Forked! “Bifurcation for Dummies” – a Rigsby qui tam Update (part 1)

I have no idea what part of bifurcate State Farm attorney Bob Galloway doesn’t understand – only that Haag Engineering’s attorney, the infamous “what-do-you-think-of-that-Larry” Canada can’t seem to grasp the concept either.  Rigsby Attorney August Matteisa “gets it” but, of course, you have to know your vocabulary words to graduate magna cum laude from Georgetown Law.

Since the word rolls off Judge Senter’s tongue like water (no pun intended) in the pre-trial orders he issues in Katrina litigation, he “gets it”, too. Obviously, Georgetown Law isn’t the only place the word is taught.  Judge Senter, as a matter of fact, graduated from Ole Miss Law; so how Galloway missed it is hard to figure.  Canada, on the other hand, is an Alabama Law graduate and could have made it out without catching on, despite the fact that Bear Bryant bifurcated the football team.

Robert Frost even wrote a famous poem about bifurcation – “Two roads diverged in a yellow wood, And sorry I could not travel both…” and Joe Diffie sang a bifurcation song all the way to #40 on Billboard’s Hot Country Songs – “Yesterday I missed my exit on my way to Sears…”

Simply stated bifurcate means “divided into two” – and when Judge Senter issues an Order to bifurcated one trial into two, he puts a fork in the road and you follow his directions.

I will hear the evidence on the Relators’ qui tam claim first. I will stay discovery on State Farm’s counterclaim until the trial of the Relators’ claim has been completed, and I will schedule a separate trial to reach the merits of the counterclaim.

The way Bob Galloway ran over Judge Senter’s Order in State Farm’s 420-page Motion to Compel, you’d think it was an armadillo.  Sop could have treated my typing fingers to a manicure for what it cost to pull the Motion off PACER, not to mention it took all but an entire ream of paper to make copy.  Consequently, one post can’t begin to cover the Motion and we look first at the related correspondence between Galloway and Metteis, a mere 53 pages, starting with Galloway’s 28-page letter of February 12, 2010, to Matteisa:

Dear Auggie [sic]:
I am writing concerning Relators’ January 11, 2010 responses and objections to State Far’s interrogatories and requests for production of documents. Of the 15 interrogatories propounded by State Farm, your clients have refused to anwer 10 of them. Simlarly, of the 43 document requests, your clients have refused to provide any information in response to 27 of them. In the hope that we can resolve this matter, I will go through each discovery request and explain why we believe your clients should provide the requested information.

The full text of Galloway’s letter is included in the linked correspondence; however, the six-page response from Mettais is better suited for summarizing and addresses the points in Galloway’s letter:

Dear Bob,
…You mention in the letter that the Rigsbys objected to a substantial portion ofthe interrogatories and requests. We objected to so many of the requests and interrogatories because most of them are part of a highly intrusive and sweeping inquiry into the Rigsbys’ personal financial information. The Court very clearly attempted to narrow the issues in this first trial phase to whether State Farm defrauded the government in connection with the McIntosh flood claim. This phase does not include State Farm’s counterclaims. Nonetheless, you contend that the disputed requests are relevant to establish the Rigsbys’ bias, motive, and credibility. While evidence of bias, motive or credibilty is permitted under certain circumstances, you cite no authority that would allow for such sweeping discovery into the Rigsbys’ personal information under these circumstances.

Galloway does cite authorities but, in a footnote, Matteis claims, “The cases cited in your letter do not provide support for State Farm’s position” and goes on the explain.

The Rigsbys have testified regarding their financial arrangement with the Scruggs Katrina Group in at least three depositions. They readily acknowledged that they were paid consulting fees by the Scruggs Katrina Group, and they testified regarding the amounts of those fees. Moreover, their November 2007 depositions in McIntosh v. State Farm were taken after they had already been required to provide State Farm with the personal financial information it now seeks again, including their “state and federal tax returns, 1099 forms, paycheck stubs, etc.” McIntosh v. State Farm, no. 1:06-cv-l080 (1193) (S.D. Miss.).

Accordingly, it is unclear why State Far would need any additional personal financial information. Nothing in the record suggests that the Rigsbys have been  misleading or dishonest regarding payments received, so State Farm simply has no basis to launch into a highly intrusive fishing expedition into the Rigsbys’ finances, presumably in hopes of finding additional payments (that do not exist)…

Nonetheless, I wil briefly address below the specific interrogatories and document requests at issue and supplement the Rigsbys’ responses where appropriate. Those regarding the Rigsbys’ financial information are addressed first, followed by some requests and interrogatories on miscellaneous topics.

