Cite web|url=https://www.irmi.com/online/insurance-glossary/terms/f/flood-exclusion.aspx|title=flood exclusion - Insurance Glossary {{!}} IRMI.com|website=www.irmi.com|access-date=2017-03-13}}</ref> Private insurance companies contract with the government and are paid fees for selling the federal flood insurance policies, for collecting the premiums, and for adjusting flood claims under those policies.<ref>{{Cite web|url=https://www.fema.gov/what-write-your-own-program|title=What Is The Write Your Own Program? {{!}} FEMA.gov|website=www.fema.gov|language=en|access-date=2017-03-13}}</ref> Sometimes, the same insurance company that insures a particular property under its homeowner policy also sells and administers the flood policy on the same home.<ref>{{Cite web|url=https://www.fema.gov/wyo_company|title=Write Your Own Flood Insurance Company List {{!}} FEMA.gov|website=www.fema.gov|language=en|access-date=2017-03-13}}</ref><ref>{{Cite web|url=https://www.irmi.com/online/insurance-glossary/terms/w/write-your-own-wyo-program.aspx|title=Write-Your-Own (WYO) Program - Insurance Glossary {{!}} IRMI.com|website=www.irmi.com|access-date=2017-03-13}}</ref> When a multi-peril storm strikes such a property, the “Single Adjuster Program” allows that insurance company to send its own adjuster to the property to adjust both the wind claim and the flood claim.<ref>{{Cite web|url=https://www.fema.gov/pdf/nfip/manual200510/14cl.pdf|title=Claims - Insurance Responsibilities|last=|first=|date=|website=Fema|archive-url=|archive-date=|dead-url=|access-date=March 13, 2017}}</ref><ref>{{Cite web |url=https://www.nfipservices.com/uploads/adjclaimsmanual_part1_508rev_12sep13.pdf |title=National Flood Insurance Program - Adjuster Claims Manual |website=National Flood Insurance Program Services |date=September 2013|deadurl=no |accessdate=March 21, 2017}}</ref> Many commentators have noted that this program creates an inherit conflict of interest because if the employee characterizes the damage as wind damage, then his employer has to pay the claim, whereas if he characterizes it as flood damage then the government has to pay.<ref>{{Cite web|url=https://www.gpo.gov/fdsys/pkg/CHRG-110shrg50358/html/CHRG-110shrg50358.htm|title=- AN EXAMINATION OF THE NATIONAL FLOOD INSURANCE PROGRAM|website=www.gpo.gov|access-date=2017-03-13}}</ref><ref>{{Cite web|url=https://www.gpo.gov/fdsys/pkg/CHRG-110hhrg34677/html/CHRG-110hhrg34677.htm|title=- INSURANCE CLAIMS PAYMENT PROCESS IN THE GULF COAST AFTER THE 2005 HURRICANES|website=www.gpo.gov|access-date=2017-03-13}}</ref><ref>{{Cite web|url=https://hazdoc.colorado.edu/bitstream/handle/10590/3476/C024043.pdf?sequence=1|title=Hurrican Katrina: Wind Versus Flood Issues|last=|first=|date=|website=Department of Homeland Security |archiveurl=https://web.archive.org/web/20170314064036/https://hazdoc.colorado.edu/bitstream/handle/10590/3476/C024043.pdf?sequence=1 |archivedate=March 14, 2017 |deadurl=no |accessdate=March 21, 2017}}</ref><ref>{{Cite web|url=http://nsglc.olemiss.edu/SGLPJ/Presentations_08/Abbott.pdf|title=Floods, Flood Insurance, Litigation, Politics – and Catastrophe:The National Flood Insurance Program|last=Abbott|first=Ernie|date=|website=olemiss.edu|archive-url=|archive-date=March 26, 2008|dead-url=|access-date=March 13, 2017}}</ref> | |||
| <blockquote>State Farm and Renfroe have charged ] with two basic types of ethical misconduct and with ], 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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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).<br /><br />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).<br /><br />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.<br /><br />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.</blockquote> | |||
| ==The Rigsbys as Catastrophe Team Managers== | |||
| ==Documents== | |||
