More Scruggs skinny, II

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UPDATED BELOW (X 2)

Okay, if game I of this doubleheader threatened to get you lost in the weeds of FREs and § 1346, I pollygize and promise to minimize that stuff (which I don’t recall enough of for comfort myself anymore). This time, I’m talking only as much Legal as we need to follow the political and financial powerplays . . .

Now where was I? Oh yeah . . . The last section of Rossmiller’s Saturday post focuses on the Jones v. Scruggs lawsuit that triggered Dickie an’ them’s current miseries.

“Scruggs Katrina Group” is/was a consortium of five Mississippi and one Florida law firm — Dickie Scruggs’s (in Oxford); Don Barrett’s (pdf) (in Lexington); Nutt & McAlister (in Jackson suburb Ridgeland); Jones, Funderburg, Sessums and Peterson (in Jackson); Paul Benton’s (in Biloxi); and the Lovelace Law Firm (in Destin).  The Jones firm’s complaint (24-page pdf), Rossmiller summarizes,

alleges that the other SKG firms “froze out” the Jones law firm from the division of some $26.5 million in fees collected from settlement of 640 Hurricane Katrina claims against insurers. Allegedly, Dickie Scruggs said his own firm would not OK any payment to the Jones firm, but that Barrett and Nutt & McAlister would agree to pay Jones $1 million from their own share of the proceeds. The Jones firm refused and demanded arbitration of the dispute, which was repeatedly rejected, and Jones then filed the lawsuit for 20 percent of the $26.5 million and 20 percent of future legal fees of the SKG. At this point, or some point earlier, it appears the Jones firm was ejected from the SKG pursuant to the joint venture agreement, which requires a vote of four members to remove a firm.

I also note that the website of the SKG currently lists only the Scruggs firm, the Barrett firm, the Lovelace firm and Nutt & McAlister — I do not know what happened to Benton, nor do I know if the remaining members came up with a new joint venture agreement subsequent to the one used as an exhibit to the Jones lawsuit.  If they did not, the current family feud between the other members and Scruggs, wherein they are trying to kick Scruggs out of the group, faces the difficulty that the joint venture agreement explicitly states that four votes are needed to eject a member.  If only four members remain — as listed on the website — Scruggs will not vote against himself and could not be removed.  This would produce an impasse that would require negotiations between Scruggs and the other members, with Scruggs holding the advantage.

Another of the major puzzles to us outsiders is why the alleged bribers wanted Judge Lackey’s order to send Jones v. Scruggs to binding arbitration rather than give them the complete victory of a summary judgment. So you can imagine my surprise to learn, via Rossmiller, that “the lawsuit alleges that Jones requested arbitration 20 times and was rejected 20 times before filing suit.” WTF?

Well: In a civil case on the interpretation of a contract, you run into two kinds of issues: “questions of law” that a judge rules on and “questions of fact” that are a jury’s call to make. In Jones’s lawsuit, we’ve got such factual issues as the intent of the parties in forming the agreement and who said what to whom when. “A summary judgment order obtained under these circumstances,” Rossmiller explains,

would be subject to review and reversal by the appellate courts, the briefing might be embarrassing, and there would be publicity. Bribery under these circumstances would not only likely not produce the desired results, but instead a summary judgment that flies in the face of reason might produce further scrutiny of what in the world was going on. When matters are sent to binding private arbitration, however, no judicial review of the panel’s decision is typically available, and the proceedings are much less exposed to the public eye. One might also observe that the opportunities to influence an arbitrator through various means would be much less exposed to prying eyes than attempts to influence appellate judges.

So now we’ve got a choice of theories as to why Balducci told Judge Lackey they wanted arbitration rather than summary judgment. Could be, says Rossmiller, just a change in strategy to meet evolving conditions, or maybe they came to realize that their earlier rejection of arbitration was a bad idea. Perchance the other firms, not Scruggs, were the ones who rejected arbitration (which would explain why only the Scruggsians allegedly/apparently went after an arbitration order).