Discovery Requests Related to the Relators’ Financial Arrangements with their Attorneys: Interrogatories 2 and 3 seek the identity of anything of value, compensation or other payment the Relators and their relatives received from counseL. Document Requests 5 and 6 seek documents relating to anything of value the Relators and their relatives received from their counsel. Document Request 30 seeks all materials related to any contracts or agreements Relators have with any Person related to the prosecution of claims in this action. Document Request 35 seeks all materials evidencing any agreement to finance the cost and expense of prosecuting claims in this action. Interrogatory No. 12 seeks the identity of every attorney who has represented the Relators, the total amount of fees costs and services related to that representation, and the identity of the person paying those expenses.

As explained above, providing further information relating to the Relators’ financial arangements with their previous attorneys is unreasonably cumulative. The Relators will, however, supplement their answers to these discovery requests to provide information related to their fee arrangement with current counsel. Current counsel are representing the Relators on a contingent fee basis. The costs of this representation, including expenses related to this representation are being fronted by current counsel. Beyond reimbursing the Relators for reasonable expenses incurred in litigation, such as travel and lodging, current counsel have provided  nothing of value to the Relators or their family members.

Document Request 33 seeks all materials evidencing any agreement to pay any part of the Relators’ potential recovery in this Action. Document Request 34 seeks all materials evidencing any agreement with respect to the Relators receiving remuneration as a result of any recovery received by any attorney in any Hurricane Katrina-related lawsuit against State Farm or Renfroe. The Relators will supplement their answer to these discovery requests by stating that they are not in possession of any responsive materials, other than their fee agreement with current counsel, which will be produced.

Matteis moves next to two additional sets of related requests: “Discovery Requests Related to the Relators’ Amounts and Sources of Income” and “Discovery Requests Based on a Suspicion That the Relators Received “Indirect Payments”.  Since this is the second of four letters and the full text is also included in the linked correspondence, I will combine excepts from both:

…The Relators have already turned over records of their state and federal tax returns, and they have been deposed by State Farm after turning over these records. State Farm also has previously subpoenaed eleven banks for information related to the Relators, as well as Sinclair Lundy, a CPA, for information related to the Relators’ tax returns…In light of the information already in State Farm’s possession, the minimal value of any additional information to potentially demonstrate the Relators’ bias does not warrant further discovery, particularly discovery of the breadth you have requested. For example, surely you do not contend that the personal checks the Relators wrote from their checking accounts last month should be discoverable; but as written, your discovery requests seek that information and more.

Document Requests 3, 4, and 20 seek materials regarding the purchase, sale, or ownership of real property by the Relators or their relatives. Document Request 11, 18 and 19 seek information related to credit or financing, billing statements from credit cards, and records of payment for credit obligations. Document Request 42 seeks payments between the Relators and the Relators’ mother and step-father, and Document Request 29 seeks the Relators’ passports…

The Relators have testified multiple times under oath about their financial relationship with the Scruggs Katrina Group. Your suspicion that there may have been other payments through indirect means..does not warant the all-encompassing discovery you seek…in light of the information already available in the public record.

Moving on, the set of requests are “Discovery Requests that Could Only be Relevant to State Farm’s Counterclaim“:

Interrogatories 7 and 11 seek information about phone numbers, email addresses, and service providers used by the Relators during Hurricane Katrina. Document Request 26 seeks all telephone records including telephone bils between August 29,2005 and August 1,2007. In defending these discovery requests, you assert that State Farm is entitled to seek information concerning with whom the Relators have communicated since Hurricane Katrina. The Relators answered State Farm’s Interrogatory No. 15, requesting information about communications related to this action and the McIntosh flood claim. Accordingly, State Farm’s other discovery requests are overbroad and would not lead to other admissible evidence. Moreover, in McIntosh, State Farm argued that email accounts were relevant because the Relators may have used their email accounts in relationwith the allegedly stolen materials, and telephone records were relevant because the Relators were provided with cellular phones by their previous counseL. These aspects ofthe discovery requests could only be relevant to State Farm’s allegations in its counterclaim.

Similarly, Document Request No. 27 seeks all calendars, schedules or diaries for dates between August 29,2005 and August 1,2007.Similarly, Document Request No. 27 seeks all . Here you assert that the Relators’ “schedules during the events that give rise to the allegations in this lawsuit” likely contain information concerning meetings, conversations, etc. Like Interrogatories 7 and 11, this request is overbroad and appears to be directed at exploring the Relators’ contacts with their former counsel, not whether the McIntosh claim is false.

