Famed tort lawyer Richard F. “Dickie” Scruggs finally got some good news. Though special prosecutors in Birmingham, Ala., planned to appeal a federal judge’s February dismissal of their criminal contempt charge against Scruggs, they inadvertently let the deadline pass for doing so.

Last week a federal judge denied the special prosecutors’ request for a retroactive extension of time in which to file their appeal. U.S. District Judge Roger Vinson concluded that their slip-up did not constitute the sort of “excusable neglect” for which such allowances could be made.

Amid Scruggs’ many legal problems at the moment - including his federal guilty plea last month to conspiring to bribe one Mississippi state judge and his ongoing federal scrutiny in connection with similar accusations involving a second one - the criminal contempt charge has understandably taken a backseat in the public eye. Nevertheless, the episode that prompted the charge is of interest for the light it sheds both on Scruggs’ push-the-envelope approach to litigation and his snug relationship with Mississippi Attorney General Jim Hood. (For background, see my recent feature story about Scruggs’ assault on State Farm Insurance Company.)

The criminal contempt charge had arisen from Scruggs’ circumvention of a federal court order issued in December 2006 by U.S. District Judge William Acker, Jr., of Birmingham. In that case, a firm called E.A. Renfroe & Company, which contracts out claims adjusters to major insurance carriers, had sued two of its former employees, Cori and Kerri Rigsbys, who had become “insiders” working with Scruggs on his suits against insurers over their post-Hurricane Katrina claims-processing policies. In December 2006 Judge Acker ordered the Rigsbys to return thousands of pages of State Farm documents they had secretly copied. Rather than let the Rigsbys turn over those documents to Renfroe’s counsel, as Judge Acker had contemplated, Scruggs asked Attorney General Hood to have his office request the documents from Scruggs (even though Hood’s office already had a set). Hood’s office did so, and Scruggs then sent the documents there instead of to Renfroe’s lawyers, theorizing that doing so would then be allowed under a “law enforcement exception” contained in Judge Acker’s order.

Judge Acker disagreed with Scruggs’ interpretation of his order, and in June 2007 he recommended that criminal contempt charges be brought against him. Birmingham’s U.S. Attorney, Alice Martin, declined to prosecute, prompting Acker to appoint three private attorneys to act as special prosecutors: Charles E. Sharp, Jr., and Joel Williams, both of Birmingham’s Sadler Sullivan, and former federal prosecutor Michael Rasmussen. Those three filed a formal criminal contempt charge against Scruggs last August.

On February 29, however, Judge Vinson dismissed that charge, concluding that Judge Acker’s order - which was directed only to the Rigsbys and their “agents” and “attorneys” - did not reach Scruggs, because he had never formally entered an appearance on the Rigsbys’ behalf in the Renfroe case. (This was so, in Vinson’s view, even though Scruggs represented the Rigsbys in other cases, had hired their lawyers in the Renfroe case, and was paying those lawyers. Indeed, he had also pledged to indemnify the Rigsbys if they were ordered to pay any damages in the Renfroe case. Basically, he was the master puppeteer behind everything.)

As a fallback grounds for dismissal, Judge Vinson also found that, “while there is a cloud of impropriety surrounding what Scruggs did,” his conduct, nevertheless, did fit within the literal terms of Acker’s order.

The special prosecutors had planned to appeal both of Judge Vinson’s rulings, and originally thought that they had until yesterday, April 29, to do so. But their deadline actually ran out in late March. As he admitted in a motion filed April 15, special prosecutor Sharp had simply looked at the wrong provision of the Federal Rules of Appellate Procedure - the one for civil appeals, which affords the government 60 days, rather than the one for criminal appeals, which affords it just 30 days. He did not realize his mistake until it was too late.

In an interview, special prosecutor Michael V. Rasmussen - the only special prosecutor with experience as a federal prosecutor - notes that he had only worked as a trial prosecutor, that “the government seldom filed appeals, and it had an appellate section which usually handled that.” Special prosecutor Sharp did not immediately respond to a call or e-mail seeking comment.

Below are all the key documents. Read ‘em and weep.

Special Prosecutors Motion to Extend Time

Scruggs Opposition to Extension of Time

Judge Vinson Order Denying Extension of Time to Appeal

Last week I published a feature story online, “The Siege of State Farm,” attempting to encapsulate the extraordinary, multifaceted assault upon State Farm and the insurance industry that was mounted by plaintiffs lawyer Richard F. “Dickie” Scruggs in the wake of Hurricane Katrina. (The story will appear in the May 5 issue of Fortune, which is also the annual Fortune 500 edition.)

In the process of trimming that article to a length that non-Scruggsiana-fanatics might find digestible and that the magazine’s post-dotcom advertising budget could pay for, I omitted some important points. In this post I’ll mention a couple. (This post is for readers who have either already read that feature or have been following the saga closely.)

To begin with, my feature did not include reference to the then-latest breaking news, which was the April 4 order of U.S. District Judge L.T. Senter, Jr., disqualifying all of Scruggs’ former Scruggs Katrina Group (SKG) co-counsel from any continuing involvement in Mississippi policyholder litigation against State Farm; disqualifying Scruggs’ former State Farm “insiders” - claims adjusters Cori and Kerri Rigsby - from testifying in any of those cases (there are about 180 of them); and forbidding any law firm from introducing into evidence in those cases any document obtained by the Rigsby sisters by means of their insider status, rather than by means of ordinary discovery processes. (See WSJ law blog post.)

Judge Senter did so, he wrote, because he found that the SKG lawyers had been aware of and acquiesced in Scruggs’ decision to have SKG pay the Rigsbys $150,000-a-year salaries as “consultants,” notwithstanding their status as fact witnesses. As I mentioned in the feature, it’s illegal to pay fact witnesses for their testimony, though it’s okay to pay expert witnesses and consultants. Judge Senter concluded that the Rigsbys’ consultancy arrangement with Scruggs was a “sham.” (Scruggs’ law firm withdrew from SKG shortly after Scruggs’ indictment last November, prompting the group to change its name to Katrina Litigation Group, or KLG.)

Since then, the disqualification snowball has continued to roll, and it is likely to reach still more lawyers and cases in the coming days. Last Friday another federal judge in the Southern District of Mississippi disqualified the SKG/KLG lawyers in another case against State Farm, as reported by David Rossmiller here.

This week, a ruling is expected on State Farm’s motion to disqualify the SKG/KLG lawyers in a civil RICO case against State Farm that SKG filed last June, where U.S. District Judge William H. Barbour, Jr., also of the Southern District of Mississippi, is presiding. It’s hard to imagine an inconsistent outcome there. [UPDATE: Barbour, in fact, disqualified the SKG/KLG lawyers and the Rigsbys, in an order tracking Judge Senter's, on April 16.]

