GULFPORT, Miss., Feb. 27 LAWFUEL – Class Action Lawsuits …

GULFPORT, Miss., Feb. 27 LAWFUEL – Class Action Lawsuits — The group of attorneys who crafted the proposed Katrina settlement agreement with State Farm told the District Court it has played “nearly all of its cards” to “force the best compromise for the greatest number” of policyholders denied coverage after the crippling hurricane.

The Scruggs Katrina Group (SKG) — counsel for the plaintiffs — led by
attorneys Richard “Dickie” Scruggs and Don Barrett, has been joined by
former Mississippi Attorney General Mike Moore. Moore will act as
co-counsel in the proposed settlement process.

In a letter to Senior District Judge L.T. Senter, Jr., who has asked
questions about the proposed agreement regarding Dennis R. and S. Imani
Woullard vs. State Farm, the lawyers called the settlement a solution “for the willing.”

“Those who wish to fight it out for punitive damages, etc., may do so
and gamble on a Broussard style verdict,” the lawyers wrote, referring to
the family who sued State Farm and was awarded $1 million in punitive
damages. “For those who wish a free, voluntary, simple and fast decision
under Court aegis in order to move on with rebuilding their lives, this
settlement will provide it.”

The attorneys, who recently agreed to a settlement with State Farm for
640 policyholders, said that with “some modifications” the proposed
settlement will “result in needed recovery for the class and the Coast.”

SKG, Moore, counsel representing State Farm and members of state
Attorney General Hood’s office will present clarifications and their
thoughts on the proposed settlement agreement before a public hearing on
Wednesday at 1:30 pm in Judge Senter’s court (see full text of the letter
below which is the basis for tomorrow’s comments from SKG).

For more information go to the website at

For Media Inquires, contact Scruggs Katrina Group at: (662) 281-1212 or
(662) 528-2922

Send emails to [email protected]

U.S. District Court for the Southern District of Mississippi: 2012 15th
Street Gulfport, MS 39501

About the Scruggs Katrina Group

The Scruggs Katrina Group is a legal team consisting of Mississippi
attorneys from the following firms: Don Barrett and Marshall Smith of the
Barrett Law Office; Johnny Jones, Steve Funderburg, and Stewart Lee of
Jones, Funderburg, Peterson, Sessums, and Lee; Dewitt Lovelace of the
Lovelace Law Firm; David Nutt, Meg McAllister, and Derek Wyatt of Nutt &
McAllister, PLLC, and Richard Scruggs, Sid Backstrom, and Zach Scruggs of
the Scruggs Law Firm. For more information go to]

The full text of the letter to Judge Senter follows:

February 26, 2007

The Honorable L.T. Senter, Jr.

Senior District Judge

U.S. District Court, Southern District of MS

2012 15th Street, Suite 514

Gulfport, MS 39501

Re: Dennis R. and S. Imani Woullard vs. State Farm Fire & Casualty Company

U.S.D.C., Southern District of Mississippi

Civil Action No. 1:06-cv-1057-LTS-RHW

Dear Judge Senter:

I write on behalf of putative class counsel for the plaintiffs.
The undersigned are not unmindful of the challenges to bench and bar
created by Katrina. Many ideas have been proffered for fairly resolving
this miasma of conflicting legal issues. Emotions are running full force.
The public justifiably expects our institution to formulate a process for
resolving it, and after eighteen (18) months, it is past time.

So far we have not found illusive “perfection.” Nor is there ever total
satisfaction in class action settlements. There are honest differences of
opinion, not only among homeowners, but also among insurers.

Our legal team has now played nearly all of its cards to obtain what is
before the court. Our goal was – using our experience in legal, political
and opinion hard ball – to force the best compromise for the greatest
number. Because of the complexity of this process, we embraced
participation from many others to complement our experience.

Our legal team has worked hard using the leverage of our 640 cases, (by
far the overwhelming majority of the cases filed against State Farm), and
joined that leverage with the power of the Attorney General as he developed
his criminal and civil cases. The combination of the two, of course,
created the impetus and strong motivation that forced State Farm to the
settlement table. Without this synergy there would be no proposed
reevaluation settlement class proposed.