Interrogatory No.8 seeks information related to computer technicians used to inspect the computers…In defending the request you explain that the Relators may have allowed computer technicians to access their State Farm computers in violation of the terms of their State Farm agreements. This allegation may be central to your counterclaim, but does not relate to the McIntosh flood claim in any way. Indeed, State Farm’s position statement submitted to the Court described this information as related to its counterclaims

Following this discussion, Matteis addresses, “Communications with Public Relations Firms and Media” and then “Communications with Government Officials” :

Interrogatory No.9 seeks the identity of every contact between the Relators and anyone acting on their behalf and representatives of the print or electronic news media, website, or a Weblog. Document Request No. 32 seeks all materials related to such communications. As you acknowledge, the Relators have already provided information related to these communications following the October 1, 2007 Order in McIntosh. Providing materials a second time is unnecessarily duplicative. The Relators answered State Farm’s Interrogatory No. 15, requesting information about communications related to this action and the McIntosh flood claim…

Document Request No. 21 seeks all materials and communications exchanged between the Relators or their counsel and any law enforcement officer or agency including the United States Attorneys Offce or the Deparent of Justice. We stated that we would produce these materials ifthose agencies consent or pursuant to a court order. Your response argued that the government’s consent should not be required, in part, because “the state and federal investigations have been concluded.” The August 1,2007 Order lifting the seal in this case acknowledged that the government’s civil investigation was ongoing…If you are aware of any information supporting your assertion that the investigation has closed, please provide us with that information.

Document Request No. 22 seeks all communications between the Relators or their counsel and the Mississippi Insurance Department. The Relators have objected to providing information in the possession of their previous counsel, which Relators themselves can no longer access and the contents of which are unknown. They renew that objection here, but-subject to that objection-there are no documents relating to communications they or their counsel have had with the Mississippi Insurance Department.

Document Request No. 24 seeks all communications between the Relators or their representatives and Trent Lott or Gene Taylor and any member of their offce staff. You defend this discovery requests on the grounds that these communications “may demonstrate your clients’ violations ofthe seal order” and they may bear on credibility, bias, and motive. We do not understand how communications with Trent Lott, Gene Taylor, or their staff could bear on the Relators’ credibilty, bias, or motive. Moreover, discovery related to the alleged seal violations obviously does not pertain to whether the McIntosh claim is a false claim for payment.

Responses related to “Surveillance Materials“, “Materials evidencing any agreement regarding indemnity or defense cost reimbursement”, and – lastly, “Communications with Richard Scruggs”:

Document Request No. 31 seeks all materials regarding surveillance with respect to State Farm, Renfroe or their attorneys. Although you assert these materials are “clearly discoverable,” we do not understand what any alleged surveillance of State Farm or Renfroe employees or their attorneys would have to do with whether the McIntosh claim is a false claim. Moreover, any surveilance undertken by the Relators’ counsel would be privileged as work product. However, the Relators wil supplement their answer to this discovery request by stating that, subject to their objection regarding any materials that might be in the possession of former counsel, they are not in possession of any responsive materials.

Document Request No. 38 seeks all materials evidencing any agreements, contract, promise or understanding regarding indemnity or defense cost reimbursement incurred by the Relators. The Relators wil supplement their previous answer to state that their arrangement with Richard Scruggs for indemnity was a verbal one, and, subject to their objection regarding any materials that might be in the possession of former counsel, they are not in possession of any responsive materials.

Document Request No. 39 seeks all materials including correspondence exchanged between the Relators issued to the Relators by State Farm, and anyone acting on their behalf and Richard Scruggs and anyone acting on his behalf. The Relators will supplement their previous answer to state that, subject to their objection regarding any materials that might be in the possession of former counsel, they are not in possession of any responsive materials.
* * *
We again request that you provide us with any authority supporting the broad discovery you seek. We have agreed to supplement certain discovery answers, and we hope that upon further reflection, you will also agree to narrow the scope of your discovery requests. Please call me if you would like to discuss this further.

At this point, I’m going to bifurcate this post and cover the last two letters  along with the Rigsbys Motion to Compel Haag Engineering in Part 2, “coming soon” here on SLABBED.

12 thoughts on “Forked! “Bifurcation for Dummies” – a Rigsby qui tam Update (part 1)”

  1. Thanks, James, you research adds much to the discussion and is a most appreciated contribution to SLABBED – and to the slabbed.