In addition, State Farm also moved last week to disqualify Scruggs’ co-counsel in the federal False Claims Act case (or whistleblower lawsuit) he had brought against the insurer on behalf of the Rigsbys alleging fraud on the National Flood Insurance Program. (See Rossmiller posts here and here.) The attorneys whose disqualification is being sought there (who were not SKG/KLG lawyers) include former U.S. Attorney for the Western District of Missouri Todd Graves and his firm, Graves Bartle & Marcus of Kansas City, Mo., and former Missouri Supreme Court Chief Justice Edward (Chip) Robertson, Jr. of Bartimus, Frickleton, Robertson & Gorny of Jefferson City, Mo.

In the whistleblower case, State Farm alleges that these law firms acquiesced or participated in the Rigsbys’ alleged violations of the Computer Fraud and Abuse Act, which forbids unauthorized intrusions into password-protected databases. In a deposition last November, Cori Rigsby acknowledged that, on at least one occasion in March or April of 2006, when she and Kerri were meeting with lawyers from Scruggs’ firm and these co-counsel firms in Scruggs’ trailer office in Pascagoula, Cori accessed the State Farm database using her State Farm laptop. “I’m not sure which documents he retrieved,” Cori said of Anthony DeWitt, an associate at Bartimus Frickleton, whom she said she was working with. “I let him in the computer and I can’t speak after that.”

Neither DeWitt nor BFRG partner Robertson returned messages I left for them April 9, nor did partner Graves of the GBM firm. In a court filing April 10, the two firms said they plan to “vigorously contest” State Farm’s disqualification motion, and asserted that it “is based upon the misguided premise that GBM and BFRG are vicariously responsible . . . for acts about which they had no or incomplete knowledge, and did not in any way direct.” (If they plan to contradict Cori’s testimony in any way, however, that, in itself, might put them in a conflict situation, requiring disqualification.)

Perhaps the most important new motion filed last week, however, was the counterclaim filed by State Farm seeking a damage award against the Rigsbys for alleged violations of the federal Computer Fraud and Abuse Act (and some Mississippi laws, too). If the Rigsbys have not yet been entirely forthcoming and candid about Scruggs’ involvement in some of their more controversial actions during the litigation - for instance, the so-called data dump of early June 2006, in which the Rigsbys downloaded some 6,000 pages of documents from State Farm’s database - the State Farm counterclaim puts added pressure on them to abandon any lingering loyalty to Scruggs in favor of saving their own skins by implicating him. The allure of doing so might also become more enticing to them if, after a successful disqualification motion, they find themselves represented by lawyers free of any past social or pecuniary ties to Scruggs.

That leads me to one last point about Scruggs-tainted lawyers. From a national perspective, the two most important Scruggs allies in this whole escapade are the ones who, prior to Scruggs’ indictment, were both being bruited about as possible candidates for Trent Lott’s former U.S. Senate seat, if not higher office still. One is Mississippi Attorney General Jim Hood, whose de facto alliance with Scruggs in the assault on State Farm has long been front-and-center, but the other is former Mississippi Attorney General Mike Moore, whose role has been lower key. Partly, this is because Moore has played his public-relations cards more deftly. He quietly withdrew from Scruggs’ campaign in January 2008, fairly soon after everything began hitting the fan.

Moore’s multifaceted role in the siege of State Farm is one of the most eye-popping, because it is impossible to say with certainty precisely who he was representing much of the time. He seems to have taken the view that what was good for Scruggs’ private clients was good for Mississippi, and he flitted from representing one to the other without giving the matter much thought. (Moore did not respond to repeated phone and e-mail messages seeking his cooperation on my feature story, so I am basing my understanding of his understanding of his role on this declaration he submitted in court in January 2008.)

At the end of 2006, when State Farm was simultaneously trying to negotiate resolutions of Hood’s civil case, Hood’s criminal inquiry, and a class-action being brought by the SKG lawyers, Moore served as a “facilitator” between all the parties on all three matters, he says in his declaration. Others present at these negotiations remember Moore describing himself at the time as “resolution counsel.” These terms make it sound like Moore was a neutral mediator of some sort. But that was not State Farm’s understanding. Its lawyers say they understood Moore to be Hood’s agent in the negotiations, not a neutral. Moore also acknowledges in his affidavit that he was, from time to time, offering Hood “advice and assistance” on his criminal inquiry of State Farm (although he didn’t actually sit in on any grand jury proceedings), which certainly helps explain why State Farm may not have seen him as neutral.

One way to find out who someone represents is to ask him how he’s getting paid. At a meeting in January 2007 deputy insurance commissioner David Lee Harrell did ask Moore that question, and Moore replied cryptically that he got “paid at the end of the day,” according to Harrell’s later deposition testimony.

In his January 2008 affidavit Moore neither confirmed nor denied having been asked that question or having given that answer. Instead, he offered this carefully worded, non-denial denial of Harrell’s testimony: “I have not received nor do I have any agreement to receive any compensation from any source as a result of my involvement as a facilitator.” Note that Moore does not say whether he had any expectation of receiving compensation.

In March 2007, the class-action settlement Moore facilitated fell apart. In June 2007 Moore entered an appearance as co-counsel for the plaintiffs in one of SKG’s key civil cases, McIntosh v. State Farm. Though Moore was never a formal member of the SKG joint venture, Cori Rigsby testified in November 2007 that she regarded Moore as a member of the SKG team. In his January 2008 affidavit - submitted after State Farm moved to disqualify Moore and the SKG/KLG lawyers in the McIntosh case - Moore wrote that because the McIntosh case involved “the most egregious conduct by State Farm, . . . I accepted the offer to be involved in the case and to have [sic] offered to do so on a pro bono basis.”

While indignantly denying any improprieties, Moore voluntarily moved to withdraw from McIntosh the same day he filed his declaration. Since his motion was granted, he successfully avoided the embarrassment of being included in Judge Senter’s April 4 disqualification order. Whether he successfully dodged political taint is another question.

A web site called mymeso.org, looks like it’s probably run by a nonprofit, 501(c)(3) group devoted to providing dispassionate information about the dreaded, fatal, asbestos-linked cancer known as mesothelioma. Or possibly by a concerned citizen whose close relative has contracted the disease.

It’s neither. It’s an alter ego of Beasley Allen Crow Methvin Portis & Miles, a plaintiffs law firm in Montgomery, Alabama, that brings asbestos suits, among other things. (Somewhat ironically, another Beasley Allen specialty is consumer fraud class-actions.)

Anyone can obtain a “.org” top-level domain name from the Public Interest Registry, which promotes itself as “the registry of choice for organizations dedicated to serving the public interest.” Though its use ordinarily connotes a noncommercial outfit of some kind, the registry does not bar for-profits from using it.

As of this writing, if you closely examine the mymeso.org homepage, and scroll down a ways, eventually in the right-hand margin you’ll detect two light-gray-on-white boxes whose typeface is so faint that they almost look like watermarks.

One box says “POWERED by HOPE and Supporters Like You,” and the other says “PUBLIC AWARENESS web site sponsored by BEASLEY ALLEN.” (When the page is printed out, these messages are invisible, at least using my printer.)

