Plea Tree of Scruggs II has roots dating back to 1984 tangled in 1998 Coahoma County Chancery Court Decision

One of the many unsolved mysteries of USA v Scruggs is the conflicting picture of Dick Scruggs – to some he is a man of unfailing generosity and to others he is one who consistently “short-changed” his partners.  Perspective aside, no one denies that he fell to the bottom line – two guilty pleas and seven years of confinement – from fee disputes with former partners Jones and Wilson.250px-ipomoea_batatasl_ja01-v2

Yesterday’s post, Dick Scruggs and the Plea Tree, examined the history of plea agreements prior to the one revealed in federal court yesterday.  Playing off the concept of descendants of a first generation illustrated by a family tree, Balducci went to the top of the Plea Tree.

The keen eye of CPA and blogging partner Sop discovered some found the graphic helpful and others did not; and, in that light, it seems important to examine the roots – thinking this time of a sweet potato and not a tree after linking to a most interesting post and set of links (h/t Alan @ Y’all) as well as the decisions of the Supremes that follow.

First, a little background on the sweet potato as a plant.  Above the ground is an ornamental plant and below the roots with a tuberous root (that could be called the tap root, I suppose) the rich meat of a sweet potato.

…a crop plant whose large, starchy, sweet tasting tuberous roots are an important root vegetable…  The young leaves and shoots are sometimes eaten as greens

180px-sweetpotato51622
In other words, what is readily visible to the naked eye is actually a cover; but, if you dig beneath the surface you will find what’s fueling the growth above ground – and, in this case (USA v Scruggs AKA Scruggs v Merkel DBA Wilson v Scruggs), it appears one can literally put that thought in a pipe and smoke it as the ‘tater is tobacco – a slow growing ‘tater with an off-shoot of its root system extending to the first Wilson v Scruggs Supreme decision with former Supreme and current Chief Judge of the Federal District Court, North Mississippi District, Michael P. Mills, writing:

In 1984, Richard F. Scruggs and William Roberts Wilson, Jr. agreed to associate one another in a  number of asbestos-related personal injury cases. Accordingly, they formed an intermediary corporation in 1985 known as Asbestos Group, P.A. In 1986, Asbestos Group hired Alwyn H. Luckey as a staff attorney.

In 1984, Merkel & Cocke (“Merkel”) was retained to pursue claims on behalf of the heirs of William H. Scott for injuries sustained by Scott as a result of his exposure to asbestos. Thereafter, Charles Merkel approached Wilson and discussed the possibility of associating him to assist with the technical aspects of the case. Wilson agreed to the association. Wilson then asked Luckey to work on the Scott case with him and Merkel.

Ultimately, the Scott case was settled with various defendants and resulted in a recovery of attorneys’ fees and expense reimbursements under Merkel’s contingency fee contract with the Scotts. Prior to 1994, these funds were processed by Merkel and distributed to Wilson, Luckey, and the Asbestos Group. In 1994, Merkel received additional settlement proceeds from the Scott litigation. This time, however, Merkel distributed the two payments, in the amounts of $9,850 and $3,284, to Wilson alone. That same year, Luckey was terminated by the Asbestos Group. Thereafter, Luckey retained Merkel to represent him in anaction against Scruggs, Scruggs, P.A., Asbestos Group, Wilson, and Wilson, P.A., to recover his share of asbestos fees which he argued were wrongfully withheld.

In September of 1997, SMBD, as an assignee of rights from Scruggs, P.A. and Asbestos Group, P.A, filed an action against Merkel in Jackson County, seeking damages from Merkel’s alleged mishandling and conversion of the 1994 Scott fees. Additionally, the complaint sought an accounting of all fees generated from the Scott litigation. In 1996, and again in 1998, Merkel received additional settlement funds from the Scott litigation. Merkel paid itself its claimed percentage of these fees and retained the balance in the firm’s escrow accounts. On March 26, 1998, Merkel filed the instant action in the Chancery Court of Coahoma County, seeking to interplead the share being held in escrow. The Coahoma County Chancery Court granted Merkel’s request for interpleader on January 22, 1999. The court further discharged Merkel from any and all liability related to either the funds interplead or the handling of the funds from the time of their receipt.

