Judge: Miss. attorney general must testify in State Farm lawsuit

Published 6:56 pm Friday, January 25, 2008

Mississippi Attorney General Jim Hood must testify in a lawsuit filed by State Farm Fire and Casualty Co. that accuses him of violating an agreement to end a criminal investigation of the insurer’s handling of Hurricane Katrina claims, a federal judge ruled Thursday.

State Farm sued Hood last September, accusing him of violating his part of a January 2007 agreement that also called for State Farm to pay millions more to victims of the August 2005 storm.

It’s not clear exactly what State Farm wants Hood to testify about, but the company’s lawsuit accuses the attorney general’s office of improper conduct, including allegedly using the threat of criminal charges to force the insurer to settle lawsuits with private attorneys.

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Hood denies the allegations.

U.S. Magistrate Judge Michael T. Parker ruled in November that Hood must “personally appear at the hearing and give testimony in this cause.”

At the time, Parker also extended a restraining order that has prevented Hood from continuing the criminal investigation.

After months of legal wrangling, Parker ruled Thursday that the order “directing the defendant to appear and testify at the reconvened hearing remains in effect.”

A date for the hearing wasn’t immediately set.

Hood has called State Farm’s lawsuit “frivolous” and said he wants the federal case to be thrown out. He said a motion for dismissal is pending before U.S. District Judge David Bramlette.

“If Judge Bramlette sets a hearing on the motion to dismiss and denies the motion, then he will decide whether testimony is needed,” Hood said in a statement.

State Farm spokesman Jonathan Freed said Thursday that the company is “trying to end Jim Hood’s harassment of State Farm, especially for our people in Mississippi, and we’re looking forward to having these issues aired.”

Hood says he did not violate the agreement with State Farm because his investigation is separate from the earlier probe.

Parker’s ruling Thursday also grants State Farm’s request to take a deposition of high-profile plaintiffs’ attorney Richard “Dickie” Scruggs. State Farm claims Hood improperly worked with Scruggs and blurred the legal lines separating criminal and civil cases.

Scruggs, his son, and several associates were indicted in November on charges that they tried to bribe a judge in an unrelated case in state court. Scruggs also is facing federal contempt charges in Alabama for allegedly violating a court order to return documents taken from a company that helped State Farm adjust claims. Instead of giving the documents back, Scruggs allegedly gave them to Hood.

Scruggs has maintained his innocence in both cases.

The dispute between Hood and State Farm stems from a January 2007 settlement agreement in which Hood agreed to end his criminal investigation and State Farm agreed to reopen and possibly pay tens of thousands of policyholder claims.

After a federal judge refused to endorse the settlement, State Farm reached a separate agreement to pay additional unsettled claims through a program developed by George Dale, who was then the Mississippi commissioner of insurance.

When Hood issued a grand jury subpoena in August 2007, requesting documents from Bloomington, Ill.-based State Farm, the company sued.

Hood said in court papers filed last week that the latest investigation is new and independent of the earlier probe of “crimes against policyholders.”

Hood’s attorneys also claimed that the January 2007 agreement doesn’t give State Farm “blanket immunity” from a new investigation “with a new focus and new genesis.”

Hood hasn’t publicly identified the new focus of his investigation. State Farm believes it centers on the company’s dealings with the National Flood Insurance Program.