Barrett v. Jones, Funderburg, Sessums, Peterson & Lee, LLC

Four of five law firms in a joint venture called the Scruggs Katrina Group (SKG) were sanctioned for bribing a judge. The Scruggs firm, Barrett firm, Nutt firm, Lovelace firm, and Jones, Funderburg, Sessums, Peterson & Lee, LLC (Jones) (plaintiff) formed SKG. The joint-venture agreement specified SKG’s purpose was to bring lawsuits for property owners wrongfully denied insurance coverage for damage arising from Hurricane Katrina. SKG made $26.5 million from Katrina litigation. The joint-venture agreement said SKG would pay 35 percent to the Nutt firm and divide the rest among the other firms based on their contributions to the litigation’s success. Disputes arose dividing the remaining 65 percent. SKG ousted Jones and offered it a 3 percent share. Jones refused and sued the other firms as well as Don Barrett and Richard Scruggs individually (defendants), claiming they conspired to allocate Jones a minimal share. The firms moved to compel arbitration under the joint-venture agreement. Meanwhile, Scruggs, his partners, and two members of an unrelated firm conspired to bribe the judge to compel arbitration. The judge reported the offer and cooperated with prosecutors while pretending to accept the bribe. SKG paid Scruggs $40,000 based on a fabricated invoice from the unrelated firm for questioning potential jurors and preparing jury instructions—in a case that never went to trial. Scruggs in turn gave the unrelated firm a $40,000 check, and someone from that firm paid the judge $40,000 cash. All the conspirators were indicted, and Scruggs pled guilty. Members of SKG’s other firms testified they did not know about, authorize, or ratify the conspiracy. The trial court nonetheless sanctioned all four firms and Barrett and Scruggs by striking their answer and arbitration motion, entering default against them, and ordering them to pay Jones’s attorney fees and costs. The firms and partners appealed. Jones settled with two firms and Scruggs, leaving only Barrett, his firm, and the Lovelace firm in the appeal.