no one knows what goes on behind closed doors but O’Keefe wants to open the door to State Farm Mutual and find out!

TEXT ONLY ORDER denying Plaintiffs’ request for a hearing on their Motions to Amend and to Expedite. The Court, in its discretion, does not find that oral argument would be necessary or helpful in deciding the Motions. Pursuant to Uniform Local Rule 7.2(F)(1), the Court shall decide Plaintiffs’ Motions without a hearing or oral argument. NO FURTHER WRITTEN ORDER WILL ISSUE FROM THE COURT REGARDING THIS REQUEST. Signed by District Judge Halil S. Ozerden on 9/2/2009. (EMN) (Entered: 09/02/2009)

Oh, no-one knows what goes on behind closed doors. Behind closed doors.

The next day, Judge Ozerden issued an Order granting in-part O’Keefe’s Motion to file an amended complaint.  O’Keefes counsel, Christopher Van Cleave, was sitting on ready and the day after Ozerden’s Order issued, he filed a Motion to Alter or Amend the Findings and/or Judgment of the Court; for a New Trial on and/or Seeking Relief from the Court’s Order...

First, a look at the Order – and be sure to read the feeling is Mutual – and so is the fact for background on the issue and a look at the chart showing the relationship of State Farm Mutual to State Farm Fire.

…the Court is of the opinion that Plaintiffs’ Motion should be granted to the extent that it seeks to amend Plaintiffs’ claims against the existing Defendants in this case.

The remaining question is whether Plaintiffs should be permitted to amend their Complaint to add an additional Defendant, State Farm Mutual. State Farm Fire maintains…that allowing Plaintiffs to amend their Complaint to add this Defendant would result in undue delay and would be futile.

Obviously, behind closed doors, Ozerden directed his attention to State Farm’s claims of futility.  The irony was lost and he included a relatively lengthy discussion of futility in his Order before toeing the parte line:

.. This effort is not new to the Court. Plaintiffs’ theory for imposing liability on State Farm Mutual under an insurance policy to which State Farm Mutual was not a party has been consistently rejected…Nor does the proposed amendment state any other plausible claims against State Farm Mutual… Based on the foregoing, the Court is of the opinion that Plaintiffs’ Motion to Amend should be denied to the extent that it seeks to add State Farm Mutual as a Defendant.

Ozerden does not explain why he holds that Mutual is not a party to the policy.  In fact, I’ve read nothing anywhere that offers much more than State Farm says it’s not.  However, the Master Services Agreement in the feeling is Mutual post shows Mutual calling all the shots, suggesting State Farm Fire is indeed a puppet as O’Keefe claims:

Plaintiffs are seeking reconsideration and/or amendment of this Honorable Court’s Order to prevent a miscarriage of justice in this cause. Plaintiffs respectfully submit that, in light of the facts placed before the Court in support of Plaintiffs’ motion for leave to amend to add State Farm Mutual as a party Defendant, denying the Plaintiffs the right to do so is akin to allowing a puppet to stand trial for alleged heinous misdeeds while ignoring the puppeteer at the other end of the strings.

As discussed below, it appears the Court may have inadvertently overlooked critical evidence demonstrating why State Farm Mutual should be added as a party Defendant to this cause. Plaintiff respectfully contends the present Motion should be granted in order to allow the Court to address critical, material issues of fact that are not addressed in the current Order; to correct errors of law resulting from the fact the Order does not address the totality of circumstances; to prevent manifest injustice; and to ensure that the Court’s ruling is a just resolution based upon “all the facts”…

The Court’s Order does not address or discuss proposed claims against State Farm Mutual in Plaintiffs’ proposed Amended Complaint that are unique to this Court’s consideration of prior efforts to add State Farm Mutual as a party in Katrina Litigation. Specifically, the Court’s Order does not address Plaintiffs’ claims that State Farm Mutual was the “co-principal” of State Farm Fire with regard to the adjustment, handling and claims decisions made on the subject claims.