In September of 1997, Scruggs, Millette, Bozeman & Dent, P.A. (“SMBD”) filed a lawsuit in the Jackson County Chancery Court against Merkel & Cocke, P.A. (“Merkel”), Charles Merkel, Cynthia Mitchell, William Roberts Wilson, Jr., P.A., and Asbestos Group, P.A. This lawsuit placed at issue the alleged mishandling of attorneys’ fees received by Merkel in 1994. These fees were derived from the Scott case, a wrongful death action against the asbestos industry.

Approximately 6 months later, on March 26, 1998, Merkel filed the instant action in the Chancery Court of Coahoma County seeking to interplead a share of the 1996 and 1998 attorneys’ fees received from the Scott litigation. SMBD responded by filing a Motion to Dismiss Merkel’s complaint, primarily stating that the complaint should be barred by the doctrine of priority jurisdiction because the fees were already an issue in the Jackson County Chancery Court action. Richard F. Scruggs, Richard F. Scruggs, P.A., and Asbestos Group, P.A., (hereafter collectively referred to as “Scruggs”) also filed a motion to dismiss upon similar grounds. The Chancellor denied both motions to dismiss and granted the interpleader relief, finding Merkel to be a disinterested stakeholder with respect to the $4,953.43 of attorney’s fees.

IMO those who found fault with Scruggs failure to include his “victims” [sic] in the apology he offered yesterday owe an apology to Scruggs –  so do all those who have promoted the hype that fee disputes with his former partners reflect on the integrity of Dick Scruggs – again JMHO but keep reading and you may agree. Now, back to the Supremes for the Statement of Law and Conclusion.

Although the issue is not raised by either party, this Court must address, sua sponte, the question of whether the trial court’s orders are appealable. Gilchrist v. Veach, 754 So. 2d 1172, 1173 (Miss. 2000); Owens v. Nasco Intern’l, Inc., 744 So. 2d 772, 773 (Miss. 1999); Williams v. Delta Reg’l Med. Ctr., 740 So. 2d 284, 285 (Miss. 1999). Rule 54(b) of the Mississippi Rules of Civil Procedure provides as follows:

(b) Judgment Upon Multiple Claims or Involving Multiple Parties. When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim, or when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an expressed determination that there is no just reason for delay and upon an expressed direction for the entry of a judgment. In the absence of such determination and direction, any order or other form of decision, however designated which adjudicates fewer than all the parties shall not terminate the action as to any of the claims or parties and the order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties. Miss. R. Civ. P. 54

(b). “Without the entry of a Rule 54(b) certificate, a trial court order, which disposes of less than all of the claims against all parties in a multiple party or multiple claim action, is interlocutory.” Owens v. Nasco Intern’l, Inc., 744 So. 2d at 774.
This case involves claims made against multiple defendants. Moreover, the Coahoma County chancellor entered the following three orders:

(1) 1/22/99 – regarding grant of interpleader, dismissal of Merkel & Cocke, and grant of injunctive relief;
(2) 2/10/99 – regarding transfer to Hinds County; and
(3) 4/27/99 – regarding attorney’s fees.

These orders, however, did not terminate the action, did not make any adjudication concerning SMBD or Scruggs, and were not certified pursuant to Rule 54(b) as final judgments.

CONCLUSION: APPEAL DISMISSED. (July 10, 2000)

In the absence of a Rule 54(b) certification, the orders are interlocutory and are not appealable as final judgments. Therefore, we dismiss this appeal.

The next reference to Scruggs v Merkel in MSSC records is a second appeal filed by Scruggs following follows the final judgment rendered by the Coahoma County court.