While settling our 640 cases and helping the Attorney General resolve
the State’s issues, we saw the opportunity to provide some relief for the
thousands of homeowners who had not filed lawsuits – probably would never
file lawsuits – but nonetheless deserved a reevaluation of their claims and
a prompt payment to assist in their rebuilding efforts. Requiring those
people to go through a trial leads to greater expense, time and also an
uncertain outcome here or on appeal. An example is the case of Leonard v.
Nationwide, tried before Your Honor.

After months of vigorous litigation, a
moderate length trial and over $200,000 in hard expenses from that trial,
the Leonard’s claim merited $1,600. While we, and even Nationwide, may
disagree with the Court’s findings, it made clear to us that some other
option had to be pursued to give insureds a better chance at recovery,
through a quicker, and more economically feasible approach. We believe this
class action, perhaps with some changes, does that.

We purposely avoided limiting the deal to slabs, since more than 90% of
the heavily damaged homes were not slabs. The inclusion of slabs in the
settlement was a necessary incentive, however, for State Farm to reopen and
arbitrate, under your supervision, disputes for thousands of homeowners.

We have now largely consummated the settlement for our 640 clients. We
have disbursed millions of dollars. Almost of all of it is net to the
homeowners, and, thanks to the Governor’s cooperation, no one’s settlement was diminished to repay MDA Grants. This is the standard we will strive to achieve for the class, if we are allowed to continue on this path.

Before the court is a settlement for the willing. Those who wish to
fight it out for punitive damages, etc., may do so and gamble on a
Broussard-style verdict. For those who wish a free, voluntary, simple and
fast decision under Court aegis in order to move on with rebuilding their
lives, this settlement will provide it. Quite frankly, we are proud of the
settlement notwithstanding the unavoidable criticisms.

In our view a “no opt out, slab only” compulsory class will be fiercely
resisted – not just by State Farm – and it is fraught with appellate
dangers not present in this settlement class. A “slab only” class would
also unfairly favor the generally more affluent, near waterfront homeowners
at the expense of those with lesser means who would continue to be left

We believe that time is of the essence, also, because of the appellate
posture of Tuepker and Leonard. Both are in mid-briefing and likely to be
decided in the court of appeals by this summer. A reversal of either would
imperil Broussard and the current landscape.

We now will attempt to clarify the issues you raised. We are, as well,
willing to accept changes that are conducive to compromise with State Farm.
We believe a more stream-lined opt out process, higher minimums on initial
offers from State Farm, on both slabs and non-slabs, more clarity in the
“Tool”, and other changes would make this reevaluation settlement more
attractive and perhaps more “fair, adequate and reasonable” as Rule 23

If this Court can assist us in achieving that with State Farm we
are more than willing to participate, but we have negotiated as far as they
will go. To achieve more, there will have to be real dialogue between the
parties with help from this Court which we have requested before.

We will attempt to address all of the issues you raise with the
settlement herein but also feel that a meeting with you or Magistrate
Walker could also be helpful to explain the settlement and/or to address
aspects that need clarification/change. Such a meeting is the usual way
it’s done, as described in the Manual for Complex Litigation. In addition,
all of this information will be more fully set forth in connection with the
final fairness hearing where the standard for approval is determining
whether the settlement is “fair, adequate and reasonable.” At the
preliminary juncture, we must show only that the settlement is “within the
range of possible approval.”

A settlement should be granted preliminary approval when it “appears to
be product of serious, informed, non-collusive negotiations, has no obvious
deficiencies, does not improperly grant preferential treatment to class
representatives or segments of the class and falls within the range of
possible approval…” In re Nasdaq Market-Makers Antitrust Litig., 176
F.R.D. 99, 102 (S.D.N.Y. 1997).

It is true that the settlement applies to eleven different types of
policies written by State Farm. However, all of these are very similar.
They are all “all risk” policies as to structure coverage, named peril
policies for contents coverage, all have flood exclusions and all contain
anti-concurrent cause clauses. Since this a Rule 23(b)(1) and (2) class it
is not necessary to show that common issues predominate as in a Rule
23(b)(3) class.

Rather, only a showing that the defendant acted on grounds
generally applicable to the class is required.

On the issue of numerosity, State Farm has represented that it has more than 20,000 class members and can present such evidence in an affidavit at a preliminary fairness hearing.