Under the facts as alleged, the bribery would make it look like Judge Lackey decided this on his own — there does not appear to have been any motion or briefing seeking an order to compel arbitration.

As we ponder that conundrum, now let’s hear from commenter “Justus Kneads,” who tells Rossmiller, “Okay, you’re doing a good job of analyzing the top layer, but you need to get to the other layers quickly so you’ll be able to see the possibility of additional indictments. Key - follow the money!”

The Nutt & McAlister firm mentioned above? According to Justus Kneads, the
“money man” who approves all SKG expenses is “none other than David H. Nutt of the Nutt-McAlister firm.”

The joint venture agreement states that Nutt’s firm gets 35% of the legal fees in exchange for funding the venture. That leaves 65% to be split between Scruggs, Barrett and Lovelace, since they kicked Jones out, resulting in about 21.66% for each of them. Thus, the joint venture agreement makes Nutt’s 35% the “lion’s share” of the legal fees by far, according to my math.

JK says Nutt struck it rich the same way Dickie Scruggs did — via the asbestos litigation whose plaintiffs were workers in the Pascagoula shipyards. Dickie then went on to the tobacco litigation, but Nutt didn’t — originally. Came a point though, JK says, when Dickie nearly ran out of money to continue the tobacco suits and approached Nutt (still flush with his asbestos-litigation fees) for funding.

… Nutt agreed to fund the tobacco litigation from that point “in exchange for the lion’s share of the legal fees” that might be recovered. The rest, as they say, is history.

Fast forward to Jim Hood’s “first” election for Attorney General about four years ago. While you and others have correctly picked up on the fact that Joey Langston was the top contributor to Hood’s first campaign, no one has yet discovered that Nutt was the second highest contributor to Hood’s first campaign. The facts can be found in the records of the MS Secretary of State. And, while Hood awarded Joey Langston the MCI case, Hood awarded David Nutt and Danny Cupit a case against pharmacy benefit managers for them to pursue on behalf of the State of MS, which could prove even more lucrative.

The point is, everyone is thinking one-dimensionally, and trying to link up Scruggs and Hood. In reality, the tighter link is really between Nutt and Hood, and since Nutt is the money man in the SKG joint venture, the link is also there between SKG/Nutt and Hood.

JK also suggests what — or rather, who — may have plunked Steve Patterson, Balducci’s non-lawyer partner/Range Rover-mucked-up former state auditor, squarely on the hotseat with Dickie and Zach Scruggs. This CPA named Bill Jones (no relation to John of the Jones law firm) worked in the auditor’s office for Patterson; nowadays, says JK, he’s “an in-house accountant for David Nutt, and … the accountant for the entire SKG joint venture and reviews and approves the SKG expenses.”

“So, you can see,” JK concludes,

Nutt (35%) stood to gain more from a favorable ruling by Judge Lackey than did Scruggs (21.66%) or any other SKG joint venturer, and there is a connection between Nutt’s CPA, Bill Jones, and Steve Patterson. …

All of the above also raises the question of whether the $50,000 bribe was an SKG expense that Nutt was funding, and whether SKG/Nutt were attempting to pass along the bribe as an “expense”, and make their Katrina clients pay it as a litigation expense?

Hmm. At this point I remind you that we’re dealing with guys who rilly love them some fees (“I was not altruistic”) . . .

lotus

UPDATE: The Biloxi Sun-Herald gives us non-locals a face — and more — to put with the name “Henry L. Lackey.”

Y’all. Balducci tried to bribe a Baptist deacon and a member of the state commission on judicial integrity. Either this is THE biggest prosecutorial travesty of BushCo’s many, or some supposedly-master lawyers utterly failed their homework.

Take a look at that photo and join me in ruing that Gregory Peck won’t be around to play Henry Lackey in this movie-to-be . . .

UPDATE II: The NEMS Daily Journal has a thoughtful editorial on this case today.

I speculate that its wording is a good deal calmer than that to be heard at the party that commenter NMC tells us will take place in Oxford tonight. NEVER have I so wanted to be a flowah on the wallpaper.