In Fonte vs. Audubon Ins. Co., 8 So.3d 161, (Miss. 2009), the Mississippi Supreme Court confirmed the viability of claims in the context of a dispute over the handling of aninsurance claim against a Defendant that is not a party to the insurance contract – even where that Defendant’s conduct may not rise to the level of gross negligence – if the insured alleges that the Defendant acted as the  co-principal of the Insurer. Plaintiffs have made just such claims against State Farm Mutual in their proposed Amended Complaint. As the Mississippi Supreme Court confirmed in Fonte, such claims are valid under controlling Mississippi law, and present questions of fact that must be resolved by a Jury…

Plaintiffs’ “co-principal” claims against State Farm Mutual are not based upon conjecture, but upon facts and evidence that were incorporated into Plaintiffs’ Motion for Leave to File Amended Complaint. Plaintiffs attached the “Master Services Agreement” between State Farm Fire and State Farm Mutual as “Exhibit 4” to their Motion, and demonstrated that this agreement is very similar to the agreement that bound Audubon to potential liability (subject to the Jury’s conclusions) in Fonte. Though that agreement, State Farm Mutual assumed multiple duties related to the sale, administration and claims handling under the policies of insurance that are the subject of this litigation – yet State Farm Fire did not retain meaningful control over State Farm Mutual’s execution of those duties.

Rather, State Farm Mutual was granted considerable autonomy with regard to the manner in which it devised claims procedures and directed and handled the adjustment (and denial) of Plaintiffs’ claims. Paired with the other facts discovered through similar litigation by Counsel for Plaintiffs (which were incorporated and supported by un-refuted evidence attached to Plaintiffs’ Motion), this Master Services Agreement demonstrates State Farm Mutual is the co-principal with State Farm Fire with regard to the handling of Plaintiffs’ Katrina claims under the subject policies of insurance. Plaintiffs respectfully submit that the Court’s Order, which does not acknowledge the existence of Plaintiffs’ “co-principal” claims despite setting forth a number of claims Plaintiffs are attempting to make against State Farm Mutual, should be reconsidered so this claim can be addressed; and that Plaintiffs’ should be allowed to add State Farm Mutual as Defendant in this cause to pursue such claim(s).

Additionally, the Court’s Order does not address the evidence set forth in Plaintiffs’ motion in support of Plaintiffs argument that, even if State Farm Mutual were found not be the co-principal” of State Farm Fire, it could be found individually liable for gross negligence in that State Farm Mutual controlled the adjustment (and ultimate denial) of Plaintiffs’ claims. Under controlling Mississippi law, it is clear that an insurance “adjuster, agent or other similar entity” can incur individual liability when its “conduct constitutes gross negligence, malice or reckless disregard for the rights of the insured.”

Plaintiffs presented the Court with un-refuted evidence, in support of their timely motion to add State Farm Mutual as a party Defendant, that (1) State Farm Mutual Automobile Insurance Company, through its agents, representatives, and/or employees was responsible for drafting and implementing the policies and procedures, including but not limited to, the contract altering claims instructions set forth in the Wind / Water Protocol, written by State Farm Mutual and used on ALL Katrina claims in Mississippi, including on the Plaintiffs’ claims; (2) Many of the individuals who made or participated in the ultimate denial of Plaintiffs’ claims were agents, representatives, and/or employees of State Farm Mutual Automobile Insurance Company; and (3) State Farm Mutual Automobile Insurance Company has been in charge of post-litigation decisions involving this case, and similarly situated cases.

It is this evidence that sets Plaintiffs’ effort to add State Farm Mutual as a party Defendant in this case apart from the “consistently rejected” efforts of other Plaintiffs referenced by the Court – and which makes Plaintiffs’ claims in this case more akin to the claims in Guice vs. State arm…and Marion vs. State Farm…where this Court did grant Motions to Amend to add State Farm Mutual as a party.