This Court, in its opinion dated July 20, 2000…Court held that “in the absence of a Rule 54(b) certification, the orders are interlocutory and are not appealable as final judgments,” and the appeal was dismissed… From that ruling, Merkel & Cocke obtained certification of a final judgment pursuant to Rule 54(b) of the Coahoma County Chancery Court on August 4, 2000. This appeal is taken from the final judgment of the Chancery Court of Coahoma County.

Statement of Issues:

I. Whether Merkel & Cocke were required to file its claim for Interpleader Relief as a Compulsory Counterclaim in the Jackson County litigation?

II. Whether Merkel & Cocke’s accounting issues in Jackson County Chancery Court should be transferred to Hinds County Circuit Court?

III.  Whethere the Chancellor erred in granting the Interpleader and relieving Merkel and Cocke from Liability?

IV. Whether the Chancellor erred in awarding attorney’s fees to Merkel & Cocke?

The Supreme’s decision cites the leagal basis for deciding:

CONCLUSION: REVERSED AND RENDERED January 13, 2001

For all the foregoing reasons, the Coahoma County Chancery Court erred as to all issues raised by SMBD. Therefore, the judgment of the Coahoma County Chancery Court is reversed and rendered.  Merkel & Cocke can seek interpleader relief by filing an interpleader action as a compulsory counterclaim in the prior pending Jackson County Chancery Court litigation.

We leave those who want to know those “foregoing reasons”  to click on the link  to the decision (above) decision and follow what is either a footnote or second paragraph of the Conclusion to Jackson County:

Wilson, Luckey and Asbestos Group were all dropped from the Jackson County action based on the pending Hinds County Circuit Court case’s priority of jurisdiction over their claims. The pending litigation in Hinds County Chancery Court addresses the issue of accounting for the attorneys’ fees received from asbestos litigation and settlements involving Scruggs, Wilson, Luckey, and Asbestos Group.

Since, I’ve yet to master the Supreme site map, it is only my understanding that the remaining issue in Jackson is Scruggs’ claim against Merkel for tortuious interference in his contractual relationship with Wilson.  Anyone wishing to correct or clarify is certainly welcome to comment; but in the absence of access to records from the court in Jackson County, we  jump directly to the decision the Supremes made on Appeal of the Jackson County Court.

Justice Waller, writing for the Court, provides more detail on the relationships of Scruggs, Luckey, Wilson, and Merkel.

As two asbestos plaintiffs’ attorneys, Scruggs and Wilson decided to share their resources and formed another professional association, The Asbestos Group, P.A., to administer the over 200 asbestos lawsuits they had filed. The documents creating the Asbestos Group provided that Scruggs, P.A., and Wilson, P.A., would share all profits 50/50. Luckey, the attorney hired by Scruggs, P.A., began working at the Asbestos Group and, therefore, was working for both Scruggs and Wilson.

Hmmm, does that means Scruggs paid Wilson’s tab, too, when he settled with Luckey?

Sometime in the mid-1980s, a third attorney, Charles M. Merkel, Jr. (“Merkel”), an appellee, was retained by the William H. Scott family to prosecute their wrongful death/product liability claims against the asbestos manufacturers. Merkel was a senior member of the Merkel & Cocke, P.A. (“M&C”), law firm, an appellee herein. Merkel, not having any asbestos experience, approached Wilson to help him with the Scott lawsuit. Merkel and Wilson orally agreed to share the Scott lawsuit profits 50/50. Wilson agreed to provide Merkel with resources and expert witnesses, and Merkel was to prosecute the case. Merkel then asked Cynthia I. Mitchell (“Mitchell”), an attorney who worked at M&C and who is an appellee, to develop the Scott case. For all practical purposes, Merkel did not oversee the day-to-day work done on the Scott file.