If you click on the “POWERED by HOPE” box, you get to a “mission statement” that finally acknowledges that mymeso.org is not just sponsored by Beasley Allen; it is Beasley Allen, or, as BA puts it, “a community outreach effort” of that firm. The site was set up by BA on January 16, 2008, according to its Whois data.

Most of the posts on the site are signed by Wendi Lewis, who is not further identified. Some of Lewis’s posts refer to verdicts won on behalf of mesothelioma victims, and some of those offer links to Beasley Allen’s main web site for the “full story.” The site also has an email “contact” feature that provides no indication of where it leads.

For comment I called Thomas J. Methvin, a name partner at Beasley Allen, who also happens to be the president-elect designate of the Alabama State Bar.

Methvin acknowledges that Wendi Lewis is a Beasley Allen employee, but says that the identification of the site as “sponsored by” the firm is sufficient to avoid any confusion. He says that those who have written to the site so far have not been seeking legal assistance; it’s just been about “awareness.”

Ethics professor Stephen Gillers, of New York University Law School, says that he did not know whether mymeso.org met the Alabama’s bar regulations, since rules on advertising vary greatly from state to state. “The disguised nature of the web site would not allow it to survive challenge under the New York rules,” he noted, however.

Professor Robert Kuehn of the University of Alabama School of Law said that Alabama’s rules on lawyer advertising are “not very stringent” and that it was not clear to him that what they do require - primarily inclusion of certain disclaimer language - would come into play here, since the site does not outwardly appear to solicit clients. He also noted that the firm might have First Amendment protections that could override whatever regulatory provisions were implicated.

Assistant general counsel Samuel Partridge of the Alabama State Bar said that, under longstanding policy, he was not allowed to give an opinion over the phone as to the permissibility of a specific lawyer’s conduct.

Incidentally, when first asked to look at the site, none of the experts I contacted initially understood what legal ethics question I wanted to ask them, since none realized that the site was run by a law firm until I told them.

Beasley Allen is not the only law firm with a dot-org avatar. The New Haven, Connecticut, plaintiffs law firm of Early, Ludwick, Sweeney & Strauss also uses one, called the Mesothelioma & Asbestos Awareness Center, at maacenter.org. The home page uses a popular symbol of medicine as its emblem - the two serpents wrapped around a winged staff - and its “about us” blurb says: “Our organization is staffed entirely by volunteer writers and other contributors who recognize the importance of building awareness.”

But at the bottom of the home page there is also a notice in faint gray typeface stating that the site is sponsored by Early Ludwick. It contains a hyperlinked disclaimer which, when clicked upon, finally does state, with refreshing candor, “Attorney Advertising.”

Jim Early, the New Haven firm’s managing partner, initially said he didn’t think his firm was associated with the Mesothelioma and Asbestos Awareness Center, and that he’d never heard of that group before. But then he added, “I’ve got people that do my Internet stuff and I’m not sure what they’re doing. I think we make it clear on all our web site stuff that we’re a law firm.”

I then used the “contact” device on the maacenter.org site, identifying myself as a reporter, and asking if the site was affiliated with Early Ludwick. Jim Early emailed me back as follows: “I have received the inquiry you posted on the web site our firm sponsors. As I indicated, I do not believe the web site is ‘deceptive’ as our name appears on the bottom of the home page as a law firm. . . . I am sorry I did not have complete familiarity with the name of the web site as you listed it to me yesterday as i was in the middle of several other projects and had not seen it beforehand. However I have since looked at it and compared it to other web sites and feel that it would be in compliance with appropriate attorney advertising standards. Emails to that web site do reach my office and we do sponsor that site.”

UPDATE: (March 28, 2008): As of this morning the mymeso.org web site had been revised. It now has a legible “Website sponsored by BEASLEY ALLEN” notice at the top, right-hand side of the home page, a second legible message at the bottom, and its “contact” device indicates that Wendi Lewis works at Beasley Allen. These seem like good revisions to me.

It appears that the drain of paying for criminal defense attorneys is having an impact even on mega-plaintiffs lawyer Dickie Scruggs, whose share of fees from the late 1990s tobacco settlements is thought to have approached $1 billion.

Since September 2006, Scruggs had been paying all fees and expenses for two “whistleblowers” who had been sued by their employer due to actions they’d taken to assist Scruggs in his assault on the insurance industry over its post-Hurricane Katrina claims-handling practices. (Basically, they stuck their necks out for him, so he was covering their back-sides.)

But on Tuesday, one of the two law firms defending the whistleblowers - Cori and Kerri Rigsby - asked to withdraw, citing “the inability of the Rigsbys and others” to pay its fees going forward or to even “adequately satisfy existing fee and expense obligations.” The motion is here.

The withdrawing firm is Washington, D.C.’s Zuckerman Spaeder, and its team was led by William W. Taylor, III, who is also the lead criminal defense lawyer for indicted class-action firm Milberg Weiss (or, as of today, Milberg LLP, see here). I have a call into Mr. Taylor, but given today’s activity in the Milberg case - founding partner Mel Weiss’ expected guilty plea, see here - I suspect I may be low down on his call-back list. Scruggs’ counsel, John Keker, declined to comment on Zuckerman’s motion and what it might mean.

The Rigsby sisters’ employer, E.A. Renfroe & Co., sued them in September 2006 for allegedly violating their employment contracts by photocopying confidential documents belonging to State Farm (to whom Renfroe was supplying supplemental claims-adjusters) and giving them to Scruggs. In addition to paying the Rigsbys’ costs of defending the suit, Scruggs had also taken on at least an oral commitment to indemnify the sisters for any judgment they might ultimately incur, according to a statement filed by the Rigsbys’ lawyers last December. See here.

Scruggs pled guilty Friday to conspiring to bribe a Mississippi state judge in Oxford in 2007, but his legal problems are not over. Prosecutors in Oxford contend he was involved in attempting to bribe a different state judge in Jackson in 2006, and a different set of prosecutors in Birmingham, Ala., are pursuing him on a criminal contempt charge, arising from Scruggs’ alleged defiance of a December 2006 court order. (The contempt charge was dismissed on February 29, but the Alabama prosecutors are contemplating an appeal.)

Scruggs is also likely paying the criminal defense costs of his son and co-defendant, Zach Scruggs, who faces trial March 31, and currently has at least 7 lawyers at 4 firms representing him, according to electronic court records. One would also expect that Scruggs would be footing the bills for his law partner Sid Backstrom, who also pled guilty Friday.

According to the withdrawal motion, the Rigsbys will continue to be represented by Birmingham’s Battle Fleenor Green Winn & Clemmor, who were also previously paid by Scruggs.

The surprise guilty plea this morning of mega-tort lawyer Richard F. “Dickie” Scruggs leaves a huge unanswered question: will Scruggs cooperate?

