Monday, January 29, 2007
An article by Anita Lee in yesterday's Sun Herald (Mississippi) -- Insurance Showdown: Here's the Inside Story of How Legal Titans Reached Settlement -- sheds light on the process by which settlement class actions are negotiated. In litigation over Hurricane Katrina insurance coverage, Sheila Birnbaum (who heads the Complex Mass Tort and Insurance Group at Skadden Arps) represents State Farm, and Richard Scruggs (Mississippi mass tort plaintiffs' lawyer who played a central role in the tobacco state attorney general settlement) represents numerous Gulf Coast policyholders. The reporter describes a phone call from Birnbaum to Scruggs in September 2006:
In a telephone interview, Birnbaum said she called Scruggs because he had put out feelers, passed on by local attorneys, that he wanted to talk.
Scruggs recalled in an interview last week: "She said, 'We need to talk. I'm representing State Farm. We'll meet you any time, anywhere and see if we can't find common ground.' That's the way things usually unfold like this on a large scale."
Eventually, they negotiated a settlement on a class action basis, in coordination with a deal between Attorney General Jim Hood and State Farm that ended the state's criminal investigation. They presented it to the federal court last Tuesday:
State Farm and the Scruggs team reached an accord for Scruggs' clients and crafted a class-action settlement for policyholders who have not hired a lawyer - about 8,000 by Hood's estimate. Those who choose to opt out of the settlement could do so.
Hood's negotiations with State Farm were aimed at keeping the company's questionable claims practices out of negotiations with policyholders who take part in the class-action settlement. He said he also pushed to get them the best deal possible, while State Farm pushed back.
Finally, they inked a deal. Hood ended his criminal investigation, but plans to forward evidence to Congress. He also dismissed a civil lawsuit against State Farm in Hinds County Chancery Court that sought full coverage for policyholders. He'll continue to press that suit against other major insurers.
Once Hood and State Farm reached an accord, that airplane finally took off for the Coast, where the proposed settlement between State Farm and the Scruggs group was delivered to the federal courthouse in Gulfport on Jan. 23.
On Friday, Judge L.T. Senter, Jr. rejected the proposed settlement without prejudice. The parties hope to revise the deal to address the court's concerns.