Round 2 – Responses filed to Motions in Rigsby qui tam

The filing of Response briefs last Friday signaled Round 2 in the briefing cycle  to be completed before the Court reschedules the Status Conference previously set for today. Since Judge Senter’s Order canceling today’s conference did not specify the pending motions, we turn to the docket listing showing the Rigsbys filed a Response in Opposition to each of the three dispositive motions filed by State Farm and State Farm’s Opposition to the Rigsby’s Motion to Reconsider the Scope of Proceedings.

In a single sentence, Relators’ Counsel summarized the obvious in all three of State Farm’s motions:

In what seems to be a common theme in recent motions, State Farm Fire & Casualty Company (“State Farm”) completely ignores the fact that the Court already decided the issues raised in its Motion.

For example, the Relators’ Response in Opposition to State Farm’s Motion to Dismiss Due to the Rigsbys’ Repeated and Calculated Violations of this Court’s Seal Order stated:

In its August 10, 2009 Memorandum Opinion [343], this Court unequivocally denied State Farm’s motion to dismiss for alleged seal violations. Undeterred, and still intent on making this case about Dickie Scruggs, State Farm makes the surprising assertion that “[t]he Court did not decide this issue in its August 10, 2009 Order.” See [739] at 2. In any event, and as set forth below, the Court should deny State Farm’s Motion to Dismiss again because (1) there was no actual harm to the government; (2) any alleged seal violations were immaterial and do not warrant dismissal; and (3) State Farm has made no showing of bad faith by the Rigsbys.

State Farm “dicked around” in three other federal court districts during Discovery  – District of Columbia; Eastern District Kentucky, and Northern District Mississippi – and, in the process of court shopping, established evidence aplenty the Company remains both “intent on making this case about Dick Scruggs” and “undeterred” by the decisions of the Southern District Mississippi federal court or the evidence on the docket documenting the government’s lapse in maintaining the seal.

However, as the Rigsbys’ point out, “the FCA does not expressly prescribe dismissal for seal violations…[and]…Scruggs, his firm and co-counsel already have been disqualified…” – leading me to believe this motion is simply another example of State Farm “dickin’ around”:

State Farm repeats its misleading interpretation of the False Claims Act (“FCA”) by arguing that a central purpose of the seal provision is to protect defendants. Contrary to State Farm’s assertion, the seal provision was intended to protect the government, not defendants.  Specifically, the requirement that FCA complaints be filed under seal was intended to prevent relators from inadvertently tipping off defendants that their fraud had been discovered, thus depriving the government of sufficient opportunity to investigate the claim and decide whether to intervene before evidence could be destroyed.

Before turning to the Response State Farm filed, we take a look at the Relators response to the two State Farm’s motions for summary judgment and first examine the Relators’ Opposition to Motion for Summary Judgment on the Claims of Cori Rigsby:

State Farm already moved for summary judgment on the claims of Cori Rigsby, arguing that she had no standing as a relator because she has no direct and independent knowledge of the McIntosh claim. In its August 10, 2009 Memorandum Opinion, the Court denied State Farm’s motion and held that “there is a genuine issue of material fact concerning Cori Rigsby’s standing as a Relator.”  The Court reasoned that because this case was “not ‘based upon’” a public disclosure, the “‘original source’ requirement” may not apply at all.  Moreover, the Court held that “Cori Rigsby’s lack of direct and independent knowledge of the McIntosh claim does not disqualify her from acting as one of the Relators in this action.” Remarkably, State Farm argues again that the Court should grant summary judgment because (1) Cori Rigsby has no direct and independent knowledge of the McIntosh claim; and (2) this case was based on a public disclosure.

Next, we examine the Rigsbys’ Opposition to State Farm’s Motion for Summary Judgment:

After exhaustive briefing by all parties and a three-day evidentiary hearing, the Court denied summary judgment and held that the “evidence was sufficient to create a genuine issue of material fact on the merits of Relators’ substantive allegations.”  After the Court’s ruling, the parties engaged in months of deposition and document discovery. The Relators’ discovery focused on seeking more evidence of State Farm’s fraudulent scheme and on how and to what extent the McIntosh claim, a product of that scheme, was knowingly false. State Farm, on the other hand, largely focused on the irrelevant sideshow of Dickie Scruggs, his law firm, his cocounsel, his secretaries, and his media consultant. Accordingly, while Relators now have substantially more evidence of State Farm’s scheme and of the falsity of the McIntosh claim, State Farm has done virtually nothing to advance its position.