The unusually short plea agreement says nothing one way or the other about cooperation. (Scruggs’ law partner Sid Backstrom also pled guilty today, and his specifies that he will cooperate. The Clarion-Ledger is reporting that Scruggs’ son, David Zachary Scruggs, will get deferred prosecution, though he’ll have to surrender his law license. [CORRECTION/UPDATE: The C-L did briefly report that, but it turned out to be inaccurate, and they quickly deleted it from their web site article. Evidently Zach Scruggs is heading for trial, as things stand.--RHP 3/18/08]

A great many people in Mississippi and national politics are undoubtedly waiting with bated breath to learn whether Scruggs plans to cooperate. A lawyer in the office of John Keker, Scruggs’ lead counsel, declined all comment.

Earlier this year, federal prosecutors in Los Angeles concluded a plea deal with class-action impresario Bill Lerach which did not require him to cooperate–a deal also negotiated by Keker–but such deals are rare.

In this morning’s plea, Scruggs admitted conspiring to pay a $40,000 to bribe to state circuit judge Henry Lackey of Oxford last year, who was presiding over a fee-dispute case filed against him by a law firm that had once been part of his Scruggs Katrina Group. That was a joint venture that brought cases for policyholders who suffered damage in Hurricane Katrina.

But Scruggs has not yet revealed what, if anything, he knows about another alleged attempt to corruptly influence a judge, which prosecutors contend occurred in early 2006. That incident involves a still sitting judge in Jackson, a former district attorney there, and, in a bit part, Scruggs’ brother-in-law Trent Lott, the former U.S. Senator. None of those individuals has been charged with wrongdoing and all have denied committing any.

But if Scruggs were to ever start talking, the area of greatest interest to any historian, certainly, would be the unexpurgated story of his most famous case–the assault upon the tobacco industry in the mid-90s. Scruggs’ multifaceted campaign in that case–including lawsuits, public relations campaigns, and political pressure– culminated in a series of settlements under which cigarette makers agreed to pay the states about $246 billion over 25 years, and to pay the plaintiffs attorneys more than $13 billion. Scruggs’s share of the fees reportedly came to more than $850 million.

On the other hand, even if Scruggs witnessed anything untoward in that campaign, and even if he were willing to tell prosecutors about it, prosecutors might be barred from pursuing it at this point by statutes of limitations.

Why would anyone think something untoward might have occurred? As a result of fee-dispute litigation relating to the tobacco case, it has come to light that Scruggs is still paying significant shares of his attorneys fees from that case to farmer and grain storage businessman P.L. Blake, whose role in the litigation remains unclear. (Under the tobacco settlement, attorneys fees are parcelled out over about a 25-year period, at a rate of between $500 million and $750 million a year.)

Scruggs and Blake testified in 2004 and 2005 that Blake provided oral political intelligence to Scruggs, though neither could recall concrete examples. From 1993 to 1998 Scruggs had paid Blake loans totalling about $785,000 in increments of $5,000 to $25,000 per month.

In the first year after the tobacco settlements were concluded, Scruggs paid Blake $10 million, out of which Blake paid back Scruggs’ earlier loans with interest. (Scruggs wired the $10 million to his friend Joey Langston, who then wired the money to Blake, though neither Scruggs, Langston, nor Blake could recall why they did it that way in their depositions).

Scruggs then started paying Blake $468,450 per quarter, at which rate the total paid out to Blake would eventually approximate $50 million. (Stories about the Blake payments have previously appeared in David Rossmiller’s Insurance Coverage Blog, the New York Times, and the Wall Street Journal.)

Correction: Earlier version had spelling error, caught by commenter Ed of Topeka, KS. Thanks, Ed.

Yesterday a special master in a federal shareholders class-action suit against The Coca-Cola Company (KO) recommended that the law firm of Coughlin Stoia Geller Rudman & Robbins be barred from serving as class counsel because it had purchased “stolen” company documents from a disgruntled former Coke executive.

“Class Counsel engaged in extremely troubling conduct,” wrote Special Master Hunter R. Hughes, III, “by paying for documents stolen from Coke, and then exacerbated the [situation] by refusing to accept responsibility for that conduct and by continuing, to this day, to defend that conduct through the use of arguments that appear to be pretextual.” Hughes’s ruling is here. (The pertinent pages are 49-69.)

Hunter’s recommendation was submitted to U.S. District Judge Willis B. Hunt, Jr., of Atlanta, who will wait to receive comments from the parties before deciding what action to take.

Hunter acknowledged that Coughlin Stoia’s lawyers had “vigorously and skillfully prosecuted this case for now seven years,” and said that “had they addressed this issue head-on, recognizing the impropriety of the arrangement they made . . . that might well have served to mitigate the circumstances. But they did not. Instead, they turned a blind eye to the terms of the consulting agreement pursuant to which they paid for the company documents and continue even now to make unfounded arguments which only obfuscate the issue.”

Coughlin Stoia partners (on the West Coast) were not immediately available to respond to email inquiries sent early this morning (from the East Coast), but any comment received will be inserted when it arrives.

(Coughlin Stoia, formerly known as Lerach Coughlin, is the firm founded by William Lerach in 2004, when he split away from Milberg Weiss and took that firm’s West Coast office with him. Lerach began serving a two-year federal prison term earlier this month after pleading guilty to conspiring to obstruct justice in connection with an unrelated kickback scheme at Milberg Weiss. Milberg Weiss has pleaded not guilty to the same charges, and is scheduled to go to trial in August.)

The case against Coke, filed in October 2000, alleges that the company artificially inflated its revenues through “channel-stuffing.” (A company channel-stuffs when it cajoles distributors into buying more product than they really need, to make it look to shareholders like consumer sales are brisker than they are.)

About four months after the case was filed, two former Coke executives approached the class’s law firm (then still known as Milberg Weiss) to offer help on the case, according to Hughes’s report. One of the two former execs, Greg Petro, told class counsel that he’d taken about 3,000 Coke documents with him when he had been terminated. The law firm then signed a “consulting agreement” with the two former executives, agreeing to pay them $200 an hour but, in any event, no less than $75,000, if they would provide information to the firm “including . . . documentation in any form, written or electronic, concerning Coke.” Petro then turned over 3,023 company documents, including many marked “confidential.” Some were then used in connection with an amended complaint filed in the case.

When the consulting agreement came to light more than a year ago, Coughlin Stoia lawyers backed Petro’s claim that neither he nor they had thought he was taking Coke documents without authority because, among other things, Petro had been ordered, when terminated, to “clean out his office.” Special Master Hughes found that such a command could not “rationally be construed to authorize Petro to walk off with company documents, any more than it authorized him to take the company’s desk, chairs, and computer.”

Hughes also rejected arguments that the firm was not really buying the documents, just entering into a consulting agreement, and a public-policy style argument that Petro’s conduct should be condoned because he was a whistleblower trying to expose corporate wrongdoing.

In a footnote, Hughes found that public policy arguments weighed in the other direction: “On a very practical level, for the Court to give Plaintiffs’ counsel a pass on this conduct, would simply invite terminated employees, particularly of public companies, to on a wholesale basis remove company documents following their termination in hopes they can sell them should the company be sued.”

