Since Seacrest’s mention a few days ago of Dickie Scruggs’s run at America’s nonprofit hospitals, I’ve been looking into that. And yes indeed, in 2004, across federal courts in 23 states, Dickie and associates sued 44 of them. Though some at the time thought this might promise a new “Big Tobacco,” as Susan Beck’s March 2008 profile of Dickie in The American Lawyer noted, it all came to naught.
To begin with, though — in fact, I might even say “before ‘to begin with’” — the massive litigation must have looked pretty promising to the Scruggsians, thanks in large part to something that transpired in Tupelo. You see, early that August, even before they could get a suit filed against it, North Mississippi Health Services, the affrighted parent of North Mississippi Medical Center and its satellite facilities, cried Uncle and settled with them. (At which point, familiar piler-on MS Attorney General Jim Hood wandered into view too.)
Between July 9, 2004, and June 1, 2005, Tupelo’s Daily Journal ran 18 articles tracking developments between Dickie and NMHS. But despite that extensive effort, I’m afraid the real story stayed invisible. The DJournal‘s first report did, however, foreshadow it:
No Northeast Mississippi hospitals have been named in a series of class action lawsuits filed across the country, but they could become targets.
“We are looking very closely at all the hospitals in Mississippi and around the country,” said Oxford Attorney Richard Scruggs, who is leading a national coalition of law firms that has filed federal class-actions lawsuits on behalf of uninsured patients against 24 nonprofit systems, covering 250 tax-exempt hospitals, since June.
The first hospital to be sued in Mississippi – St. Dominic’s in Jackson – was named earlier this week.
“What prompted this was that patients got tired of being badgered by billing,” for hospital charges they couldn’t possibly pay, said David Merideth, a Ridgeland attorney and former emergency room physician, who is part of the coalition. The Langston Law Firm of Booneville is also a part of the national group.
Throughout Northeast Mississippi, nonprofit hospital officials said their organizations are staying true to their charitable missions and the aggressive collection practices – garnishing wages and filing liens on primary homes – aren’t happening here.
“We only fulfill our mission if people can get access (to our services),” said Gerald Wages, interim CEO of North Mississippi Medical Center in Tupelo. “We take care of people regardless of their ability to pay.”
The attorneys say they are looking at three central factors when considering the lawsuits against nonprofit hospitals:
- Cash reserve in excess of $100 million
- Aggressive collection practices, particularly targeting the uninsured
- Sweetheart deals for board members or favored physicians groups.“The principle [sic] thrust of this litigation is to change the business practices of charity hospitals,” said Scruggs, who is well known for his public interest work against big tobacco companies, asbestos manufacturers, HMOs and predatory lending companies. “It doesn’t mean they should go broke, but they shouldn’t be squirreling away billions in cash” without having to pay taxes.
Aha, N.B.: “The Langston Law Firm of Booneville is also a part of the national group.” As Walter Olson noted in a January 15, 2008, post at Overlawyered.com:
Though the firm is better known for its plaintiff’s-side work, the Langston firm’s “national practice” page asserts: “The Langston Law Firm virtually defined the role of ‘Resolution Counsel’ in the modern era of jurisprudence. Prominent domestic and foreign companies facing massive litigation have turned to The Langston Law Firm to create winning strategies to save their companies.”
“Resolution counsel”? What did cheerful-and-clean-sounding Joey Langston mean by that? Has an honorable sort of ring to it, doesn’t it? Maybe means “lawyers who specialize in Alternative Dispute Resolution”? Specialists in negotiating, mediating, arbitrating disputes? Anyhow, legal heroes who save clients’ companies. (Cue Jaws music.)
Now recall that, during the famous “Halloween deposition” of Mississippi Deputy Insurance Commissioner Lee Harrell in McIntosh v. State Farm, Zach Scruggs had much to do trying to keep opposing counsel Dan Webb’s questions away from paydirt. Here again, a passage from pages 332-4 of that transcript, Harrell speaking first:
A. I asked [former MS Attorney] General [Mike] Moore who was he representing.
MR. WEBB: Q. What did he tell you?
