Katrina suit to net lawyers $46M

Katrina suit to net lawyers $46M

	Published : Thu, 25 Jan 2007 22:57 By : Agencies Print this Story

(AFX) - A high-profile lawyer whose firm was paid more than $1 billion for helping negotiate a settlement with tobacco companies in the mid-1990s will earn a far more modest paycheck for his work on Mississippi's accord with State Farm Fire & Casualty Co. over Hurricane Katrina damage.

Richard 'Dickie' Scruggs and other members of his legal team can collect up to $46 million in fees from Tuesday's accord with State Farm.

The insurance company is expected to pay hundreds of millions of dollars to resolve more than 600 lawsuits and thousands of other disputed claims stemming from its refusal to pay for damage from Katrina's storm surge.

State Farm will pay about $80 million to 639 policyholders who sued the company after the Aug. 29, 2005, hurricane. All are represented by Scruggs' legal team, which will be paid roughly $26 million by State Farm.

'It will not diminish by one cent what our clients will get,' Scruggs said Thursday.

The Bloomington, Ill.-based insurer also agreed to pay at least $50 million -- but possibly hundreds of millions more -- to roughly 35,000 policyholders who haven't sued the company but will have their claims reopened, reviewed and possibly paid.

A judge will decide how much State Farm will pay Scruggs' legal team for this 'class action' portion of the deal, but any payment is capped at $20 million. It could be millions less than that, however, if fewer policyholders participate, Scruggs said.

'It was never about the money for me, this litigation,' said Scruggs, whose home in Pascagoula, Miss., was destroyed by Katrina.

Dane Ciolino, a Loyola Law School professor who was an outspoken critic of the staggering fees awarded to lawyers involved in the landmark tobacco settlement, said the payments due to Scruggs' legal team for the State Farm deal seem are markably fair.'

'A lot of the problems associated with the tobacco settlement aren't here,' Ciolino, who teaches legal ethics at the New Orleans law school.

Scruggs, working with then-Mississippi Attorney General Mike Moore, played a key role in securing a $250 billion settlement with tobacco companies a decade ago. Many critics were outraged that arbitrators awarded billions in fees to Scruggs and other lawyers.

Scruggs said his legal team, which includes several law firms and dozens of attorneys, has spent around $5 million on the Katrina litigation so far.

State Farm's settlement with Scruggs' clients also resolves a civil lawsuit that Mississippi Attorney General Jim Hood filed against the company and ends Hood's criminal investigation of State Farm's claims handling practices after Katrina.

The deal doesn't affect claims in other states, but Louisiana and Alabama's insurance commissioners say they are teaming up to press State Farm for similar settlements in their states.

'I'm optimistic that the same thing will be done for claims in Louisiana and Alabama because there are no reasons not to,' Louisiana Insurance Commissioner Jim Donelon said Thursday.

Mississippi is the only state that has had formal settlement talks with State Farm over Katrina claims, but the company is settling claims individually across the Gulf Coast.

'We are always open to exploring reasonable, fair and efficient ways to resolve pending litigation,' company spokesman Phil Supple said.

Alabama Insurance Commissioner Walter Bell said he and Donelon are trying to 'formulate a plan' before they formally reach out to State Farm officials.

'This is a multistate issue,' Bell said.