    I’ve got a lot more to post – not just Part 2 which I hope to get up tonight. I think you’ll find it all of interest and wish I could get it up faster – but I do read the documents I post and, as you can see, some are very lengthy and most require additional research.

  2. Recently (March 4, 2010) the NFIP reissued its “Wind/Water Investigative Tips” for the flood adjusters.

    I noted the following: “canvas the neighborhood for eye-witnesses and take their recorded or signed statements….Record in the claims file only what each witness actually says – not hearsay or your opinion.”

    I’m still convinced that McIntosh fraud breaks on the content and handling of the Ford/Kelly reports and Lecky King.

    No amount of bashing the Rigsbys or Scruggs is going to save State Farm when it comes to the due diligence of their claims handling…..the adjusters followed their professional standards….then Lecky made a mess of it…..

  3. Here’s a helpful read on the bifurcation rationale because of the counterclaim issue….

    Judge Senter is smart to keep the ‘Mississippi Shakedown” counterclaim out of the first phase to the extent possible….taxpayers need to see the State Farm conduct issue tried independently…….

    And this is one of the reasons why I said that Branch was the better case….

  4. I’ve been trying to resist interfering and/or interjecting a Jefferson Parish twist into this serious discussion, but I can’t help myself.

    I’m not only flabbergasted but also dismayed with Mr. Galloway’s effrontery and profligate voluminous Motion to Compel (428 pages) and his letter (28 pages).

    I can be thankful that the powers that be in Jefferson Parish never retain(ed) him to defend the indefensible (apparently his specialty): as in the case of Simon vs. JP, Kerlec, covered here on slabbed; and the Vandenweghe matter coming to head soon.

    Mr. Galloway’s tactics would not only bankrupt the taxpayers of JP, his potential contributions as a result of those legal fees to the political elite of JP could have such a chilling effect on the election process, I… can’t…even…imagine…the…future…

  5. Just got to a computer to post. Friends, if you are going to cite Robert Frost, please get the poem right. Failure to do so makes the professor in me cry. “Two roads DIVERGED in a yellow wood…” Diverge= separate. Converge= join. For this post, I believe you want separate. Yeah, I know, your heart was in the right place. Aside from that blunder, great post! Guess we’ll soon see how it all comes out.

  6. Well worth the blunder to have you back, Sampson! Correction made, however. I copied the lines from a website, pasted into the post and moved on to “hot country” without noticing.

  7. James appears to be right about most things, except for Branch being the better case. Branch got almost all of its leaves clipped on Friday. The Federal courts really don’t want these cases going to trial. And if a Katrina qui tam case gets to trial, it will be in a far narrower fashion than any relators’ claims as stated in their complaints.

  8. Judge S’s analysis follows along Scalia’s Rockwell logic….if your allegations were deemed to be “publicly disclosed” and you are NOT an “original source” of that specific allegation (i.e. independent and direct knowledge of the information on which your allegations are based) then the Court has no subject matter jurisdiction for that part of the claim.

    In the end, James Stone’s allegation had a false premise…..though it caused the FBI to get involved and Rockwell was seriously in violation of various laws and regs….resulting in a huge fine at Rocky Flats. James Stone is an all-American hero, and Scalia is to Rockwell what Johnnie Cochran was to OJ…….if the glove don’t fit you must acquit…..really?

    Anyway, the issue is whether Branch’s complaint (I think they’re dealing with the First Amended Complaint) was so detailed in describing a “loss-shifting” allegation, that they are stuck with that allegation exclusively, which clearly is the exact claim that the Rigsbys were making on ABC News.

    If this sticks, that eventually will be the big mistake. Loss-shifting is just one motivation for over-billing the NFIP…..if you were the WYO of the flood policy and didn’t carry the homeowners policy would you be any less motivated to over-bill the NFIP……I think NOT… would bill the flood maximum and hope for the best, because at the very least the homeowner would feel like you were their hero, increasing the likelihood of repeat business.

    So all this talk about loss-shifting vs. revenue enhancing as separate “schemes” is really a bunch of bull….the allegation is FRAUD….which never lists “scheme” or “motivation” as elements.

    The advantage for the Rigsbys is that they are considered a bona fide “original source” and therefore the public disclosure issue is ineffective….note that Judge Senter wasn’t even sure that public disclosure had occurred…..

    Don’t give up all hope…..Shushan’s analysis is full of internally inconsistent reasoning, and trial for the 27 claims keeps the issue alive……….and the FED can still intervene and they are not constrained by the public disclosure/original source jurisditional bar.

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