O’Keefe correctly states his claim of co-principal is unique to Ozerden’s Court.  In Bridgewater v State Farm, Ozerden was faced with an entirely different situation and wrote in his Order dismissing Mutual as a defendant:

State Farm Mutual will be dismissed from this cause of action pursuant to Rule 12. This dismissal will be without prejudice to the right of Plaintiff to seek the Court’s leave to file an amended complaint stating a valid cause of action against State Farm Mutual, if there are facts in his case later shown with particularity to support a claim against it. It will not be acceptable for Plaintiff to treat “State Farm” collectively in any future pleadings, and with respect to the dismissed State Farm Defendant, in any future Complaint in this case, Plaintiff will be required to make allegations against State Farm Mutual with reasonable specificity.

In Fowler v State Farm, Judge Senter had entered an Order dismissing Mutual before Ozerden took the case.  Senter’s decision turned on Fowler’s naming Ed Rust personally as the defendant and the Court’s related lack of jurisdiction:

Mississippi’s long-arm statute, cited supra, subjects a nonresident person to the jurisdiction of the courts of this state if that person makes a contract with a resident of this state to be performed in whole or in part by any party in this state, commits a tort in whole or in part in this state against a resident or nonresident of this state, or does any business or performs any character of work or service in this state. Although these nonresident Plaintiffs say that Rust signed their policy (and it is probable the same can be said of all other State Farm insureds), he did so as State Farm’s President, Chief Executive Officer, and Chairman of the Board. The contract is not with him personally, but with the insurance company.

Plaintiffs’ generalized allegations of fraud are really nothing more than claims against State Farm. These assertions do not meet the heightened pleading standard of Fed. R. Civ. P. 9(b)…The point is that, even taking the allegations of the complaint as true, Rust, in his corporate capacity, committed nothing more in the Plaintiffs’ eyes than a personal affront to their plight and that, with respect to the denial of their claim, State Farm and Rust benefitted financially by accepting premiums and not paying under the policy. It is the Court’s opinion that Rust is not amenable to service of process under Mississippi’s long-arm statute.

More importantly, due process is violated by the assertion of personal jurisdiction over Rust in this forum. As stated above, claims involving unjust enrichment and conversion relate to the acceptance of premiums and the denial of insurance benefits. Cases cited alleging other misconduct have State Farm as the defendant. The Plaintiffs’ broadside sounds more like the stuff of class actions, which this Court has denied in the insurance claim context, because the nature and extent of property damage suffered by property owners in Hurricane Katrina will vary greatly in particulars depending on the location and condition of the property before the storm struck and depending also on what combination of forces caused the damage.

In Perkins v State Farm, Judge Senter encounter a situation similar to Bridgewater but took a slightly different approach in his Order dismissing Mutual.

Plaintiffs’ allegations attempt to paint a complex civil conspiracy, but there are no specific allegations of actionable misconduct by State Farm General Insurance Company or State Farm Mutual Automobile Insurance Company. The fraud claims are so general and conclusory that they do not satisfy the requirements of Fed. R. Civ. P. 9(b). Furthermore, there is no contractual relationship between Plaintiffs and either of these State Farm entities. There is no evidence that the three named State Farm defendants have not respected the corporate form in conducting their business, and there is no indication that the parent, State Farm Mutual Automobile Insurance Company, has disregarded the formalities necessary to accomplish the
lawful purpose of maintaining these forms.

The Court will not allow Plaintiffs to allege misconduct by two defendants not in privity with them by the mere expedient of treating them collectively in framing their pleadings. State Farm Fire and Casualty Company has a contractual relationship with the Plaintiffs, owes contractual obligations to them, and has the legal responsibility to fairly evaluate their claims in good faith and respond appropriately.

Looking at Ozerden’s Order and O’Keefe’s Motion to Alter or Amend… in the context of these previous attempts to name State Farm Mutual as a defendant helped me, in turn, see all four orders in a different light – or five if you include Marion quoted in “the feeling is Mutual”.

Viewed one at a time, each is a snapshot; but, viewed together, you see a different picture – and if you look at it long enough, you begin to understand what all those law firm websites mean by complex litigation.

No one knows what goes on behind closed doors. However, at this point, there have been so many cases and all more alike than different, justice would be best served if significant questions were heard and not just read.

28 thoughts on “no one knows what goes on behind closed doors but O’Keefe wants to open the door to State Farm Mutual and find out!”