As a discovery deadline in the Scott lawsuit approached, Mitchell told Merkel that they needed to obtain information on expert witnesses. Relying on his agreement with Wilson, Merkel told Mitchell to call Wilson for that information. The information was provided as per their agreement.

Later, before some depositions scheduled in Washington, D.C., Merkel met with Wilson to discuss strategy. Wilson informed Merkel that he had other business to tend to, but that Luckey would be able to prepare their expert witnesses and would attend the depositions. Wilson then introduced Luckey to Merkel, and Luckey performed the preparation for the depositions. Luckey attended the depositions but did not take part.

From that point on, it appears that Luckey and Mitchell did most of the work on the case. Exhibits of record show that, in corresponding with Mitchell, Luckey sometimes used the Asbestos Group letterhead and sometimes used the Scruggs, P.A., letterhead. Luckey then entered an appearance and also listed Scruggs as counsel. Apparently, in the early 1990s, the Asbestos Group became aware that its name could violate a trademark, so Scruggs, P.A., and Wilson, P.A., stopped using the name “Asbestos Group.” The Asbestos Group did not acquire a new name, but the agreement between Scruggs and Wilson and the administrative duties of the Asbestos Group continued.

On February 26, 1991, Scruggs sent a memo to Luckey as follows:

What are the fee arrangements with Merkel in the Scott case? It appears from the enclosed materials that there is a 1/3 attorney[‘]s fee contract[] to be split equally between Merkel and us. What is not clear is who “us” is. It appears so far that Bob [Wilson] has taken 50% of our 50%. Please explain.

On August 7, 1992, Wilson, Wilson, P.A., Scruggs, Scruggs, P.A., and Luckey entered into an agreement which provided that: (1) Wilson, Wilson, P.A., Scruggs, and Scruggs, P.A., initially shared ownership of the Group equally; (2) In October of 1988, Wilson, Wilson, P.A.,Scruggs, and Scruggs, P.A., gave Luckey 5% of the stock, thereby decreasing Wilson and Wilson, P.A.’s interest to 47.5% and decreasing Scruggs and Scruggs, P.A.’s interest to 47.5%; (3) In 1990, Luckey acquired an additional 10% of the stock, increasing his interest to 15%. Wilson and Wilson, P.A.’s interest was decreased to 40%, and Scruggs and Scruggs, P.A.’s interest was decreased to 45%; and (4) The “business relationship . . . existing between Wilson[and Wilson, P.A.] on one hand and Scruggs [and Scruggs, P.A.] and Luckey on the other hand is terminated . . . .”

The Scott case was eventually settled for over $300,000.00. Settlement checks from the various defendants were received by M&C over the next several years. As the checks were received, M&C disbursed various sums to various payees: the Scott family, to itself, to Wilson, to Luckey, to Wilson and Luckey, and to the Asbestos Group. Mitchell testified as follows: “It was clear to me that they (Wilson or Luckey) didn’t particularly care how checks were made payable, and different ways over the period of several years, and no one ever called up and complained that we needed to do something different.”

In 1993, Scruggs fired Luckey. In April of 1994, Luckey hired M&C to represent him in a suit against Scruggs and Wilson. This suit was filed in the Circuit Court of Hinds County.

On September 23, 1994, the Manville Personal Injury Settlement Trust wrote a letter to Mitchell stating as follows: Our records indicate your received the discounted settlement as lead counsel for [William H. Scott] in February 1994. The law office of Richard Scruggs has called requesting confirmation of this payment, as they claim to be the co-counsel on this case. The system does not list a co-counsel on this claim. I have not yet pulled the file from the warehouse to verify any information that may be in file but not on the system. I would appreciate it if you could confirm if they are indeed co-counsel for the case and approve their receipt of the payment information for Mr. Scott’s claim.

On September 23, 1994, Mitchell responded as follows: In response to your earlier inquiry, this law firm associated William Roberts Wilson, Jr., as co-counsel on this case. Mr. Wilson in some manner associated Alwyn Luckey in this matter. I do not know the arrangements, if any, between Mr. Wilson and Mr. Scruggs regarding this case. Mr. Wilson’s share of the fee has been paid to him.