Indeed, while the evidence is now slanted even further in favor of the Relators, the record still is replete with factual disputes precluding summary judgment with respect to (1) whether the McIntosh claim was false; and (2) whether State Farm knowingly submitted a false claim. As to the falsity of the McIntosh claim, the parties disagree over the timing of wind and water, the strength of the wind, the amount of water that entered the home, the cost to repair that damage from water, and the credibility of virtually all of the witnesses that have testified on each side. Nonetheless, State Farm contends that the Court should ignore all the disputed evidence and accept as a matter of law the views of only one witness on the question of how much flood damage occurred at the McIntosh house. That witness is Robert McVadon, a fact witness who worked on rebuilding the McIntosh home and now is being paid by State Farm…(emphasis added)

The Defendants’ second argument, that State Farm did not knowingly submit a false claim as a matter of law, is equally specious. The Fifth Circuit has “emphasized repeatedly that cases which turn on the moving party’s state of mind are not well-suited for summary judgment.” Int’l Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1265 (5th Cir. 1991) (collecting cases). Consistent with that principal, there are numerous facts here that would permit a reasonable jury to infer that State Farm intended to defraud the government. For example, the evidence shows that State Farm knew that (1) winds from Hurricane Katrina could destroy homes; (2) it was improper to coerce engineers into changing the conclusions in their reports and then purge their files of the damaging reports; (3) FEMA rejected the expedited claims procedures used by State Farm; (4) FEMA required a line-by-line estimate of flood damage for claims like McIntosh; and (5) it was improper to create false line-by-line estimates to paper their files.

Indeed, the testimony of Relators’ expert Louis Fey alone is also sufficient to defeat summary judgment, as Mr. Fey concluded that State Farm’s adjustment of the McIntosh flood claim did not comply with FEMA procedures, and in particular, that State Farm’s use of Xact Total on the McIntosh claim was for the purpose of summarily establishing a higher estimate of flood damage than would have been reached without using Xact Total…

Despite the fact that the FEMA directive W-5054 authorized the use of Xact Total in a far narrower set of circumstances than State Farm had requested, State Farm disregarded the written FEMA directives and adjusted claims based on its September 13 proposal. Juan Guevara testified that State Farm’s claims adjusting practices did not change as a result of W-5054 because “approval was given by Jim Shortley” to adjust claims based on procedures contained in the September 13 proposal. Ex. 8, Guevara Dep. at 69:16-70:2, 94:17-22.

Guevara claimed that State Farm had special privileges. But Maurstad testified that W-5054 embodied the only expedited procedures that were approved following Hurricane Katrina…

No doubt State Farm has other “special privileges” that allowed the Company’s taking-candy-from-a-baby approach to policyholder claims – and, State Farm’s Opposition to the Rigsbys’ Motion to Motion to Reconsider the Scope of Proceding suggests the Company believes even more such privileges are du:

This case is both factually and procedurally different from Branch for a host of reasons. First, the Rigsbys do not identify “a large number of fraudulent adjustments” involving properties where there was little or no flood damage. Rather, this case involves a single flood claim adjustment to the McIntosh property, which inarguably “sustained substantial flood damage.” ([343] at 3.) There is simply no basis to infer a comprehensive flood fraud scheme from a single allegation of overpayment.

This is especially true given that the Rigsbys admittedly spent months combing though State Farm’s claim files and computer databases in 2005 and 2006 in an attempt to support their flood fraud claim, and came up with nothing.

“Nothing”!  Hardly!  Stay turned for a follow-up post with this Gershwin tune as its theme song:

“Oh, I got plenty o’ nuttin’
An’ nuttin’s plenty for me.
I got my gal, got my song,
Got Hebben the whole day long!
Got my gal, got my Lawd, got my song!