| The Rigsbys worked as catastrophe adjusters for insurance companies on many hurricanes and other storms for several years prior to Katrina.<ref name=":1">{{Cite news|url=http://www.propertyinsurancecoveragelaw.com/2016/12/articles/state-farm/state-farm-claims-whistleblowers-win-in-united-states-supreme-court-and-may-get-additional-evidence-of-wrongdoing/|title=State Farm Claims Whistleblowers Win in United States Supreme Court and May Get Additional Evidence of Wrongdoing {{!}} Property Insurance Coverage Law Blog {{!}} Merlin Law Group|date=2016-12-14|work=Property Insurance Coverage Law Blog|access-date=2017-03-13|language=en-US}}</ref> In the days after Katrina made landfall, the Rigsbys were called to work as team managers overseeing adjusters in State Farm’s Gulfport catastrophe claims office.<ref>{{Cite web|url=http://www.washingtonpost.com/wp-dyn/content/article/2006/08/26/AR2006082600358_pf.html|title=Sisters Blew Whistle on Katrina Claims|website=www.washingtonpost.com|access-date=2017-03-13}}</ref><ref name=":2">{{Cite web|url=http://www.badfaithinsurance.org/reference/General/1244a.htm|title=State Farm called Katrina a "Water Storm"|website=www.badfaithinsurance.org|access-date=2017-03-13}}</ref> During the weeks and months after the storm, the Rigsbys noticed that State Farm was engaging in a scheme to defraud the government by shifting losses from its homeowners’ policies to the government flood policies by intentionally miscategorizing wind damage as flood damage.<ref name=":2" /> Kerri Rigsby first noticed that something was terribly wrong when she found two engineering reports on a property owned by Chris and Pam McIntosh in Biloxi: the first version of the report stated that wind was the primary cause of damage to the home, while a second report done by the same company a week later stated that flood was the primary cause of loss.<ref name=":2" /><ref name=":1" /> | |||
| 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 Lawsuit== | |||
| In April 2006, the Rigsbys filed a lawsuit in a Mississippi federal court under the qui tam whistleblower provisions of the False Claims Act (“FCA”).<ref>{{Cite news|url=http://www.insurancejournal.com/news/national/2015/01/05/351400.htm|title=Sisters' Whistleblower Case Over State Farm's Katrina Claims Nears Court Date|date=2015-01-05|work=Insurance Journal|access-date=2017-03-17|language=en-US}}</ref><ref>{{Cite news|url=https://www.courthousenews.com/justices-hold-violating-seal-in-false-claims-act-case-not-fatal/|title=Justices Hold Violating Seal in False Claims Act Case Not Fatal|date=2016-12-06|work=Courthouse News Service|access-date=2017-03-17|language=en-US}}</ref> The FCA provides a vehicle for private citizens to blow the whistle on companies that defraud the federal government.<ref>{{Cite web|url=http://www.taf.org/resource/fca/false-claims-act-overview|title=False Claims Act Overview {{!}} Taxpayers Against Fraud Education Fund|website=www.taf.org|language=en|access-date=2017-03-17}}</ref><ref>{{Cite news|url=http://www.bernlieb.com/whistleblowers/History-Of-The-False-Claims-Act/index.html|title=History of the False Claims Act - The Whistleblower Act|access-date=2017-03-17|language=en-US}}</ref> The FCA was initially referred to as “Lincoln’s Law” because it was enacted in the Civil War Era to incentivize private citizens to blow the whistle on unpatriotic companies that were overcharging the government during the war effort.<ref>{{Cite web|url=https://www.falseclaimsact.com/federal-false-claims-act|title=False Claims Act Law Firm|website=www.falseclaimsact.com|language=en-US|access-date=2017-03-17}}</ref><ref>{{Cite web|url=http://www.taf.org/press-releases/lincoln-law-150-years-old-and-thriving-0|title=The Lincoln Law is 150 Years Old and Thriving {{!}} Taxpayers Against Fraud Education Fund|website=www.taf.org|language=en|access-date=2017-03-17}}</ref><ref>{{Cite web|url=http://www.whistleblowingprotection.org/?q=node/69|title=Qui Tam Timeline {{!}} Whistleblowing Protection|website=www.whistleblowingprotection.org|language=en|access-date=2017-03-17}}</ref> | |||
| 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 ]. State Farm representatives in ], ], the home office, say what the women describe would be contrary to the company's claims practices. | |||
| When they filed the FCA claim, the Rigsbys were represented by Richard Scruggs, a Mississippi plaintiffs lawyer who had become famous for an historic settlement with tobacco companies.<ref>{{Cite news|url=http://www.sunherald.com/news/local/hurricane-katrina/article119386213.html|title=Scruggs says Rigsby sisters are the Coast’s ‘Thelma and Louise’|work=sunherald|access-date=2017-03-24|language=en}}</ref><ref>{{Cite news|url=http://www.chicagotribune.com/business/ct-supreme-court-state-farm-katrina-20161206-story.html|title=Justices uphold Katrina fraud verdict against State Farm|last=services|first=Tribune news|work=chicagotribune.com|access-date=2017-03-24|language=en-US}}</ref> The lawsuit alleged that State Farm implemented a fraudulent scheme to defraud the federal government by mischaracterizing wind damage as flood damage and thereby shifting losses from Hurricane Katrina away from State Farm’s homeowner insurance policies onto FEMA’s federal flood policies. | |||