After receiving notice of Scruggs’ interest in the Scott proceeds, M&C began escrowing the money, interpleading it, or writing letters to Wilson, Luckey and Scruggs asking how to distribute it.

On September 22, 1997, Scruggs and Scruggs, P.A., assigned any proceeds they might receive from the Scott settlement to SMLB&D.

Scruggs filed this suit in the Jackson County Chancery Court against M&C, Merkel, Mitchell, Wilson, Wilson, P.A., and Luckey, alleging that they tortiously interfered with his contract with Wilson and Wilson, P.A., and that he is entitled to damages. Following a trial, the chancellor dismissed Scruggs’ action with prejudice, finding that there was no evidence to support a finding that Merkel, Mitchell, or M&C intended to harm Scruggs, and that it was unclear, at best, whether Merkel, Mitchell or M&C had knowledge of Scruggs’ agreements with Wilson and Luckey.

Based on the record, we conclude that the decision of whether or not to share their portion of the Scott proceeds was for Wilson and Luckey to make and that there is absolutely no evidence that M&C, Merkel, and Mitchell had an intention to interfere with Scruggs’ contract or to otherwise harm Scruggs. We therefore affirm the chancellor’s judgment dismissing Scruggs’ complaint…

CONCLUSION

Although the evidence supporting the chancellor’s decision is substantial, most telling is the fact that Scruggs knew of the Scott settlement disbursements as early as 1991, and he did absolutely nothing to assert and protect his claims until after Luckey filed the lawsuit against Scruggs. The chancellor found that Scruggs’ claim had no merit, and that, indeed, what little proof was offered to support his claim, amounted to nothing more than conjecture and assumptions. We affirm the chancellor’s judgment dismissing Scruggs’ complaint.

ON DIRECT APPEAL: AFFIRMED. ON CROSS-APPEAL: DISMISSED AS MOOT.  September 15, 2005

Note this is the first post-Katrina decision by the Supremes; and, those who have an interest in how the Court’s composition is reflected in its decisions might also want to look at who made each of the three decisions linked in this post.

The brief section of the Court’s decision entitled “Discussion” – seven lines total with citations – merits attention:

The standard of review of questions of law is de novo… We must reverse for erroneous interpretations or applications of law…We cannot overturn the decree of a chancellor unless we find with reasonable certainty that the decree is manifestly wrong on a question of law or interpretation of facts pertaining to legal questions….(citations removed)

A footnote to the title of the next section – Whether the Chancellor Erred in Dismissing Scruggs’ Claim of Intentional Interference with a Contractual Agreement – likewise merits a closer look since the Supremes only decided one of the three issues Scruggs cited in his appeal:

Scruggs raises two more issues: First, he claims that the doctrines of quantum meruit and implied contract apply to this case; however, the final judgment entered by the chancellor does not address either issue. Second, Scruggs claims that the chancellor should have granted him judgment on the interpled funds; however, the interpled funds were properly transferred to the Hinds County litigation. Both of these claims are without merit.

What needs examination, however, is the basis for this statement in the Conclusion (Decision) – The chancellor found that Scruggs’ claim had no merit, and that, indeed, what little proof was offered to support his claim, amounted to nothing more than conjecture and assumptions – when the related text in the document states:

The chancellor found that Scruggs established that he had suffered actual damage or loss (loss of 50% of the attorney’s fees acquired through the settlement of the Scott case because Wilson and Luckey did not share with Scruggs, Scruggs, P.A., or the Asbestos Group their portion of the attorney’s fees), but that Scruggs failed to make a prima facie case of intentional interference with a contract.