In the silver-lining department, Special Master Hughes did find that the mere past involvement of Bill Lerach in the case, and Lerach’s subsequent admission of unrelated criminal conduct, did not warrant barring Coughlin Stoia from serving as class counsel.

Correction: Earlier version of this story had wrong the wrong month for when Milberg Weiss is set to go to trial. Correct month is August. Regret the error.

Attempting to ride a wave of corporate and judicial disenchantment with aspects of the current patent system, a new project was unveiled Thursday designed to, as its name bluntly indicates, End Software Patents. (Press release is here. The group’s “first yearly report” on the state of software patents is here.)

The group is intended to become a clearinghouse for information and a hub for those strategizing legal challenges, according to its executive director, Ben Klemens. Though End Software Patents will not initiate litigation of its own, it will be on the lookout for appropriate test cases to support as they arise, he says.

Though the project is being sponsored and funded by leaders of the Free and Open Source Software movement, it hopes to attract support from the wider community of businesses, financial institutions and universities that have all been blindsided in recent years by lawsuits over software patents and their close-cousins, business-method patents.

The End Software Patents Web site, here, highlights a long list of diverse businesses that have been sued for allegedly infringing software patents, including the Green Bay Packers, OfficeMax, Caterpillar, Kraft Foods , ADT Security Services, AutoNation, Wal-Mart , Walgreen , Barnes & Noble, Circuit City Stores , Ford Motor , E I du Pont de Nemours and Co. , and so on. In most cases, the companies have been sued because of certain basic, routine functions performed on their Web sites — the way images are displayed, the way data is gathered or transmitted — which are said to infringe software patents.

The group also hopes to attract support from the many financial institutions, including JP Morgan , Merrill Lynch , and NCR Corp. , that have been asked to pay patent holding company DataTreasury for permission to send check images over the Internet. (For a Washington Post story about remarkable proposed federal legislation directed specifically at the DataTreasury patent, click here.)

The point, explains Klemens, is this: “If you’re running a business of any sort, you have to care about the software and business method patents.” That’s because nearly every business today operates a Web site and employs a staff of in-house IT programmers who enable them to conduct business in the digital age. In that sense, every business is now a software business.

Klemens is a mathematician (a guest scholar at the Brookings Institution since 2003) who uses algorithms to analyze data. In a recent article, for instance, he and his co-authors use data analysis to link certain genes to bipolar disorder. “I often run into patents on statistical methods and mathematical algorithms of the type that I implement,” Klemens says. “I don’t think I violate the ones I’ve seen, but I could be wrong, and I don’t know what else is out there. . . . That’s the thing that really woke me up: by doing pure math, I face legal liability. As far as I know, that’s a first in human history.” Klemens’s personal Web site is here.

In a 2005 book, Mathematics You Can’t Use, Klemens criticizes software patents from an economic and legal perspective, and does so in unusually crystalline, easy-to-understand terms. (For chapter one, see here, and for chapter six, see here.)

The book attracted the attention of the Free Software Foundation, whose president, Richard Stallman, has been railing against software patents since at least 1991, for related, but narrower, reasons: they posed a potentially mortal threat to his brainchild, free software — i.e., software, like Linux, that programmers are able freely to examine, modify, and redistribute without fear that their work will ever be taken out of circulation, declared off-limits, or placed behind a toll-booth by private proprietors. (For a feature story on the tension between patents and free and open software, “Microsoft Takes On the Free World,” see here. Generally speaking, though, software patents present dangerous traps for any programmer. Unlike copyrights, which are difficult to infringe inadvertently, a programmer can easily write software that inadvertently infringes someone else’s patent. That happens whenever the programmer independently comes up with an innovation that, unbeknownst to him, someone else has already staked a claim to. While copyrights are relatively easy to write around — since they protect only particular sequences of words or code — patents present broader, vaguer, and more durable obstacles, since they purport to proprietize implementations of ideas.)

In Klemens, the Free Software Foundation saw a potential ally who, thanks to the breadth of his critique and clarity of his writing, could attract a broader audience than just free and open source programmers. “We came to him,” says Peter Brown, the foundation’s executive director, “and said, we really want to fund your work. And he said yes.”

At the moment, the End Software Patents project is formally an offshoot of the Free Software Foundation. It also enjoys the “sponsorship” — though not monetary support — of the Software Freedom Law Center, which is led by Eben Moglen (an outside lawyer for the FSF and its former general counsel), and of the Public Patent Foundation, an organization led by the center’s legal director Dan Ravicher. The Software Freedom Law Center is itself funded largely by such Linux-supporting corporate patrons as IBM (IBM), Hewlett-Packard (HPQ), Red Hat (RHT), Novell (NOVL), Oracle (ORCL), and Sun Microsystems (JAVA).

To be sure, the goal of abolishing software patents remains a radical position in the sense that very few corporations endorse it. (A surprising exception is pharmaceutical manufacturer Eli Lilly & Co. See here. Evidently Lilly recognizes that poor quality software patents are among the problems spurring the tech industry to seek patent reforms, and it hopes to find of way of placating the tech industry without weakening protections for the drug patents that are the lifeblood of the pharmaceutical industry.)

Though many information technology companies, like IBM, Hewlett-Packard, and Cisco, are publicly championing patent reform, they only favor improving the quality of software patents, not abolishing them. After all, there are estimated to be more than 200,000 active, issued software patents in the United States, and most major tech companies have acquired, at considerable expense, substantial portfolios of them. Companies like Philips Electronics also argue that drawing the line between hardware and software is no longer easy, and that many patents relate to processes that were once accomplished using hardware but are now accomplished using software. Why should the modernization of the medium deprive Philips of recognition for its inventions, its lawyers have argued (albeit, in a slightly different context). See here.

Still, Klemens expects his group to find much common ground with the more moderate IT industry reformers, as well as with those whose main bugaboo is business-methods patents. “Pretty much every argument we make, top to bottom, applies to business methods as well,” Klemens says. In addition, the group’s supporters hope that the major tech players are coming to conclude that the vast number of software patents they have accumulated is part of the problem. “There are so many rights in so many hands,” says Moglen, of the Software Freedom Law Center, “everybody is at risk all the time.”

In any case, even if End Software Patents’ goals are extreme, they are not far-fetched. The U.S. Supreme Court has never ruled on the patentability of software, and at one time the predominant assumption among lawyers was that it could not be, because it amounted to nothing more than mathematical algorithms, which, in turn, were considered nonpatentable “laws of nature.”

That assumption was gradually turned upside down through a series of decisions rendered in the 1990s by the U.S. Court of Appeals for the Federal Circuit, a specialized court that had been set up to handle patent appeals, among other things, in 1984. Those decisions suggested that even if pure software itself was not patentable, software when loaded onto a general-purpose computer created, in effect, a new physical device that could then be patented. Some of the same rulings that opened the door to software patents effectively opened the door to “business method” patents, too.