| ==E.A. Renfroe== | |||
| Scruggs was eventually indicted for misconduct unrelated to the Rigsby’s lawsuit and withdrew from the case.<ref>{{Cite news|url=http://www.msnewsnow.com/story/7423440/scruggs-and-others-indicted-for-bribery|title=Scruggs and Others Indicted for Bribery|access-date=2017-03-27|language=en}}</ref> In 2008, the Rigsbys retained Augie Matteis of Weisbrod Matteis & Copley and Maison Heidelberg of Watson Heidelberg, who have represented the Rigsbys continuously since that time.<ref>{{Cite web|url=http://slabbed.org/2008/08/05/legal-team-for-rigsby-sisters-files-first-qui-tam-motion/|title=Legal team for Rigsby sisters files first qui tam motion|last=Author|date=2008-08-05|website=Slabbed|access-date=2017-03-27}}</ref><ref>{{Cite web|url=http://slabbed.org/2008/07/30/provost-umphrey-was-a-qui-tam-smokescreen-gilbert-randolph-welcome-to-slabbed/|title=Provost Umphrey Was a Qui Tam Smokescreen. Gilbert Randolph Welcome to Slabbed|last=Author|date=2008-07-30|website=Slabbed|access-date=2017-03-27}}</ref><ref>{{Cite web|url=http://fortune.com/2008/08/25/scruggs-updates-part-i-key-witness-will-finally-testify/|title=Scruggs updates, Part I: Key witness will finally testify|website=Fortune|access-date=2017-03-27}}</ref> | |||
| E.A. Renfroe, the company that contracted with State Farm Insurance Co., ] the Rigsby sisters on September 1, 2006. It alleged in its lawsuit that Cori and Kerri Rigsby broke the law when they turned over reams of internal State Farm records to attorney ]. Renfroe's lawsuit, filed in an Alabama ], accused the sisters of violating the Alabama Trade Secrets Act and breaching confidentiality agreements with the company. Renfroe successfully asked a ] 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. | |||
| ==The Rigsbys Win a Unanimous Jury Verdict== | |||
| State Farm filed scores of motions over the years to dismiss the Rigsbys’ lawsuit, but was unsuccessful.<ref name=":3">{{Cite web|url=http://www.gotofirm.com/publications/state-farm-qui-tam-suit-over-flood-claims-survives/|title=State Farm Qui Tam Suit Over Flood Claims Survives|website=www.gotofirm.com|language=en|access-date=2017-03-29}}</ref> <ref>{{Cite news|url=http://www.pjstar.com/x1853935501/State-Farm-appeals-Katrina-fraud-ruling|title=State Farm appeals Katrina fraud ruling|work=Journal Star|access-date=2017-03-29|language=en}}</ref> Judge Senter, the federal judge assigned to adjudicate all of the Hurricane Katrina claims in Mississippi, denied State Farm’s summary judgment motion and directed the parties to prepare for trial.<ref>{{Cite web|url=https://www.law360.com/articles/350716/scruggs-leaks-can-t-save-state-farm-from-katrina-fca-suit|title=Scruggs Leaks Can't Save State Farm From Katrina FCA Suit - Law360|website=www.law360.com|language=en|access-date=2017-03-29}}</ref><ref name=":3" /> | |||
| Although the Rigsbys’ alleged that State Farm’s fraudulent scheme affected thousands of flood claims, Judge Senter ordered the parties to try the McIntosh claim first as a “bellwether” trial before allowing the Rigsbys to take discovery on the magnitude of the fraud.<ref name=":4">{{Cite web|url=http://www.mondaq.com/unitedstates/x/554594/White+Collar+Crime+Fraud/A+Closer+Look+At+Rigsby+And+The+Supreme+Courts+Rejection+Of+Mandatory+Dismissal+For+Seal+Violations|title=A Closer Look At Rigsby And The Supreme Court's Rejection Of Mandatory Dismissal For Seal Violations - Criminal Law - United States|website=www.mondaq.com|access-date=2017-04-05}}</ref><ref name=":5">{{Cite web|url=https://www.law360.com/articles/842422|title=Gov't Tells High Court FCA Seal Violations Need Discretion - Law360|website=www.law360.com|language=en|access-date=2017-04-05}}</ref> The Rigsbys would first have to prove to a jury that State Farm’s submission of the $250,000 flood insurance claim to the NFIP constituted a false claim under the FCA.<ref name=":4" /><ref name=":5" /> Judge Senter retired and then died prior to the trial.<ref>{{Cite news|url=http://www.nola.com/crime/index.ssf/2011/05/retired_us_district_judge_lt_s.html|title=Retired U.S. District Judge L.T. Senter dies at age 77|work=NOLA.com|access-date=2017-04-05|language=en-US}}</ref> | |||