A. He said he was serving as resolution counsel.
Q. And was this in the meeting that he had where it was just you and him?
A. And Jimmy Blissett. That’s it.
Q. And he was resolution counsel. Did he explain what that term meant to you?
MR. SCRUGGS: I’m going to object on relevancy, too.
HARRELL – A. I asked him, well, who’s paying you? I know you are not doing it for free.
MR. SCRUGGS: Move to strike as non-responsive.
MR. WEBB: Q. What did he say?
A. He said he gets paid at the end of the day.
Q. He said he gets paid at the end of the day?
A. Yes, sir.
Q. Did he ever say how he was going to get paid or by whom?
A. We never could figure that one out.
Hmm. Can it be that, as practiced by the Scruggsians, “resolution counsel” means something closer to “shakedown artist”? Is a “resolution counsel” someone who, though known as a “plaintiffs’-side” attorney, goes to prospective defendants offering to protect them from the Big Bad Plaintiff for a not-so-nominal fee?
The reason I wonder has to do with Jackson’s huge St. Dominic’s, as mentioned above, another Mississippi hospital sued by Dickie himself, with help from in-staters David Merideth and Don Barrett and San Francisco’s Elizabeth Cabraser. But unlike NMHS, St. Dominic’s held its ground against the Scruggsians.
This, I’ll just betcha, is where the real story exists — the one abroad in legal Jackson and elsewhere: that Mike Moore made an appointment with an administrator at St. Dominic’s sometime that summer of ’04, then showed up waving the draft of a lawsuit. “Dick Scruggs is fixing to sue you,” he’s said to have warned, “and it’ll cost you X to settle. Or you can hire me for X and fight.”
“Thank you very much” (or words to that effect), the administrator reportedly replied. “But Brunini is our law firm, and they always fight hard for us. Have a good day.”
Though the fox-in-the-henhouse Resolution Counsel got shown the door in Jackson, in Tupelo his ploy may have worked better. If it indeed did, why would it?
For one thing, Phelps Dunbar, the venerable firm that Mike Moore had joined only that January, had been NMHS’s lawyer for years. For another, the hospital’s newbie CEO, John Heer, may have felt desperately pressured to avoid another $7-8 million in legal fees while dealing with an ongoing contract-rate dispute with Mississippi BlueCross BlueShield and local feelings still roiled by the state legislature’s recently-failed attempt to create a second hospital in Lee County. So . . .
So . . . what? One of my correspondents asks, “Now if we think about it, was there something wrong with what Moore was doing? Was there something wrong with what Scruggs was doing? Scruggs was about to file lawsuits and picking Moore as the guy who would defend. Why? To drum up business for Moore who was at Phelps? Not exactly adversarial positions. Collusion? Does this amount to collusion?”
One veteran Missisippi reporter I know rather thinks so. This person believes the NMHS-settlement episode “was a example of ‘Shirts and Skins,’ which these guys played often and ran up sizable legal fees for each other.”
I’ll be interested in your views on the question. And I’ll be very interested if anyone here can fill in the blanks marked X in my paraphrase of Mike Moore, Boy Resolution Counsel’s storied pitch to St. Dominic’s — let alone what Team Scruggs might have calculated would come its way had the NMHS settlement stuck.
But alas, like all the other 44 suits, it finally fell apart, leaving them skint.
Wow. First rate, Lotus.
Nothing to add based on personal knowledge, but this reeks of collusion and kickbacks.
Thanky, d761. This tale is certainly one inviting further pursuit, so I hope we hear Moore (h/t jsh).
When I read Susan Beck’s article in The American Lawyer that you mention above, I thought that “resolution counsel” was what Scruggs was offering to Sulzer Medica Ltd, the Swiss company hit with suits after recalling defective hip implants. According to the article, Scruggs sought out the company to offer his services. Sulzer Medica Ltd. hired Scruggs after he explained to the company that he “could offer exceptional access to the plaintiffs attorneys.” In other words, Scruggs could work from both sides.