In the past two years, however, it has become clear to all that the U.S. Supreme Court is extremely unhappy with the patent environment that the Federal Circuit has fostered in the two decades since its creation. In eBay v. MercExchange (May 2006), the Court unanimously junked one longstanding rule of that court, and last term, in KSR International v. Teleflex (April 2007), it unceremoniously dispatched another. (In eBay, the Supreme Court ruled that judges need not always enjoin defendants from infringing, even after a patent-holder has proven its case, and in KSR it made it much easier for judges and patent examiners to invalidate patents due to obviousness.)

For Klemens, however, the most encouraging ruling for his agenda was one that, technically, wasn’t. In LabCorp v. Metabolite Laboratories (June 2006), the Supreme Court had been asked to review the Federal Circuit’s precedents on patentability – the issue that ultimately also determines whether software patents and business-method patents are permissible. After hearing oral argument, the Court punted, deciding that, for technical reasons, it never should have heard the case in the first place. But three justices dissented, writing that they would have overturned the Federal Circuit and invalidated the patent in question, because it clearly amounted to an attempt to patent a nonpatentable “natural phenomenon,” though the phenomenon had been recast in the patent application as a patentable “process.” For that opinion, see here. Klemens contends that software patents amount to much the same thing.

Though only three justices signed the dissent, it does appear that it, in combination with the Supreme Court’s back-of-the-hand treatment of other key Federal Circuit precedents, has led the patent appeals court to engage in some soul-searching. Just two weeks ago, it announced, without having been spurred to do so by the parties, that it would rehear an important patentability case, In re Bilski. (See generally here.) It even asked the parties to brief whether a key ruling it rendered in 1998, State Street Bank & Trust v. Financial Signature Group – one of the pivotal ones greenlighting software and business-method patents — was correctly decided.

“There are test cases all over the place,” observes Klemens. Plainly, his timing is propitious.

Correction:  As a commenter points out, in an earlier version I misused the legal term of art “reads on.” Then I did it again in a comment. Regret both errors.

Just in time for Valentine’s Day, a 2-1 majority of the Fifth U.S. Circuit Court of Appeals has struck down a Texas law that banned sales of vibrators and other sex toys. The court found that the law violated the Fourteenth Amendment “substantive due process” rights of Texans “to engage in private intimate conduct without government intrusion.”

The one dissenter, Circuit Judge Rhesa Hawkins Barksdale, wrote that invalidating the statute was unnecessarily “friction-producing” for state-federal relations. Both opinions are available here.

Only three other states have similar laws in force — Mississippi, Alabama and Virginia — and Mississippi’s will evidently be nullified by Tuesday’s ruling since it also falls within the Fifth Circuit. State supreme courts had previously struck down such laws in Louisiana, Kansas, and Colorado.

On the other hand, the neighboring Eleventh U.S. Circuit Court of Appeals upheld Alabama’s law in 2004, even as it related to plaintiffs who had been prescribed such devices by their doctors for health reasons. Tuesday’s ruling therefore creates an arguable conflict among the circuits, at least theoretically teeing up a possible U.S. Supreme Court case.

Since the issue does not appear to have arisen in confirmation hearings, it is unclear where the High Court’s newest members, Chief Justice John Roberts and Associate Justice Samuel Alito, would come down on vibrators. So to speak.

Attorneys for famous plaintiffs lawyer Richard F. “Dickie” Scruggs filed a battery of motions yesterday which suggest that he plans to try to invoke a variety of “entrapment” defense — claiming, essentially, that the government unfairly lured him into commiting the crime — without openly admitting that that’s what he’s doing. If a defendant invokes the entrapment defense openly, he becomes subject to a number of special obligations and burdens that the Scruggs lawyers will want to avoid. I’ll explain exactly what I mean by that at the end of this post, after reviewing the substance of the motion.

In their papers, Scruggs and his two co-defendants - law partners Sidney A. Backstrom and David Zachary Scruggs (Scruggs’s son) - specifically ask a federal judge in Oxford, Mississippi to dismiss the indictment against them due to “outrageous government misconduct.” The motion alleges that government “agents,” including Lafayette County state judge Harold Lackey of Oxford (the alleged target of the bribery attempt outlined in the indictment), effectively manufactured the crime. It also claims that federal investigators misled federal judges in their wiretap applications by concealing evidence suggesting that Scruggs and his partners were not involved - at least at the early stages.

The motion is here. The crux of its argument is this. On March 28, 2007, Timothy Balducci, a lawyer who was working with Scruggs in defending a fee-dispute suit filed against Scruggs’s firm and four other law firms approached Judge Lackey in an “ex parte” meeting — i.e., a discussion about a case without opposing counsel being present. While such meetings might be considered unethical in themselves, they are not per se criminal. The motion says that Balducci was acting on his own, without Scruggs’s knowledge, and implies that such ex parte encounters, called “earwigging,” are common in northern Mississippi, even if frowned upon.

At the meeting Balducci told Judge Lackey, whom he knew well, that he’d consider it a “personal favor” if the judge would order certain inflammatory language removed (”stricken”) from the plaintiff’s complaint against the firms and then send the case to arbitration. Balducci also suggested that when Judge Lackey retired from the bench, he’d consider it an honor if Lackey would let him pay him to serve as an “of counsel” to Balducci’s newly formed firm, lending his name to the firm’s letterhead. The motion claims that Balducci meant for the two invitations — the “personal favor” and the offer of “of counsel” status at his firm — to be unrelated and independent of one another, though it is unclear how the Scruggs defendants would know what was in Balducci’s mind. (Balducci pled guilty to conspiring to bribe Judge Lackey in November is now a cooperating government witness against the Scruggs defendants.)

The motion then suggests that Lackey overreacted and misinterpreted what Balducci was saying — perhaps because he, Lackey, feared that he was the target of a sting operation — and that Lackey went to the FBI a few days later to report the approach. Thereafter Lackey began working for the government, wearing a wire, and aggressively attempting to build a criminal case against Scruggs, the motion says. (It alleges that Lackey repeatedly called Balducci, for instance, and dropped by unannounced at his office, while Balducci often did not even return the judge’s calls.)

For more than five months, the motion continues, the government still had nothing on the Scruggs defendants. Then on September 18, the motion argues, everything suddenly took a decisive turn toward the criminal — but only because of Judge Lackey and his government handlers.

Lackey called Balducci and told him, in “hushed, conspiratorial tones,” that he had something to say that might shock Balducci. He asked whether, if he helped Balducci and Scruggs, they would help him. Balducci evidently agreed, and three days later Lackey asked for $40,000 to take care of an unspecified problem. Balducci again agreed, but the motion maintains that in the subsequent taped and wiretapped conversations Balducci repeatedly asserted that this would be a matter just between him and the judge (i.e., not involving Scruggs at that stage).

“Here’s how it works,” Balducci told Lackey on September 27, for instance, when he delivered the first $20,000. “They’ll come a time where I’ll sit him down in private and I’ll tell him [Scruggs] that I solved a problem for him. . . . . I’ll just go to him and say that I cured a problem that you had and you need to recognize the problem that I have cured you had.”