First, the chancellor found that Merkel, M&C and Mitchell had not acted intentionally or with malice when they did not include Scruggs, Scruggs, P.A., or the Asbestos Group in their disbursements. This finding is amply supported by the evidence which clearly shows thatWilson, Wilson, P.A., and Luckey were the ones who had the duty to share attorney’s fees with Scruggs, Scruggs, P.A., or the Asbestos Group, and that they, not Merkel, M&C or Mitchell, violated that duty. Indeed, Wilson admitted that he did not share some of his disbursements with Scruggs because he felt that he had not gotten his fair share when the agreement between Wilson, P.A., and Scruggs, P.A., dissolved…

Well, let’s just roll out the red carpet and welcome him back from Alabama!  Oxford, reportedly, will be his new home.  If his law practice falls on hard times, maybe he can find work at a retailer there that doesn’t mind employees taking merchandise, selling it on the side, and keeping the money.

There is absolutely no evidence that Merkel told Wilson not to pay Scruggs because Wilson had not gotten his fair share from Scruggs.

It is clear that Wilson and Luckey’s actions were the proximate cause of Scruggs, P.A. and Scruggs’ losses, not anything Merkel
might have done or failed to do…

Scruggs argues that intent may be implied when the “defendant knows of the existence of a contract and does a wrongful act without legal or social justification that he is certain or substantially certain will result in interference with the contract.”

The chancellor correctly held that more than basic awareness of an association between two lawyers is necessary to constitute a finding of intentional interference with a contract. It is clear that Merkel, M&C and Mitchell did not have knowledge of the existence of the agreement between Wilson, P.A. and Scruggs, P.A.

They did have knowledge of the fact that Luckey worked in Scruggs’ office and that he sometimes used Scruggs, P.A. letterhead. But Luckey explained away those disparities by stating that he worked for the Asbestos Group and that the Asbestos Group could not continue to use that name. Because he could not use Asbestos Group letterhead, he used Scruggs, P.A., letterhead. These circumstances do not constitute actual or implied knowledge of the contract between Wilson, P.A., and Wilson, P.A.

Indeed, any rational person would be confused by all of the convoluted relationships under which the asbestos claims were handled…

What, pray tell, is confusing about any of that? For something confusing, try and figure out an honorable reason the Court felt compelled to add:

Scruggs’ own actions belie his claims. Even after he had notice of the Scott settlement  as evidenced by his 1991 interoffice memorandum to Luckey, Scruggs never contacted anyone at M&C to inform them that the funds were not being disbursed correctly.

Finally, there is no evidence that the disbursements were made to Wilson, Wilson, P.A., Luckey or the Asbestos Group in order to cause damage or loss to Scruggs or Scruggs, P.A.

Filing suit in Coahoma County, I suppose, was evidence of Merkel’s  goodwill toward Scruggs – figure that? Better yet, figure this:

There is no evidence of any ill will or malice between Merkel, M&C and Mitchell on the one hand and Scruggs or Scruggs, P.A., on the other.

Indeed, if there was any ill will or malice between these parties, it arose after Scruggs attempted to have M&C disqualified in the Hinds County action and, when the motion to disqualify was denied, Scruggs filed the instant lawsuit against Merkel, M&C and Mitchell.

Scruggs’ claim of intentional interference with contract was properly dismissed by the learned chancellor.

Really?  Would not any rational person with the slightest interest in even simple justice have considered Scruggs reported silence and inaction was based on his trust of Luckey until Luckey filed suit represented by Merkel & Cocke – or just the rational and not the learned?

The answer matters when the result is this statement in the Court’s Conclusion (Decision):

...most telling is the fact that Scruggs knew of the Scott settlement disbursements as early as 1991, and he did absolutely nothing to assert and protect his claims until after Luckey filed the lawsuit against Scruggs.

What people remember about an Appeal is the Decision and this Decision is biased by statements that reflect negatively on the injured party – no doubt fueling the the highly promoted, widely accepted perception – misperception IMO – that Scruggs, and not the other party,  is responsible for the various fee disputes.

What a set of roots!

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