Nomiss, I recall hearing that at one point Joey Langston had an office in Switzerland — musta been during this gambit, huh?
I keep thinking as I read all this that it makes no sense for non-profit hospitals to be run like for profit corporations. And wondering why it is that poor people pay more for hospital services than folks with insurance. I don’t think big health care has any moral high ground here . . . otherwise this is interesting . . . On the Sulzer deal I am pretty sure that ALL involved knew Scruggs role and all his relationships. I just view that as an innovative way for Sulzer to deal with a difficult situation. On the Moore deal, is the St. D’s story fact or supposition? I couldn’t tell if that came from the depo or from some other source?
Hi, dd. As I hoped the post made clear, this Mike-visits-St.-Dominic’s story is Jackson legend (though others around Mississippi have told me they’ve heard it too). It’s a story, not testified to anywhere that I know of. This Harrell depo was related to post-Katrina events, not the hospital litigation.
re the Swiss Sulzer deal: I am pretty sure also that “ALL involved knew Scruggs role and all his relationships”–that’s what Scruggs offered and that’s why Sulzer hired Scruggs. This reminds me of Rossmiller’s description of Scruggs: “a master of leverage” and “an amazingly resourceful lawyer who always has something up his sleeve.”
I would assume that Scruggs gets paid by both sides “at the end of the day.” Is this collusion or is this simply “resolution counsel in the modern era of juisprudence”?
Also, look at the roles of Anderson, Sears, et al in the tobacco deal. Their role was to encourage a national settlement, but who were they working for, the tobacco companies or Scruggs? Supposedly, they were on the tobacco side, but then they got millions of dollars from the attorney fees through DMG, Inc. and/or Blake. Grover Norquist also appears to have played both sides in that deal.
Still, NMHS is a grown-up corporation with high-paid administrators, savvy board members, legal counsel, etc. They are not a bunch of rubes who easily could be railroaded into a settlement, and they certainly knew that Moore had a history with Scruggs.
And there is something sketchy about the practice of billing uninsured patients higher fees than the fees negotiated with insurance companies for the purpose of having larger tax write-offs for “charity” care. They write-off the amount of unpaid charges from these high charges, not their actual costs to provide that care. NMHS did not invent this system, but the fact that there are a dozen prices for the every medical procedure with those least able to pay charged the highest prices, is one of the most screwed up things in our health care system.
That does not mean a bunch of lawyers should be able to cash in on a settlement that appears to have done very little, if anything, for the uninsured patients themselves.
The St.D case sounds alot like the MCI case, only the MCI is well documented. According to Jim Hood it goes from a young lawyer from Georgia who came up with the idea(Quinn) I believe who turned out to once be a law clerk for Judge Mills, Who in turn gets a job with Langston who then brings it to the State, Then Moore hooks up as MCI’s Lawyer and sits down with his friend Joey Langston, his then employee Tim Balducci , and their friend Jim Hood , who is Mike Moore’s sucessor as Mississippi Attorney General. Gee did I leave anyone out. Same MO. Going round and round. Same Ring. Seven Million of Fees went to a law firm in Georgia (maybe where Quinn was working at the time) Balducci was left out of the loop(notta dime) and it has never been stated how much MOORE received for being A RESOLUTION LAWYER.
Researcher @ 8, 1st para.: kind of adds a new dimension of meaning to the ole civil defense bar adage, “Sue my client and sue him often…”
My understanding of the MCI case is that Quinn was working for the Louisiana law firm when he and his boss approached Hood with their idea for the case. Hood was non-commital after meeting with Quinn et.al. Subsequently, the Louisiana lawyers received a call from Langston who informed them that he had the contract with the State of MS, and that he would subcontract with them.
Magnolia @ 8 – Why would Moore’s fees be disclosed, he wasn’t working for the State, he was retained by MCI. Or is this more of the “conspiracy?”
Square//Would like to see time frame on how long Langston had the case before The Louisiana Lawyers were contacted.