Finally, on November 1, when Balducci made the final payment, FBI agents confronted him with the evidence against him, flipped him, and sent him back to the Scruggs law firm wearing a wire in an attempt to make a case against Scruggs. At that point, the motion’s narrative abruptly stops, offering no insights into what the Scruggs defense from that point forward would be, if not entrapment. The indictment, after all, goes on to allege that the Scruggs defendants agreed, at Lackey’s request, to make an additional $10,000 payment, and that Scruggs provided Balducci with phony invoices for jury consulting in an effort to cover-up what the, by then, $50,000 in bribes had really been.

So what the defense is alleging sounds an awful lot like entrapment, but it never uses that word. Here’s why, I think. If a defendant mounts a formal entrapment defense, he must prove that, first, the government induced him to commit the crime and, second, that he had no predisposition to committing it.

There are lots of difficulties that come with invoking that defense, but chief among them is that the defendant opens the door to the government’s trying to prove other “similar” bad acts, even though the defendant hasn’t been charged with them in the indictment. (These become relevant to proving the defendant’s “predisposition” to commiting the crime)

The government already gave notice on January 28 that it will, in fact, try to introduce evidence of at least one such “similar act.” Prosecutors want to show that Scruggs was involved in a conspiracy to improperly influence a Hinds County state court judge, Bobby DeLaughter of Jackson, in early 2006. On January 7, Scruggs’s longtime friend (and erstwhile defense co-counsel in the federal bribery indictment), Joey Langston, in fact pled guilty to conspiring to corruptly influence DeLaughter at Scruggs behest. (Judge DeLaughter himself has not been charged with any wrongdoing, and has strenuously maintained his innocence.)

Scruggs’ counsel are understandably determined to keep the DeLaughter incident out of evidence - indeed, another motion filed yesterday is devoted specifically to achieving that goal - but their chances of succeeding would be greatly reduced if they ever admitted that they were mounting an entrapment defense.

My subjective view, then, for what it’s worth, is that the defense lawyers do not realistically hope to win the motion to dismiss (an extreme longshot) but rather fully expect to have to proceed to trial. The short-term purpose of the motion is to counteract months of adverse publicity with a competing storyline: one that portrays the Scruggs defendants as victims, not perps. That way, if the case does go to trial, there will at least be two narratives out there percolating down into the potential jury pool, and not just the government’s.

Further, my guess is that the Scruggs defendants never will actually invoke an entrapment defense, but will, rather, tell this (possibly true) story of a heavyhanded government sting operation, implicitly inviting the jury to acquit even if a technical crime may have been committed. The ultimate goal, then, would be a form of jury nullification.

The motion to keep the DeLaughter incident out of evidence is here. (In other motions filed yesterday, the defendants also asked that the wiretap evidence be thrown out; that the defendants be tried separately from one another; and that, due to adverse publicity, the case be moved outside of Mississippi to either Texas or Louisiana. All of those motions, together with supporting documents, are available at David Rossmiller’s Insurance Coverage Blog, here, which has had the most comprehensive coverage of the Scruggs indictment.)

Yesterday morning, an extraordinary lawsuit — in which State Farm had gone to Mississippi federal court to enjoin a Mississippi state criminal investigation of the insurer — ended in an extraordinary way.

After Mississippi Attorney General Jim Hood endured three hours of tough questioning by a State Farm attorney (who said, when court adjourned at 5 p.m., that he still had another hour left to go), attorneys for both sides huddled for hours until they struck a settlement. It was finalized Wednesday morning, before Hood’s testimony was to resume.

Most details of the settlement were sealed, including the all-important question of whether Hood would be permitted to continue his criminal inquiry. It appears that Judge David C. Bramlette wrestled the agreement out of the parties after making an important, though not necessarily determinative, legal finding in State Farm’s favor. His order is available here.

Nevertheless, my very subjective reading of the spectacle (I’d gone down to the Natchez, Mississippi, federal court to watch the hearing) was that it had ended rather like that infamous Roberto Duran-Sugar Ray Leonard bout in which Duran failed to answer the eighth-round bell, mumbling, “No más, no más.”

The case, which State Farm brought last September, is an instance of one of the rarest species of lawsuit, and one of the most difficult to win: a suit by the target of a state criminal investigation asking a federal court to halt the inquiry in its tracks.

Generally, the law forbids federal courts from interfering in this situation, because the federal courts are supposed to assume that state courts will adequately protect the federal civil rights of the target.

There is a narrow exception to that rule, however, if the target can show that the state prosecution is being brought in “bad faith” or for purposes of “harassment” — an extremely difficult thing to prove. Nevertheless, under the unusual facts of this case, State Farm, in fact, won a temporary restraining order against Hood last September, which was still in effect as of Wednesday, and it is hard to believe that State Farm would have settled the case without keeping that ban in place.

State Farm’s statement on the outcome reads: “Judge Bramlette has ruled that our contract with the attorney general is valid, unambiguous and enforceable and we are very pleased with the outcome.”

Hood’s office, on the other hand, emailed this comment: “Thanks to Judge Bramlette, who has the patience [of] Job, this case has been dismissed. I am glad I had an opportunity to rebut the allegations against our office. The Office of Attorney General will continue to fight for the policy holders [of] Mississippi. As for the criminal investigation, as with any case, I cannot comment.”

In February 2006 Attorney General Hood commenced a criminal investigation into whether State Farm had engaged in fraudulent practices to avoid paying money it owed policyholders for wind damage sustained in Hurricane Katrina. (A thirty-foot storm surge had demolished many homes on the coast, leaving nothing but slabs of concrete; that made it hard to determine the degree to which the homes had suffered damage from hurricane-force winds, which was covered under homeowners policies, before they were washed away by the later storm surge, which was not.)

Hood had agreed to drop his criminal inquiry in a letter agreement dated January 23, 2007. On that same date State Farm agreed to settle a civil case Hood had brought against State Farm in state court; a federal private class action brought for 32,000 policyholders by a group of lawyers headed by Richard F. (”Dickie”) Scruggs; and 640 individual cases also brought by Scruggs’ group. The Scruggs attorneys stood to make $10-20 million in fees from the class action, and another $26 million from the 640 individual cases. Scruggs and other members of his group are major campaign contributors to attorney general Hood.

While the settlement of the 640 individual cases did become final, a federal judge refused to approve the class action deal as proposed. Then, before that judge’s qualms could be addressed, the Scruggs group lawyers withdrew from the deal, and the case was dismissed. There is evidence that the Scruggs group withdrew from the deal at least in part because they were infuriated that State Farm had failed to pressure a subcontractor into dropping its suit against two former employees who had, for many months, been secretly assisting both the Scruggs group and the Hood investigation by supplying them with internal, confidential State Farm documents — allegedly in violation of their employment agreements. Scruggs himself was the main party on the hook in the case against the whistleblowers, since he was paying their attorneys fees and had agreed to indemnify them for any judgment ultimately entered against them.