  1. I think these orders just demonstrate how unequal the relationship between insured and the insurer. The insured is not able to escape the impact of their actions by the creation of corporate shells. The true decision makers at State Farm Fire don’t even work for the company. They operate on a level which the impacted policy holder never gets to access. Fair. No. Why are the State Farm upper management not forced to meet their clients in Court? Oh because it might inconvience them or cause them problems. How about the guy who pays for his policy and shows upto Court absent his premiums paid and his home? That guy strikes me as the one who is really inconvienced and in need of being able to ask those who make decisions which have impacted him to be available for questioning and responsible for their actions.

  2. …and when they get behind closed doors,
    they’re going to make some good ole’ deals,
    they’re going to pay themselves and the attorneys,

    …..and when they get their checkbooks out,
    and the crooks surround the tables, everyone

    …and after they pay themselves and everyone is unjustly enriched, they go out and by themselves JETS & JEWELS, and the corruption just goes ON AND ON AND ON BECAUSE



  3. P.S. The above song dedication was (obviously) not directed to the few, the proud and non-greedy people of the world.


  4. Gee I’m homeless, clothless, foodless and even tooth brushless. I’d hate to bother Mr. Rust he might not appreciate it very much. It might interfer with his running that big company of his. I have not been inconvienced in the least…

  5. PS Shouldn’t the person not performing be brought to Court. Imagine if criminals could just say. Gee It sure would be a pain in the asss to goto Court on that charge. Now those houses were in my momma’s name that the boyz were selling drugs out of and I ain’t never touched none of that “product” because you know I gots peoples to take cares of that for me you know. So be gone mr. POlice and leave me to my money… Yep that will go over real big. How about running an insurance company and not a scam and maybe your fat arse won’t end up in Court?

  6. The Muslim Al Qaeda Federal Judge on the Mississippi Gulf Coast has “struck” again. I have been following this/these issues only half-heartedly, and i make the following comments: (1) The date of the discovery of the Master Service Agreement(s) with State Farm Mutual is very critical, because how were the policyholders/insureds and their lawyers supposed to “divine” that a corporate entity other than the “insurer” identified in the insurance contract was ‘really” calling the shots; and (2) Although I haven’t read their pleadings, the plaintiffs’ lawyers do not appear (from the portions of the opinions I’ve read, by virtue of being posted on SLABBED) to have articulated, factually and legally, the proper argument(s) for the Judges (whether Muslim Terrorists or not) to address, namely that the corporate veils of all entities in the State Farm “Family” should be pierced, because they are all alter egos of each other, with “control” existing (apparently) in State Farm Mutual. It is clear from the portions of the opinions that have been posted that the Judges have not addressed these issues, either because the issues were not presented to them or because they (the Judges) are being “result-oriented” in their “decision-making processes”, in violation of their oaths of office. In short, if what I suspect took place (and continues to take place) under the State Farm umbrella, then “State Farm”, whether “Automobile”, “Fire”, “Mutual” or “Whatever”, should be entitled to the benefits of separate corporate identity.

  7. Gee, Ashston, could you spin that by us one more time a little slower…..billant points though and I’m sure you’re right.


  8. Steve, I understood your layman’s example very well though and you’re definitely right on every point. Great example.


  9. Steve: i think this is what he means and this is what he wrote:

    “namely that the corporate veils of all entities in the State Farm

  10. Whoops! Error-in-navigation. Make that “…should NOT be entitled to separate corporate identity”. In short, the corporate veils should be pierced, because they are all alter egos of each other, with one and the same “puppeteer” pulling all of the strings.

  11. Tx Ashton….that’s just the clarification I needed you to make…was pretty sure that’s what you meant anyway though. 🙂


  12. When you’re talking about the “veil” you’re talking about something much larger than 7 brides for 7 brothers – but when you go with co-principal, you just fit the pieces together.

    NAAS, is Green v Champion a Louisiana case? State court or federal?