In determining whether numerosity exists,
courts focus on practicality of individual joinder. General Tel. Co. v.
EEOC, 446 U.S. 318, 330 (1980); Zeidinan v. J Ray McDermott & Co., 651 F.2d
1030, 1038 (5th Cir. 1981). Here, this Court has already severed fewer than
700 cases against State Farm on a finding that joinder of that number of
claims was improper. This being so, impracticability of joinder is evident.
See American Pipe and Const. Co. v. Utah, 414 U.S. 538, 553 (1974); Green
v. Ferrell, 664 F.2d 1292 (5th Cir. 1982). “Impracticable” does not mean
“impossible.” It need only be shown that it is extremely difficult or
inconvenient to join all members of the class. Mullen v. Treasure Chest
Casino, LLC, 186 F.3d 620, 624 (5th Cir. 1999). Moreover, numerosity is
presumed when the proposed class has forty or more members. Mullen, 186
F.3d at 624 (citing Herbert B. Newberg and Alaba Conte, Newberg on Class
Actions, §3.05 at 3-25 (3d. ed. 1992).

The plaintiffs have alleged that they are State Farm policyholders and
State Farm has not refuted that allegation. At the final fairness hearing
we will present additional evidence to show their status as State Farm
insureds, or could do so now if your Honor desires.

As to commonality, this requirement is one with a low threshold. Mays
v. Nat’1 Bank of Commerce, No. l:96cv8-D-D (N.D. Miss. E. Div., November
20, 1998, The Honorable Glen Davidson, U.S. District Judge); Shipes v.
Trinity Industries, 987 F.2d 311, 316 (5th Cir. 1993). In fact, a single
common issue has been held sufficient to meet the commonality test. Forbush
v. J.C. Penney Co., 994 F.2d 1101, 1106 (5th Cir. 1993). Here, the common
issues that this Court must consider are the fact that all of their
policies contained identical language and identical flood and
anti-concurrent cause clause exclusions. Thus, absent class members do not
have unique characteristics, such as separate writings with the defendants
or other individual circumstances that would make class certification
inappropriate. The adverse effect sought to be remedied by the proposed
class representatives was and is the same problem suffered throughout the

As to typicality, the test for typicality is not demanding, and it
focuses on the legal and remedial theories and the similarity between the
named plaintiffs legal and remedial theories of those of the absent class
members. Forbush v. J C. Penney Co., 994 F.2d 1101, 1106 (5th Cir.1993);
Flanagan v. Ahearn (In re Asbestos Litig.), 90 F.3d 963, 976 (5th Cir.
1996). claims or Rule 23(a)(3) requires that the class representatives
defenses be typical of those applicable to the absent class members
described in the complaint and that all have tangible and legally
protectable interests at stake. The class representatives are typical, if, in the event the class members were to proceed in a parallel action, they
would advance legal and remedial theories similar to those advanced by the named plaintiffs. Lightbourn v. County of El Paso, Tex., 118 F.3d 421, 426 (5th Cir. 1997).

Decisions construing typicality have given it a liberal
construction, holding that a claim is typical if it arises from the same
events, practice or course of conduct that gives rise to the claims of
other class members, and if the claims are based on the same legal
theories. Senter v. General Motors Corp., 532 F.2d 511 (6th Cir.), cert.
denied, 429 U.S. 870, 97 S.Ct. 182 (1976); Newberg on Class Actions, § 3.13
n. 198. In the instant action, the Woullards and each class member have
failure to provide insurance*alleged injury arising from the defendants
coverage for the same event utilizing the same exclusions. Further, the
Woullards are not subject to any unique defenses which would eliminate the typicality of their claims.

Adequacy of representation interests is met if (1) the named plaintiffs
are not antagonistic to the interests of absent class members; (2) the
named plaintiffs are effective class representatives and the proposed class
counsel are qualified, experienced, and generally competent to conduct the
litigation. Deposit Guaranty Nat’1 Bank v. Roper, 445 U.S. 326 (1980),
aff’g Roper v. Consurve, Inc., 578 F.2d 1106, 1112 (5th Cir. 1978); Sosna
v. Iowa, 419 U.S. 393, 403 (1975). If there is to be a challenge to the
adequacy of the proposed class representative, the defendant must bear the
burden of demonstrating that the named plaintiffs are not adequate to
represent the class because either: (1) they hold an insufficient stake in
the outcome or (2) they possess interests that are directly antagonistic to
central issues in the case or to the interests of the absent class members.
Falcon v. General Tel. Co., 626 F.2d 369, 376 n.8 (5th Cir. 1980), rev’d on
other grounds, General Telephone Co. of Southwest v. Falcon, 457 U.S. 147
(1982); Jenkins, 782 F.2d at 472. Here, there are no such conflicts as the
class members and the Woullards have all suffered as the result of similar actions.