After the class action deal fell apart, State Farm says it nevertheless honored the deal’s substantive terms — reevaluating slab claims and offering to pay a minimum of 50% of the policyholders’ policy limits for structural damages — albeit in the more informal setting of mediations supervised by the Mississippi Department of Insurance. (The Scruggs group attorneys don’t make any money off these mediations.) The company claims to have already paid out more than $70 million to policyholders in those mediations in a process that is ongoing.

In August 2007 Hood served State Farm with a new criminal grand jury subpoena seeking documents nearly identical to those that had been sought during his earlier criminal inquiry, prompting State Farm to sue the following month in federal court in Jackson, Mississippi, to stop Hood from reopening the criminal inquiry. State Farm claimed that Hood was violating its January 2007 letter agreement and unethically colluding with the Scruggs group, using the criminal proceeding as a way to pressure State Farm into paying lucrative settlements that would benefit the Scruggs lawyers — Hood’s campaign contributors.

Hood responded that his January 2007 agreement had only been a “gentleman’s agreement”; that, in any case, State Farm had failed to honor its terms in that the deal had contemplated federal court supervision; and that the criminal inquiry was, in any event, not covered by the letter agreement because it was a new inquiry focusing no longer upon a fraud upon policyholders (withholding payments for wind damage) but fraud upon the National Flood Insurance Program (improperly deflecting State Farm’s wind damage liability to the federally-funded National Flood Insurance Program.)

Even before State Farm filed its suit on September 13, 2007, the plot had begun to thicken. On August 21, 2007, Scruggs was indicted in federal court in Birmingham for criminal contempt for failing to obey a court order in the case brought by State Farm’s subcontractor against his whistleblowers. Scruggs has pleaded not guilty. The order he is charged with defying had required him to return to the subcontractor documents that had been “purloined” by Scruggs’s whistleblowers; instead, Scruggs had turned the documents over to Hood’s office (even though Hood’s office already had a set).

In June 2007, Judge William Acker Jr. had recommended that criminal contempt charges be brought against Scruggs. He had found that the night after Acker issued his order, Scruggs had called Hood and had prompted him to have a subordinate email instructions to Scruggs to send the documents to him. He noted that he could not understand why Scruggs and Hood would have behaved as they had unless they had “teamed up to bully State Farm into civil and criminal settlements.”

Then in late November 2007, Scruggs and four associates were indicted by federal prosecutors in Oxford, Mississippi for allegedly trying to bribe a state judge to influence litigation stemming from an intra-Scruggs-group squabble over the $26 million in fees received from State Farm’s settlement of the 640 Katrina cases. Scruggs has pleaded not guilty to those charges, too.

At Wednesday’s hearing, attorney general Hood professed very vague memories of what, if anything, Scruggs had asked him to do in the days immediately following Judge Acker’s order, stating only that his understanding had been that there was a “law enforcement exception” to the order and referring all more specific inquiries to the line prosecutor handling the inquiry, Courtney Schloemer. He said he’d never seen the letter Schloemer emailed to Scruggs instructing him to send the documents to her, though he’d had “some communication” about it with her before she sent it.

Schloemer had been subpoenaed to testify at this week’s hearing, so had the proceeding not been settled, she presumably would have done so. It would have been a ticklish task. She either would have had to accept sole responsibility for aiding conduct that Judge Acker has said he considers contemptuous, or she would have had to testify that her boss played a more active role than he now recalls. (In his testimony Wednesday, Hood also maintained that he had still never read any of Judge Acker’s orders, including the one that had all but labeled Hood a co-conspirator in Scruggs’ alleged contempt.)

But the emotional high point of Wednesday’s hearing came when State Farm attorney James R. Robie posed a certain highly specific question to Hood, the very asking of which suggested that State Farm might have somehow gained access to sources who were once quite close to Scruggs.

An attorney’s questions do not constitute evidence. On the other hand, an attorney is not supposed to ask an inflammatory question without a good-faith basis. Accordingly, it was a bombshell when State Farm’s Robie began the following line of inquiry:

Q. Mr. Hood, before Scruggs settled with State Farm … the case with 640 plaintiffs, which generated a fee in excess of $20 million for Mr. Scruggs and his partners, did they dispatch Mr. [Timothy] Balducci and Mr. [Steven] Patterson to have dinner with you in a restaurant in Jackson to talk about that?” [Balducci and Patterson are associates of Scruggs who have each pleaded guilty to bribing a state court judge in connection with one of the two federal criminal cases that Scruggs now stands accused of.]

A. I don’t know.

Hood’s counsel, J. Lawson Hester, objected on relevance grounds, but Judge Bramlette overruled and allowed Robie to press further.

Q. I’m asking you whether or not Mr. Scruggs sent Mr. Balducci and Mr. Patterson to have dinner with you here at a restaurant in Jackson to talk about settlement of that case.

A. I don’t know what Mr. Scruggs did with Balducci and Patterson.

Q. Did you have dinner with Mr. Balducci or Mr. Patterson at Crechale’s restaurant where they discussed Scruggs’ desire to settle that case?

A. No, sir. I haven’t been to Crechale’s in a long time.

Q. You did not have dinner with them where they discussed –

A. When are you talking about? And you said “Crechale’s.” I haven’t been to Crechale’s so I know I didn’t have dinner with anybody at Crechale’s.

Q. My real question is: Did Mr. Patterson or Mr. Balducci have dinner with you and tell you that if you did not participate or assist Mr. Scruggs in settling that mass tort action which was going to generate a 20-million-dollar-plus fee, that he would fund an alternative candidate to run against you for attorney general?

A. If you’re asking me did somebody come to me and threaten me, the answer is no. Now, out of all candor in this, I don’t want to mislead you. I remember having dinner on one occasion with Mr. Balducci and Mr. Patterson, but that conversation was about they were leaving the firm that they were presently — that Mr. Balducci was presently with. They didn’t convey any threats to me about settling the case or anything like that. [Balducci left the firm of Joey Langston in about January 2007 to start his own firm, bringing nonlawyer Patterson, who had also worked with Langston, with him as a business associate. (Last month Langston pled guilty to participating in yet another bribery attempt, in 2006, allegedly intended to aid Scruggs in a different state-court fee-dispute litigation. Scruggs has denied involvement in any wrongdoing there, too.)]

Q. They never suggested that if you didn’t participate in dropping your criminal investigation that Dickie Scruggs would fund an alternate candidate and [former Mississippi attorney general] Mike Moore would support that?

A. No, sir. Absolutely not.

Well, Hood denied it, so that’s where things stand. But had the proceeding continued, we might have learned what Mr. Robie’s basis was for asking the question, and we might have heard some other interesting questions he thought he had a good-faith basis for asking.

Between the pending federal prosecutions of Scruggs and the multiple ongoing litigations between State Farm and the remnants of Scruggs’s group, now known as the Katrina Litigation Group, it seems likely that we will eventually be hearing more about the evidence that prompted Mr. Robie’s question.