A1A// Don’t do the old Conspiracy deal. Just setting here trying to rachet up some business, thought this was a good business scale. Doesn’t appear to be any conspiracy just business as usually.
Do not think it was all that long – a matter of maybe a couple of weeks. The way it was related to me, Hood let the Louisiana lawyers know they would be working with Langston on the case or not working on it at all.
Square// Wonder how long from start to finish on this case. Many years, many months, or many days.
My info from a friend of a friend says that NMHS Board agreed to the memorandum of understanding for settlement early on in the Scruggs’ suit at urging of their legal counsel from the Phelps Dunbar law firm–the same firm in which Mike Moore was a member. They were reminded of the Scruggs tobacco settlement and the long and expensive legal defense and were told that they should avoid the bad PR in a legal challenge and that if they settled early on, they good get good PR as a role model and hero in doing the right thing. (Remember the community had just had a lot of community complaints and there had been a local request for a second hospital.)
However, after the federal panel decided not to consolidate the plaintiffs’ cases, and individual federal judges starting dismissing cases, the Board felt that they had been misled by their legal counsel, and they were not happy. Hence, in April, 2005, NMHS halted negotiations with Scruggs and challenged the court’s jurisdiction over the case, as other hospitals had done. End result was that Judge Mills dismissed the case stating the court had no jurisdiction.
If this information is not correct, I hope someone corrects me. I am not nor have ever been on the NMHS board, but I’m told that this “settlement” was discussed amongst the public at the time this was going on. I’m also told that the general public does have the opinion that NMHS is a non-profit that makes a lot of money and is led by a Board that answers to no authority but their own.
"Now if we think about it, was there something wrong with what Moore was doing? Was there something wrong with what Scruggs was doing?
I’m not sure where I read it, but I’m pretty sure that Scruggs boasted that this (NMHS) settlement was to be the “model” for the rest of the suits. It squares with the tobacco pattern – finally getting a smaller outfit to settle then the rest fall in line. Getting an early settlement certainly is helpful. I just find it odd they were able to squeak out a settlement here so quick without actually filing suit, but had filed suit on a few other hospitals prior and that AT Hood made an active appearance.
Mag, I don’t know the answer to that question – #16. My comments were based on a conversation I had with one of the Louisiana lawyers a couple of months ago shortly after Langston and Balducci pled.
The breakdown of the settlement
Scruggs and other plaintiffs attorneys have asked U.S. District Judge Mike Mills to implement stringent conflict-of-interest policies for the hospital’s board of directors and senior executives
In hindsight, the irony of that contention and Scruggs, Moore, Langston/Balducci and Hood all apart of this deal is pretty rich.
It is my impression that the nonsubstantive issues No miss quotes are definitely correct- the ill feelings on the community towards the hospital for its imperious nature and lack of support were repeated to me daily at that time in my exam room. This despite the fact that my presence was completely dependent on NMHS since I was and am an employee. The perceived deficiencies of the ER, billing practices and the poor projection the hospitals benefits all led to an aggressive stance of the locals against the hospital including the posturing of some local pols and leaders who promoted the ill advised idea of a competing hospital (given the nature of health care economics likely to either fail or to drive up overall local costs with some benefit to the surface attributes of health care including more choices in whose technical toys one uses, more smiling but little in the way of better overall health- but that is another essay) . One of my patients, a retired insurance agent was amazed since he had never seen sentiment run for an insurance company (BCBS and against the hospital a real entity with people that one knew and dealt with as opposed to the voices and computers at BCBS. I even had one of my clerks argue that the place was terrible and evil while supporting her little niche , the local NMHS clinics. I cannot speak to the decision making process because it has been and will be controlled by the business GOBs who keep these cards very close to their chests but it has the ring of veracity to it and jibes with the 3rd hand rumors I heard.
The pressure did have some very positive effects.
dd
lotus: I guess the questions you raise could be put to khayat, martz or mikhail for an ethics opinion. But then why bother?
Good job Lotus. I had forgotten many of the details although I could recall the stench with utmost clarity. At the time, I didn’t know who’s side to be on as I was equally disgusted with both!