Further, and as can be shown now or at the final fairness hearing plaintiffs experience in successfully prosecuting class action and mass
tort litigation.

Your Honor also had concerns with the fact that the parties did not
provide you with the extent of claims and the extent of coverages for the
five categories of claims in the settlement. The extent of claims is
certainly a matter that merits further consideration and the parties
intended to provide all such information to the Court in connection with
the final fairness hearing but can certainly do so now.

Your Honor noted that slabs are the only category of cases that receive
a guaranteed minimum offer by this settlement. That is true and reflects
the views of this Court in Broussard and State Farm’s recognition that
these are the most difficult cases to defend.

Moreover, this aspect of the
settlement was an area focused on not only by class counsel but also by
Attorney General Hood and Commissioner Dale. See, e.g., Notice 2006-50 from
the Ms. Insurance Commissioner.

Other categories are not guaranteed minimum
offers after receiving their re-adjustment largely because houses in this
category oftentimes did not have storm surge damage and therefore did not
result in an unsatisfactory claims result. Causing these individuals to
receive additional money where none was owed would diminish recovery of
those who most need it and deserve it.

The Order also expresses concern over the lack of guidelines for
evaluating of claims and the fear that claims may be adjusted the same way
as those that led to litigation. To ensure that the same practices are not
employed, the agreement requires that new adjusters be used and that the
anti- concurrent cause clause will not be relied upon to deny claims
(section 8.5). Moreover, the settlement requires State Farm to prove that
an excluded event occurred before a denial can be issued.

Your honor knows
from Broussard that State Farm’s initial adjusting method required the
policyholder to prove that the loss was not from an exclusion, a burden
shifting that was improper.

The concern that the settlement limits recovery based on the existence
of other insurance is another legitimate concern. We strove to comply with
Your Honor’s ruling in Tejedor. If we have not, we will certainly attempt
to modify the agreement to do so.

The opt out feature of this settlement is beneficial to the class.
23(b)(2) classes typically do not contain opt out provisions and typically
are approved nonetheless. Here, we did not include an opt out option on the
Katrina Registration Card to avoid confusing the class member.

However, if
the Court desires such a change we would be agreeable to seeking the same
from State Farm. In the past, we have required a separate letter to prevent
lawyers from unilaterally opting all of their clients out without notice to
the client, an unsavory but not uncommon practice. Allowing only one opt
out period is fairly routine in class action settlements. Doing otherwise
could waste judicial resources, by having Courts consider settlements and
then effectively mooting that consideration by class members opting out

The amount of time to opt out of the class was also a concern. It is
fairly common to have a 30 to 60 day opt out period but we would not be
opposed to seeking a longer period if the Court desires. A longer opt out
period, of course, means a longer wait for the final fairness hearing and
thus a longer wait for class members to receive their money. Such was not
lost on plaintiffs’ counsel when this provision was negotiated.

The release of extra-contractual claims as well as other entities
associated with State Farm was negotiated as part of the consideration for
the guaranteed minimums for slabs, guidelines for other categories, minimum
$50 million payment, and ability to participate in a streamlined
arbitration. Requiring State Farm to continue to be liable for
extra-contractual damages in an arbitration setting and allowing their
adjusters to be sued for the same practices class members hold State Farm
accountable for would diminish the benefits of the settlement to them so
much that they would achieve no finality by consummating it.

The claims process was designed to be independent with the Court
approving the choice of the parties for both Special Master and the
arbitrators. See section 8.14.1 and 8.14.3. Moreover, class counsel, who
also participates in the training of the arbitrators, knows that the Court
is ultimately in charge of, and has final say over, all facets of the
claims process.