| In April 2013, after seven years of scorched earth litigation, the Rigsbys prevailed in a jury trial that was presided over by Judge Ozerden in the Southern District of Mississippi.<ref>{{Cite web|url=http://www.jacksonfreepress.com/news/2013/apr/09/jury-finds-state-farm-committed-fraud/ https://www.law360.com/articles/431287|title=|last=|first=|date=|website=|archive-url=|archive-date=|dead-url=|access-date=}}</ref> After a two-week trial, the unanimous jury ruled in less than three hours that State Farm violated the FCA by submitting a false claim and false records to the federal government.<ref>{{Cite web|url=https://www.law360.com/articles/440611/state-farm-attacks-post-katrina-gov-t-fraud-verdict|title=State Farm Attacks Post-Katrina Gov't Fraud Verdict - Law360|website=www.law360.com|language=en|access-date=2017-04-05}}</ref> Indeed, the jury found that the McIntosh’s home was completely destroyed by wind, so it therefore suffered no flood damage and the $250,000 payment was fraudulently charged to the government.<ref>{{Cite web|url=https://casetext.com/case/united-states-ex-rel-rigsby-v-state-farm-fire-cas-co|title=Casetext|website=casetext.com|language=en|access-date=2017-04-05}}</ref> | |||
| Judge Ozerden affirmed the jury’s verdict and awarded $250,000 to the federal government, trebled to $750,000, plus civil fines, attorneys’ fees and costs. The Court awarded the Rigsbys the maximum share allowed for plaintiffs in FCA cases, which is 30% of the amount recovered for the government. | |||
| ==The Rigsbys Win in the Fifth Circuit== | |||
| State Farm appealed the jury verdict and the Rigsbys’ appealed the District Court’s decision that the Rigsbys were entitled to no more discovery.<ref name=":6">{{Cite web|url=https://cases.justia.com/federal/appellate-courts/ca5/14-60160/513113882/0.pdf|title=Published Opinion Filed|last=|first=|date=|website=|archive-url=https://cases.justia.com/federal/appellate-courts/ca5/14-60160/513113882/0.pdf|archive-date=July 13, 2015|dead-url=|access-date=May 3, 2017}}</ref> The Rigsbys won on both issues: the Fifth Circuit affirmed the verdict, but reversed the District Court’s decision that denied the Rigsbys’ discovery into other false claims.<ref name=":6" /> | |||
| ==The Rigsbys Win 8-0 in the U.S. Supreme Court== | |||
| After its devastating loss in the Fifth Circuit, State Farm petitioned for certiorari in the Supreme Court.<ref>{{Cite web|url=http://www.scotusblog.com/wp-content/uploads/2015/10/15-__PetitionForWritOfCertiorari.pdf|title=Petition for writ of certiorari|last=Supreme Court of the United States|first=|date=|website=scotusblog.com|archive-url=http://www.scotusblog.com/wp-content/uploads/2015/10/15-__PetitionForWritOfCertiorari.pdf|archive-date=October 20, 2015|dead-url=|access-date=May 3, 2017}}</ref> The Supreme Court granted cert on one narrow issue: Whether seal violations by Richard Scruggs in 2006 required automatic dismissal of the lawsuit.<ref>{{Cite news|url=http://governmentcontracts.dentons.com/en/insights/alerts/2016/june/1/us-supreme-court-grants-certiorari-to-resolve-seal-requirement-in-fca-litigation|title=US Supreme Court grants certiorari to resolve seal requirement in FCA litigation|access-date=2017-05-03}}</ref> <ref>{{Cite news|url=http://www.jdsupra.com/legalnews/no-secret-here-supreme-court-set-to-73858/|title=No Secret Here: Supreme Court Set to Hear Yet Another FCA Case Next Term {{!}} JD Supra|work=JD Supra|access-date=2017-05-03}}</ref> Under the FCA, a lawsuit must be filed under seal and remain under seal for at least 60 days.<ref>{{Cite web|url=https://www.law.cornell.edu/uscode/text/31/3730|title=31 U.S. Code § 3730 - Civil actions for false claims|website=LII / Legal Information Institute|language=en|access-date=2017-05-03}}</ref> After 60 days passed, Judge Senter had extended the seal, and Richard Scruggs violated the seal order during that time by releasing certain information to media . State Farm argued that Scruggs’s seal violations mandated dismissal of the lawsuit and that the trial judge abused his discretion by denying a motion to dismiss.<ref>{{Cite web|url=http://www.scotusblog.com/wp-content/uploads/2016/08/15-513-Merits-Brief-Petitioner.pdf|title=STATE FARM FIRE AND CASUALTY COMPANY, Petitioner, v. UNITED STATES, EX REL.CORI RIGSBY, ET AL., Respondents.|last=|first=|date=|website=|archive-url=|archive-date=|dead-url=|access-date=}}</ref> | |||