  13. I would imagine and it is just imagination on my part but this is what State Farm does—

    It has a sub let’s say State Farm Fire. It has a management team in place on the level of State Farm Fire. However, it has a management team in place at the State Farm Mutual level which also manages State Farm Fire. Consider it a form of corporate incest. The communication flow between State Farm Mutual and State Farm Fire would gosomething like this in my imaginary scenario. Rust would not communicate directly with the SF Fire. He woudl talk to his management team at State Farm Mutual that handles SF Fire. This would create a firewall(no pun intended)between Rust and SF Fire. It would create a corporate shield between SF Mutual employee’s who direct SF Fire.

    Keep in mind Warren Buffett is not a saint but I bet he doesn’t have this type of corporate incest going on. Only benefit to this type of arrangement would be limiting information flow in Court cases and limited the people who can say you did something wrong.

    Great analysis on your part Mr. O’Dwyer.

  14. Steve, sounds right to me and (naturally) Atty. O’Dwyer hit the nail on the head.

    Hey, “corporate incest” …that’s a new term and what better co. to give it than the Farm. It’s very fitting for them, Steve. “….THIS WOULD CREATE A FIREWALL – NO PUN INTENDED…” yeah, ok, Steve; well, I took it as a pun and am still laughing. Tx for the smile!


    P.S. I’m sitting here writing a paper for a Psych. course I’m taking. I think I’m going to do my Final Project (it’s a Group project) on ins. companies….really.

  15. Nowdy when reading the stuff Ashton etc pointed to I was impressed with WHY State Farm Mutual would want a way to move money out of State Farm Florida with being able to justify it on economic needs IE Reinsurance to move profits. Not just move the profits but call it reinsurance. They could show up in Court and say they have lost money on HO in Florida yet make money off of RE sold to State Farm Florida. Might have to do with leaving the State after a huge disaster and letting State Farm Florida fail. Control of blowback.

  16. Hey, Tx Steve, I like that:

    “…Learned helplessness theory is the view that clinical depression and related mental illnesses result from a perceived absence of control over the outcome of a situation.”

    I mean its morbid that I’m using Katrina and all the after-trash as a resarch topic, but when I think about it, its really not, is it? At least I’m calling attention to the matter(s) at hand. It’s certainly going to be a unique paper – that’s for sure. I’m even going to have to use you as a citation. 🙂


    P.S. It’s not due until late Nov., but I like to plan ahead.

  17. To all: There’s a very concise explanation of the “single business enterprise” doctrine a/k/a “the alter ego doctrine” available on the Internet, and authored by Attorney Jill Gautreaux of the McGlinchy Stafford firm in one of the firm’s recent Newsletters.

  18. Thank you Ashton.

    There are two parts to learned helplessness. The second part is learned optimism. You would not be able to get the subjects very easy but by theory you would predict that those with an optimistic “explanatory style” would be more likely to file suit and carry it out until the end. People with Pessimistic explanatory styles would tend to take the first offer and disappear into the night. The industry sets up it’s “claim system” not to find out who is justified in their claim but as a sort of “skinner box” where the “rat’s IE clients” are put through a series of events, which lead to no reward. Eventually the subject develops a mindset that no matter what I do it will not change the outcome so I give up. The cases are dragged out for so long to use an an example –Social learning theory— to those who might want to sue of what will happen to them—you will not get anything for a very long time. Having a cap on punitive damages is very good for this system because it discourages people thinking there may be a big pay day at the end if they keep plugging away.

    I would speculate the industry tries to cultivate an atmosphere of learned helplessness in the claims process. From Good Hands to Boxing Gloves confirms such a belief. Good luck. They do keep statistics on how many people(subjects) survive each task they are assigned to do inorder to get paid on the claim and how much money that is payed out etc. So they could easily run statistics on all this stuff. Which they probably do.

  19. “Employing careful business management practices may preserve the limitation of liability among affiliate companies, in the event that you find yourself in the unfortunate situation of having to defend yourself in litigation. Maintaining

  20. Good follow-up to Ashton’s tip, Steve. Thank you both.

    It’s obvious State Farm believes the “Management Services Agreement” establishes the “arms length” but it appears to do nothing more than establish evidence of “single enterprise” as defined in the article.

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