It was class counsel’s desire to have a streamlined arbitration for the benefit of class members and thus the two hour maximum. The finality of the arbitrators’ decision was again designed to be beneficial to the class member so that State Farm could not appeal an adverse decision. In the two decisions before this Court, Tuepker and Broussard, appeals by State Farm
have occurred after events adverse to them. If a class member rejects the
offer and does not invoke arbitration, the agreement is not clear on what
results. Our view is that the class member should maintain the right to sue
for his contractual rights just like the class member who fails to file a
claim at all. We can work on this aspect of the agreement.

Allowing an arbitrator to award less than the offer again was designed to be helpful to the class member. If State Farm’s offer could only be improved on by the arbitrator, such would tend to cause State Farm to offer consistently lower amounts than it would have otherwise, to protect itself at arbitration. Moreover, class members would always invoke arbitration if the result could only get better, since the arbitration is being paid for
by State Farm. Such would slow the process considerably and such delay
would harm the class more than it would State Farm.

The concern about Poorman-Douglas is a valid concern. Poorman-Douglas
enjoys a national reputation for excellence in notice and class settlement
administration and, of course, we certainly will provide additional
evidence about their impartiality and expertise prior to the final fairness
hearing. Poorman-Douglas’ role in this case is to issue notice to the class
which this Court will approve before it gets disseminated to the class.

Class counsel certainly expects to assist all class members who desire assistance with the settlement process. Helping class members in a
settlement process is expected of class counsel in every settlement and is a task we relish here. Not only do we contemplate assisting class members with their questions as occurs in most settlements, we intend also represent them in arbitration proceedings if they so desire. Moreover, under common benefit fee principles, the more money paid to the class a result of class counsel’s help, the better chance class counsel’s ultimate
fee petition is approved by this Court. The fees articulated in the class
settlement are not minimums but are maximum amounts that State Farm would
not object to if ultimately applied for by class counsel.

If class members are already represented by counsel, class counsel would not intend to usurp that arrangement. Under the agreement as presented, the class member could make whatever arrangement he or she desired with that lawyer. However, as
State Farm conceded at the preliminary approval meeting, they would
consider paying class members’ lawyers their contingency fees if their
clients desired to opt into the settlement. Moreover, class counsel are
agreeable to amending the agreement to provide that if a class member
wishes to arbitrate and wishes to have his/her own lawyer to assist, then
that lawyer can apply to the Court for a fee, to be paid out of class
counsel fees Your Honor may award after the final fairness hearing.

The settlement only addresses claims not presently in litigation as
class counsel did not desire to usurp others’ who had already made the
decision to bring a cause of action. The settlement does allow these
individuals to become class members if they so desire.

Involving other parties is also a laudable goal but all class action
settlements generally result from numerous cases being filed and numerous
disparate interests like in the present case. Involving all interests each
time a class action settlement is contemplated would likely lead to an
inability to finalize a class settlement at all.

Here, with the parties involved in this settlement up to now, negotiations were long, hard-fought
and at times frustrating given the other than bilateral nature of them. The appointment of class counsel, the objection and opt out period called for by rule 23 ensure that the approval of a settlement must only occur after a consideration of all potential interests.

The $50 million minimum payment was a concern for Your Honor as well.
With a new process in place to give policyholders a reevaluation of their
claims, State Farm was of the view that there was no need for minimums.
They countered that the settlement was unlimited and subject to the
arbitrators’ sole discretion and therefore a minimum was unnecessary.

Class counsel appreciated the value in these aspects of the settlement but felt that those most affected by the storm should know that some minimum amount of money is available to satisfy their claims and that said amount would
not revert back to State Farm. All class members have an opportunity to get
full policy limits if they are owed and less if less is owed. All the
while, the class member can be assured that the process is not illusory
because no less than $50 million will be spent by State Farm even if only
one policyholder makes a claim.

The settlement’s recitation of state law controlling is no more than
recognition of the fact that this Court is governed by Eerie. Our strong
view is that Your Honor has followed Mississippi Supreme Court rulings in
all of your rulings, and we think our distinguished proposed arbitrators
will agree.

We hope that this letter has been helpful in explaining the settlement
and the reason for our advocating it for the class. We truly believe that
with some modifications it can be in the best interests of the class and
will result in needed recovery for the class and the Coast.

Richard F. Scruggs

Mike Moore

Don Barrett

Scroll to Top