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Justices uphold Katrina fraud verdict against State Farm

07 Diciembre 2016

A unanimous Supreme Court on Tuesday upheld a jury verdict that State Farm Fire and Casualty Co. committed fraud against the federal government after 2005's Hurricane Katrina.

The justices ruled that even though the whistleblowers who sued State Farm had violated a court-ordered seal and leaked information about the case to the media, the False Claim Act (FCA) does not mandate that their complaint to be dismissed.

The Rigsbys won their case in 2013, focused on one home in North Biloxi, Mississippi. False Claims Act lawsuits are required to be filed under seal and remain private for 60 days. Scruggs later withdrew from the case, was subsequently convicted of trying to influence a judge in an unrelated case and was disbarred as an attorney.

Justice Anthony Kennedy, writing for the court, said the seal requirement is meant to benefit the government because it prevents those suspected of defrauding it from being alerted about a potential case alleging that fraud took place.

The Obama administration had backed the sisters in the case.

Two sisters, Cori and Kerry Rigsby, filed a fraud lawsuit on behalf of the government after they said they witnessed State Farm shifting MS claims to federal flood insurance. Their lawyers won $2.9 million in legal fees and expenses.

He went on to say that district courts have inherent power to impose sanctions short of dismissal for violations of court orders.

Justices uphold Katrina fraud verdict against State Farm