| In an 8-0 decision, the Supreme Court affirmed the Fifth Circuit’s decision and held that the FCA does not mandate dismissal for seal violations and that the trial judge in this case did not abuse his discretion by denying State Farm’s motion to dismiss. | |||
| ==The Rigsbys Can Now Take Discovery to Determine the Scope of State Farm’s Fraud== | |||
| The case is now remanded back to Judge Ozerden and the Rigsbys can finally begin discovery into the full scope of State Farm’s fraudulent scheme. | |||
| ==Court== | ==Court== | ||
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| Insurance Commissioner George Dale: Dale launched his own investigation of the ''']''' 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. | Insurance Commissioner George Dale: Dale launched his own investigation of the ''']''' 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=== | ||
| ] William Acker Jr. requires the Rigsby sisters to return the documents to E.A. Renfroe. | |||
| ===January 2007=== | ===January 2007=== | ||
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| State Farm has lodged a case in the ], ''State Farm Fire & Casualty Co. v, United States ex rel. Rigsby'' to be heard in the term which commences in October 2016. State Farm is arguing that the attorneys for the Rigsbys violated a part of the False Claims Act, that is they released documents which were under the 60 day seal rule. The decision of the Supreme Court has ramifications beyond the matter being argued, as the Rigsbys attorneys argue that State Farms actions could involve thousands of cases. State Farm want clarification on the 60 day seal rule as in this particular matter the breaching of the rule was overlooked by a lower court and the action allowed to continue. | State Farm has lodged a case in the ], ''State Farm Fire & Casualty Co. v, United States ex rel. Rigsby'' to be heard in the term which commences in October 2016. State Farm is arguing that the attorneys for the Rigsbys violated a part of the False Claims Act, that is they released documents which were under the 60 day seal rule. The decision of the Supreme Court has ramifications beyond the matter being argued, as the Rigsbys attorneys argue that State Farms actions could involve thousands of cases. State Farm want clarification on the 60 day seal rule as in this particular matter the breaching of the rule was overlooked by a lower court and the action allowed to continue. | ||
| === November 1 |
=== November 1 2016 === | ||
| Arguments before the Supreme Court. The justices will vote at the end of the week, but the complexity of the case means that it will most probably come down to a written judgement after they achieve consensus over the winter. The case is pending | Arguments before the Supreme Court. The justices will vote at the end of the week, but the complexity of the case means that it will most probably come down to a written judgement after they achieve consensus over the winter. The case is pending | ||
| ⚫ | === |
||
| Supreme Court Judges affirmed 8-0 that a "... seal violation does not mandate dismissal of a relator's complaint under the False Claims Act." <ref name=":0">{{Cite web|url=http://www.scotusblog.com/case-files/cases/state-farm-fire-and-casualty-co-v-united-states/|title=State Farm Fire and Casualty Co. v. United States ex rel. Rigsby|last=|first=|date=|website=SCOTUSblog|archive-url=|archive-date=|dead-url=|access-date=7 March 2017}}</ref> | |||
| "The judgement of the Court of Appeals for the 5th Circuit is ''Affirmed''.<ref>{{Cite web|url=https://www.supremecourt.gov/opinions/16pdf/15-513_43j7.pdf|title=Stae Farm Fire & Casualty Co. V United States EX REL Rigsby et,al.|last=|first=|date=|website=Supreme Court of the United States October Term, 2016|archive-url=|archive-date=|dead-url=|access-date=7 March 2017}}</ref> The judgement was issued January 9, 2017.<ref name=":0" /> | |||
| == Whistleblower recognition == | == Whistleblower recognition == | ||
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| ⚫ | = External links = | ||
| ==References== | |||
| {{Reflist}} | |||
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| {{DEFAULTSORT:Rigsby Sisters}} | {{DEFAULTSORT:Rigsby Sisters}} | ||
Revision as of 20:14, 31 July 2017
Kerri Rigsby and Cori Rigsby (Moran) are the American 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 relating to Hurricane Katrina (2005). 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 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.
