DC Magistrate Judge limits third-party discovery in convoluted Katrina insurance qui tam suit

by Ben Vernia | June 21st, 2010

US Magistrate Judge John Facciola in DC issued a ruling on June 16 on third-party discovery in DC in a Katrina insurance qui tam suit filed in the Southern District of Mississippi. The sisters worked at an insurance adjusting contractor of State Farm, and – employing a consortium of law firms, including the Scruggs Law Firm – sued State Farm under the False Claims Act, alleging that the insurer was defrauding the US in its methods of processing hurricane-related claims. The law firm consortium in turn employed DC-based The Rendon Group to “create a favorable public atmosphere” for the consortiums’ cases. State Farm issued a discovery subpoena to The Rendon Group, though it had succeeded in narrowing the sisters’ False Claims Act suit to a claim involving a single house in Mississippi; The Rendon Group opposed the subpoena on privilege and burdensomeness grounds.

Magistrate Facciola noted that The Rendon Group did not have standing to assert the attorney-client privilege because they had no attorney-client relationship with anyone in Misssissippi; he then noted that the case presented several bizarre features. First, the sisters did not formally oppose State Farm’s subpoena because, their lawyer explained, “[t]he review necessary to permit such assertions [i.e., regarding privilege] would risk the taint [related to the issues that caused the disqualification of [the sisters’] prior counsel we need to avoid.” As Judge Facciola stated, “[t]hus, we have the curious situation where the only parties with actual standing to assert an attorney-client privilege have insisted they will not intervene and claim it.”

In addition, although the Scruggs Law Firm had been dissolved, Judge Facciola noted:

A mysterious entity, said to be a successor to the Scruggs Law Firm, P.A., SLF, Inc., a corporation not engaged in the practice of law, has also sought to intervene. Its standing is a riddle. Since TRG is resisting the subpoena, it adequately protects whatever interest this entity could claim and there is no warrant for its intervention.

Turning to the burdensomeness issue, the Court noted that The Rendon Group had failed to specify what burdens it faced in the production. Nevertheless, because it was a third-party subpoena, written broadly, and because the sisters’ case had been dramatically narrowed, Judge Facciola granted production of a narrow category of documents and permitted State Farm to renew its motion after reviewing them.

Leave a Reply

Recent Posts

Recent Comments