Tuesday, July 21, 2009

Sanction Order Against Richard Scruggs Reversed

In E.A. Renfroe & Company, Inc v. Cori Rigsby Moran, et al., Richard F. Scruggs, The Scruggs Law Firm, P.A. (08-13724 & 08-14716), the Eleventh Circuit reviewed an order from the district court sanctioning Richard Scruggs. The facts are somewhat bizarre.

"In early 2006, the Rigsbys approached attorney Richard F. Scruggs with documents they had obtained from the Renfroe firm that allegedly showed that State Farm was fraudulently denying coverage to its insureds in the wake of Hurricane Katrina." Renfroe filed a lawsuit against the Rigsbys seeking the return of the documents. The district court entered an injunction requiring the return of the documents and later held the Rigsbys were not in violation of the injunction because they had disposed of the documents. However, the district court held the non-party Scruggs in criminal contempt.

"Scruggs learned of the injunction on Friday, December 8, 2006. Shortly thereafter, Mississippi Attorney General Jim Hood requested that Scruggs send Hood the set of the State Farm documents Scruggs had obtained from the Rigsbys to avoid disclosure to Renfroe. On December 12, 2006, Scruggs sent Hood his set of the Rigsbys’ documents."

In sanctioning Scruggs, the District Court said that it would request that an attorney for the government prosecute Scrugs. The US Attorney declined to prosecute and the district court judge appointed a special prosecutor "so, pursuant to Rule 42, Fed. R. Crim. P., the district court appointed special prosecutors, recused itself from further proceedings and the prosecution went forward. By order dated February 29, 2008, the district court appointed to conduct Scruggs’ criminal proceedings dismissed the charges, holding, inter alia, that the Renfroe district court did not have jurisdiction over Scruggs to hold him in contempt."

"Subsequently, by order dated June 5, 2008, the Renfroe court decided that it did have jurisdiction over Scruggs and adjudicated both the Rigsbys and Scruggs in civil contempt for their failure to “comply immediately and fully [with the injunction]." It is the June 5th order that the Eleventh Circuit reviewed in this case.

The court reversed the contempt order and held:

"The law is clear that a court may not enforce an injunction against a nonparty “who act[s] independently” of the enjoined party. Regal Knitwear Co., 324 U.S. at 13. “A nonparty who has acted independently of the enjoined defendant will not be bound by the injunction.” Microsystems Software, Inc. Scandinavia Online AB, 226 F.3d 35, 43 (1st Cir. 2000). Such independent conduct by the non-party, as found by the district court to have occurred in this case, does not constitute “aiding and abetting.” Since Scruggs did not aid and abet the bound parties in the Renfroe lawsuit in a violation of the district court’s injunction, he is not subject to the contempt jurisdiction of the district court."

The court then excercised its "supervisory power" and directed that all remaining issues relating to Scruggs be handled by a different district court judge.


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