NoMiss – your post is right on, by the way.
Does anyone know what prompted Moore to leave Phelps?
Nomiss and NatLov, I’m really glad you brought the local perspective into this picture, especially the news that “the pressure had some very positive effects.”
The last-sentence link in the post includes a quote from John Heer, “We were particularly encouraged that the judge commented favorably about our changes to the conflicts’ issues.” (This DJ story lays out what those included.) Here’s what Judge Mills’ said:
As to the indigent-patient issues, at the time NMHS broke off negotiations with Dickie (April 2005), John Heer announced that it was voluntarily adopting the same 13-point plan proposed to Team Scruggs (presumably the best-case-scenario as far as NMHS was concerned).
Hey, Curly! May I add to yours the companion question, How long was he at Phelps? I know he started there on January 8, 2004, but haven’t yet run into the date he left.
Curly #24
Could it have possibly had anything to do with wanting to keep (i.e. not share) all the fees from his “resolution counsel” bonanza? It was just a little lagniappe after-all.
Well, Crispin Garcia! Where ya been, kiddo? I was looking at some earlier comment-threads last night and wondering what cat had got yo’ tongue lately. Welcome back!
Jim Hood intervened to protect “The Poor People of Mississippi.”He can not open his mouth without interjecting those five words. Since Jim Hood doesn’t speak for me, from now own each time I write his name I will interject dumb, as in dumb Jim Hood.
In reading through the articles lotus linked from the Daily Journal, I noted several comments that reveal that Scruggs planned to model the non-profit hospitals suits on the Tobacco Settlement Model.
From the article dated 8/17/2004 quotes Hood regarding NMHS agreeing to settle before any legal action was taken: “Hood said the settlement is likely to pull other hospitals to the bargaining table.”
From the article dated 2/2/05: “Scruggs had intended to merge the multitude of hospital suits he filed in federal court into one class-action case, along the lines of his tobacco lawsuit. But, in October, a federal panel denied the request to consolidate the cases.”
The articles also note that once the federal judges starting dismissing cases or trying them on an individual basis, Scruggs then said he would file the hospital cases in state courts. Maybe he would have better luck there.
the non-profit hospitals suits on the Tobacco Settlement Model.
Even had ‘whistleblowers”
I noticed in the NMHS open letter on the settlement, the board of Director chairman
Guy W. Mitchell III
Chairman of the Board
Of Mitchell, McNutt & Sams, P.A. Profile
This is the transcript of a session of the pretrial deposition of Jeffrey S. Wigand, the former research chief for Brown & Williamson Tobacco Corp. The November 29, 1995, testimony was given in a lawsuit brought by the State of Mississippi seeking reimbursement for the cost of smoking-related illnesses. Obvious typographical errors are corrected in brackets.——-
MR.CARROLL: Jim Carroll, Mitchell, McNutt, representing Dick Scruggs in connection with a civil subpoena.
http://www.tobacco.neu.edu/litigation/hotdocs/wigand_depo.htm
Cozy, huh, Seacrest? Nice catch.
Seacrest// I have the faith you gonna’ find the POT OF GOLD on the Tobacco Settlement, that be The Master Tobacco Settlement, where Mr. PL Blake, Mr Anderson, Mr Sears and who KNOWS whom else in the ring is set up for life, on the backs of the poor people of Mississippi on MEDICAID.
Seacrest 32 and lotus 33 // I doubt seriously that Guy Mitchell did anything “cozy” with Dickie. Jim Carroll was in their Jackson office and was a lateral over to MMTSS. It didn’t work, and Mr. Carroll went out on his own.
Again, guilt by association is not necessarily the case absent additional evidence.
DN, what’s MMTSS? Ya lost me.
Nomiss, Yep he can file them before his license is lifted. Maybe you meant He could have filed them.
Mitchell, McNutt, Threadgill, Smith & Sams, the previous name of Mitchell, McNutt & Sams.