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 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.
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 31, E.A. Renfroe's attorney requested the Rigsby sisters and their representation face civil and criminal charges for their actions.
February 2008
The charge of criminal contempt against Scruggs is dismissed.
April 2008
A federal judge dismissed the action by Thomas and Pamela McIntosh of bad faith and fraud against State Farm. They had filed a claim after State Farm minimized its liability by using a second engineering report which minimized wind damage for which State Farms was liable and blamed flood and storm.
September 2008
Thomas and Pamela McIntosh settle their lawsuit for $250,000.
July 2009
The finding of contempt by the District Court overruled in the U.S. Court of Appeals for the eleventh circuit.
June 2010
Federal Magistrate Judge Robert Walker ruled that State Farm should not be required to hand over engineering reports to the Risbys, The case involved claimants Thomas and Pamela McIntosh whose house was damaged and two engineering reports, the first citing wind damage and the second tidal surges. The Risbys also were seeking any other altered reports in an attempt to establish a pattern of fraudulent behaviour.
June 2012
Judge Halil S Ozerden in the District Court of the Southern District of Mississippi ruled on final motions by State Farm and the Rigsbys. State Farms repeated motions to have the case dismissed were denied and the Rigsbys were limited to provided testimony only in the case of Thomas and Pamela McIntosh as they had direct knowledge of the documents in that case.
April 2013
In Federal Count a jury found for the Rigsby sisters in their whistle-blower lawsuit against State Farm. The plaintiffs suggested that State Farm minimized its wind damage payout to $30,000 when the policy provided for up to $500,000 by charging the National Flood Insurance Program where payments were paid by the government.
March 2014
In the federal court a jury found that State Farm had defrauded the government in a policyholder claim. State Farm was ordered to pay the Rigsbys attorneys $2.6 million plus expenses of just over $3000,000. The Rigsby sisters were to each receive 15 percent of the $750,000 awarded to the government. The case involved the claim of Thomas and Pamela McIntosh only and the judge refused to allow any claims on other properties to be included. The Rigsbys launched an appeal to the 5th U.S, Circuit Court of Appeals in New Orleans.
April 2015
State Farm is sued in a claim filed 21 April by the Mississippi Attorney General over allegations that they minimized wind damage in their response to claims which resulted in the states Homeowner Assistance Program paying far more than it should have. The private attorneys for the Rigsbys have been engaged by the state.
July 2015
The Rigsby sisters were successful in their qui tam appeal in the Fifth Circuit Court of Appeals to expand their claims of fraud in relation to the adjustment of National Flood Insurance Program claims. The court found that many homeowners were covered by at least two policies, one for wind and one for flood. A private insurance company administering both policies would be liable for wind damage but would pay flood damage with government funds. It would be in the company's interest to classify Hurricane Katrina damage as flood related to minimize its exposure to payouts. State Farm argues that the case should have been dismissed as the Rigsbys lawyer, Scruggs sent documents to the media when they were still under seal. Scruggs was gaoled over another matter and the court ruled that violating the seal should not result in the dismissal of the case,
August 2015
State Farm to challenge the ruling by the Fifth Circuit in the U.S. Supreme Court with a certiorari petition. Their argument centres around the plaintiffs talking with the media and thus violating the 60 day seal provisions of the False Claims Act.