8 thoughts on “Round 2 – Responses filed to Motions in Rigsby qui tam”

  1. Oh, thank you, Nowdy!! Your posts are like Christmas presents under the Christmas tree on Christmas Day! And the anticipation of the next post is like waiting for Christmas Day!

  2. Amen on Bellesouth post…this is great…I’m beginning to see desperation in SF arguments…arguing the same stuff over and over again…becoming increasingly shrill.

    People keep forgetting that the United States Government is the plaintiff, the whistleblower is a sentry, once the relator (our sentry/watchdog) discovers evidence of fraud the entire point of the FCA is to open up the whole process to investigation….SF continues to focus on the Rigsbys (and Scruggs) and the idea that the whistleblower is tainted or has an agenda or someother distraction about whether THIS whistleblower has jurisdiction or is entitled to a reward….are they actually arguing that Branch is the appropriate whistleblower?

    Morevoer, if the Guevara/Shortley conversation is their next defense strategy, they are really screwed. “The governemnt told us to inflate the flood claims.” Good argument State Farm.

    the only question before the court is: Did SF defraud the government, by “knowingly” filing inflated flood damage claims?

    even one claim is justification….but the Forensic testimony about changing documentation on 19 claims is a pretty good hint that it is a heck of a lot of claims….

    I would think that they are praying for government settlement…opening up the files exposes management to questions they don’t want to answer…big deal… 100,200 or 300 million settlement…it’s only money and not even their money.

  3. (I’m still mad…so I’ll make a couple of other points)

    #1. “Rigsbys attempt to obfuscate..” Are you kidding me? The only party “obscuring the truth” is you State Farm….why not produce all the files for independent review and why did you confuse the FEMA auditor with retrofit documentation?

    #2. Stop misrepresenting the Rockwell decision…Rockwell was found liable under the FCA…the only issue was whether James Grant had jurisdiction based on his allegations in the FCA claim (and therefore was entitled to a portion of the recovery), which he was not (according to Scalia). Once the Federal Government intervenes the Rigsby jurisdictional argument (as a defense to discovery) goes away. If the Feds intervene and find other evidence of fraud, SF is toast, regardless of whether the eventual determination is that McIntosh is not evidence of fraud. One critical similarity with Rockwell is that the Rigsbys may end up like Grant, a placeholder for the government, without recovery.

    #3. Along the same line of thinking, SF makes the disingenous argument that the Rigsbys only have McIntosh as evidence. That isn’t really true. All the other supporting claims files were removed because they were obtained inappropriately. That doesn’t mean they don’t exist.

    #4. Finally, State Farm continues to make the argument that the FCA requires proof of overbilling in the McIntosh case; that if there was $250,000 worth of flood damage then the case has to be dismissed because there was no injury to the government. That isn’t correct. That’s why the statute has nominal damage provisions. There are lots of cases of attempts to defraud the government that ended up without actual payments and they nonetheless are subject to FCA liability. If SF claimed $500,000 worth of flood damage, including items they knew were not damaged by flood, then that’s FCA fraud. Most of the suspicion concerning SF’s motivations is SF’s own fault, like suppressing Ford’s report and similar evidence in other files. No surprise that SF had to attack the credibility of the Ford report, once concealed there needs to be an explanation. But even that explanation is insufficient, because Ford’s report didn’t receive that level of scrutiny when it was removed from the McIntosh file…only after it became an issue. Where was the due diligence when it was required.

    OK enough venting for one day.

  4. Believe it — SF (read: all insurers) is TERRIFIED! The Truth is that they even fear possible indictments — not just the cash settlement.

  5. It is my understanding that Judge Senter eliminates “for cause” all potential jurors who had their own Katrina claims. I can’t even begin to comprehend this. For the love of God, I really hope the Rigsbys lawyers try this case like a bad faith case. The FCA stuff is very difficult to understand, so let the jury charges take care of most of that. Put Lecky on the witness stand right out of the blocks and clean her clock.

  6. Sorry, the guys name in Rockwell is James Stone, not James Grant. I was reading James Grant’s editorial on the Coinage Act and the Fed’s quantitative easing strategy…..

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