Ah, thanks for the clarification, DN. The lesson here being that “Scruggs” has become legal Mississippi’s “Typhoid Mary,” eh wot?
In another crossing of paths, don’t forget that once Jim Carroll left Mitchell McNutt and opened his own firm, Carroll’s firm gave Zach Scruggs his first job out of law school. Nothing sinister in that, but it does point out how closely connected the Mississippi legal community is at times.
Yes, I remembered that Zach worked for Jim’s firm. Jim Carroll used to be at the Watkins & Eager firm years ago. In fact, he was a partner at that firm when Dickie went to work there 2 years out of law school (having worked the first two years at Watkins Ludlam & Stennis).
Legend has it Scruggs was asked to leave Watkins Ludlam after he decked one of the partners in a heated exchange over a case. Anybody around during that time who could enlighten us on whether that is fact or fiction?
If I was Zach, I sure would be wishing I had never left Jim Carroll’s firm. What a different path that would have been for him.
Seacrest 32 and lotus 33 // I doubt seriously that Guy Mitchell did anything "cozy " with Dickie.
DeltaNative
You are right. I should have said I wasn’t implying actual “cozy” misconduct just observing the close ties.
I had to dash out and thought I should have said something like though.
You have to wonder if a close tie to Scruggs would effect your decisions though. It could be an indication why the settlement here happened – if you know what kind of bulldog player Scruggs is and you want to insulate your interests in a hurry.
Jim Carroll represented Scruggs in Wilson v Scruggs.
Carroll was pre-Langston and Balducci, wasn’t he?
Yes he was during the Hilbirn “sic ‘em” order.
Who else was counsel of record at that time? I always assumed Carroll’s firm was in that case because the claims triggered some sort of insurance coverage.
Just Carroll’s firm then Jeffrey Reynolds firm joined later.
Seacrest. I’m not certain the coincidence you point out even indicates close ties. I believe all it indicates that Guy Mitchell happened to be serving on the board of NMMC at the time Dickie sidled up with his hand stuck out.
The whistleblower in the hospital litigation was a Georgia CPA, Charles Rehberg, that was a former hospital finance executive. The story is pretty interesting, see http://tinyurl.com/6ge6rr
Also seems to have been covered in TIME magazine in Sept. of 2004 and on ABC PrimeTime in Dec. of 2004, per my Google search.
I think the hospital litigation was justified, regardless of how you feel about the lawyers involved.
Seacrest. I’m not certain the coincidence you point out even indicates close ties.
DeltaN
My fault for not explaining better earlier, but my wonder of the coincidental ties does not necessarily mean a dark conspiracy in a negative way. I just wonder if close ties effect decisions based on experience and knowledge not backroom winks and such.
Do you think it beyond the pale to imagine an active attorney who is chairman of the BOD of a hospital who is being threatened with a pretty serious (and potential financial ruining) lawsuit to confer with an associate in his firm who at one point represented the infamous wildly SUCCESSFUL class action attorney to get a good firm handle on how the hospital should proceed? And what he learned may have been a factor in settling so quickly ? I only say because I would imagine the BOD play some role in the decisions regarding huge lawsuits, especially of this nature.
I am NOT suggesting this happened, just wondering. If it were the case I think many could agree that in the hospitals beleaguered state the scenario described above would be a prudent and commendable act. And the few details I know, I can see a quick settlement decision to be in the best interest for a beleaguered hospital too.
But beyond my wonders, you are right, it remains solely just a coincidence.
Huh. Imagine that. One of the hospitals in this Scruggs case settlement is my hospital (or the one I gave birth at) dismissed Feb of this year.
http://www.chwsettlement.com/docs.htm
If memory serves me correctly, the North Mississippi Medical was promoting their own health insurance and not accepting Blue Cross Blue Sheild. This was causing problems with local people and industry in the area.
[...] and brought in mega-firm Lieff Cabraser. [Aha: another name we’ve seen before. Recall that Dickie’s fruitless run at St. Dominic’s Hospital involved Don Barrett and San Franciscan Elizabeth Cabraser, among [...]