June 2016
State Farm has lodged a case in the U.S. Supreme Court, State Farm Fire & Casualty Co. v, United States ex rel. Rigsby to be heard in the term which commences in October 2016. State Farm is arguing that the attorneys for the Rigsbys violated a part of the False Claims Act, that is they released documents which were under the 60 day seal rule. The decision of the Supreme Court has ramifications beyond the matter being argued, as the Rigsbys attorneys argue that State Farms actions could involve thousands of cases. State Farm want clarification on the 60 day seal rule as in this particular matter the breaching of the rule was overlooked by a lower court and the action allowed to continue.
November 1 2016
Arguments before the Supreme Court. The justices will vote at the end of the week, but the complexity of the case means that it will most probably come down to a written judgement after they achieve consensus over the winter. The case is pending
Whistleblower recognition
In February 2007, Mississippi state senators Dawkins and Williamson submitted a resolution, 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
- 25 AUG 2006 - Sisters Keri and Cori Rigsby Speak Out About State Farm Insurance Fraud - Parents Advocate
- 28 AUG 2006 - Exclusive: Whistleblowers Say State Farm Cheated Katrina Victims - ABC's The Blotter
- 29 AUG 2006 - Sisters Were Whistleblowers in Katrina Claims Handling Case - AP
- 23 SEP 2006 - 'I felt like we were being unfair' - Biloxi Sun Herald
- 26 SEP 2006 - Firm wants sisters silenced - Biloxi Sun Herald
- 27 SEP 2006 - Adjuster Sues Sisters for Releasing State Farm Files - AP
- 23 OCT 2006 - Miss. homeowner says State Farm coerced him into statement supporting company - AP
- 15 NOV 2006 - AG: Suspend civil suit - Biloxi Sun Herald
- 12 DEC 2006 - Judge requires return of documents - The Birmingham News
- 23 JAN 2007 - Ex-State Farm Adjusters Tell Miss. Grand Jury of Katrina Claims - AP
- 23 JAN 2007 - Judge seeks women's defense - The Birmingham News
- 30 JAN 2007 - Lawsuit in Miss. stands in contrast to La. - Times Picayune°
- 07 FEB 2007 - State Farm pays Scruggs' clients - Biloxi Sun Herald
- 03 MAR 2007 - Scruggs' contempt hearing set for Wednesday
- 15 JUN 2007 - Judge wants Katrina lawyer prosecuted
- 15 JUN 2007 - Judge Recommends Feds Prosecute Scruggs for Contempt
- 15 JUN 2007 - EA Renfroe & Co Inc. v. Moran, 508 F Supp 2d 986 (N.D. Ala. 2007) - Court Listener
- 19 JUN 2007 - State Farm wants Scruggs disqualified from policyholder lawsuit
- 29 FEB 2008 - United States District Court for the Northern District of Alabama Southern Division
- 14 MAR 2008 - Scruggs pleaded guilty ; plus a profile of the 'King of Torts" - ABA Jounal
- 22 APR 2008 - Federal judge dismisses Hurricane Katrina fraud claim against State Farm - Jurist
- 16 SEP 2008 - Update : Mississippi couple in settlement with State Farm over Katrina - Insurance Journal
- 21 JUL 2009 - E.A. Renfroe & Co. v. Cori Rigsby Moran et al. - JUSTIA US Law
- 29 JUN 2010 - Walker says no to Rigsbys - Sun Herald
- 21 JUN 2012 - After 6 year of Wrangling, State Farm, Rigsby sisters headed to trial - Property Casualty 360°
- 08 APR 2013 - Rigsby Sisters win whistleblower trial against State Farm - MS Litigation Review and Commentary
- 16 MAR 2014 -State Farm ordered to pay $3M in damages to Mississippi Katrina whistlenlowers - Insurance Journal
- 27 APR 2015 - AG Hood hires whistleblowers' attorneys for Katrina lawsuit against State Farm - Legal NewsLine
- 15 JUL 2015 - Rigsby sisters win qui tam appeal regarding fraudulent handling of Katrina flood claims - Lexology
- 17 AUG 2015 - State Farm to ask High Court to overturn Katrina FCA ruling - Law 360
- 06 JUN 2016 - Scotus to hear Katrina fraud case involving State Farm - SE Texas Record
- 02 NOV 2016 - Argument analysis : Justices dubious about mandating dismissal for "seal" violations in False Claims Act cases
= External links =Categories: