I recently had lunch with Wes Teel, a burly 6’1″ lawyer who served for
four years as a chancery court judge in Harrison, Hancock, and Stone
Counties in coastal Mississippi. Teel has a fine sense of humor and an
optimistic view of life, but that is being sorely tested by the fact
that he is scheduled to report to a federal penitentiary in Atlanta by
the end of the month to begin serving a 5 year, 10 month sentence on a
corruption conviction, and his judge has failed to rule on a motion
for stay of the sentence pending appeal. (In less
partisan political contexts, the judge in question seems to have no
hesitation about granting a stay pending appeal. See Kraft Beverly,
“Judge Tells Ex-Councilman to Find Job, Lets Bond Stand,” Jackson
Clarion-Ledger, Feb. 18, 2000, p. 1A.) The more I learn about his
case, the more I believe that, like former Governor Siegelman in
Alabama, Teel was the victim of an effectively executed but politically motivated prosecution.
Teel was defeated for re-election to his judgeship in November 2002 after
papers began running stories linking him to a criminal investigation
about campaign finance irregularities. Soon thereafter he learned that
he was a target in a federal criminal investigation directed by
Jackson U.S. Attorney Dunnica Lampton. “Of course, they were out after
Paul Minor,” Teel told me. “I was just collateral damage.”
Was he? Judge Teel was charged together with two other Mississippi
judges and trial attorney Paul Minor. The first trial produced a hung
jury, but the judge’s posture shifted rather dramatically in the
second trial, and it produced some convictions, including Teel’s.
Many of the details of this trial have been set out in prior posts–A
Minor Injustice, and its
continuation and Justice in
The charges are simple. Teel’s campaign fund was supported by Paul
Minor, who issued a guarantee for a bank loan he took to finance
election advertising. Teel then presided over a case in which Minor
represented a bank in a dispute with an insurance company. The case
resulted in a settlement following some discussions
mediated by Teel. The insurer and its counsel charge that Teel leaned
in support of the bank and Minor in the settlement process and that as
a result they accepted a bad deal.
My gut reaction to these charges was: where are the criminal
charges? Surely there has to be some criminal wrongdoing? But this
appears to be another case in which prosecutors have very creatively
spun campaign finance practices into something criminal.
The prosecution does not contend that Teel received a personal
benefit of any kind; the money went to finance an election campaign.
Neither do prosecutors suggest that he took a bribe to throw a case.
He did get the benefit of a loan guaranty from Minor, but again that
was for campaign finance. Moreover, that was a matter of public
record, understood by the parties in the lawsuit. Mississippi ethics
rules did not require recusal in such a case at the time, and it was
not a practice for Mississippi judges to recuse themselves,
particularly in the absence of a motion for recusal by one of the
But what was the “corruption” that was used to prosecute Judge Teel?
It seems that Teel presided over a settlement in a litigation between
a bank and an insurance company. He didn’t seek the case out, Teel
told me–and the jury when the case against him was prosecuted in the James Eastland Federal Courthouse in Jackson. It was assigned to him by another judge.
The insurance company didn’t ask Teel to step aside. In fact, given the way judicial elections are financed in Mississippi, you would be very hard pressed to find a judge who didn’t draw on campaign support either from the trial lawyers bar or from the insurance industry–and sometimes from both.
But the fateful showdown between the bank and the insurance company never went to trial because the parties entered into a settlement. And that presents a very strange premise for a prosecution. The Justice Department’s contention is that the insurance company wouldn’t have entered into the settlement but for the pressure of Judge Teel.
That means the Justice Department has decided to treat the insurance companies and their high-priced lawyers with the sort of special paternalistic deference reserved in the nineteenth century for widows, imbeciles and orphans. (Which is not to say that the Bush
Administration would protect widows, imbeciles and orphans in this way. Bush has now vetoed the SCHIP legislation for a second
time.) Now the insurance company and its fancy lawyers were definitely not widows or orphans, and whether they were imbeciles would be a judgment call I am not prepared to make. But for the Bush Justice Department they are, apparently, to be viewed as persons who cannot fend for themselves in the rough-hewn wilderness of Mississippi’s judiciary, lurking as it is with judges whose campaigns were
fueled by Democratic money and who are far too familiar with the trial
As my readers know, I am not exactly indifferent on tort reform and
similar issues. I spent a good part of my career representing the
interests of insurance companies–mostly in negotiating investment
transactions, but frequently enough also advising them in connection
with domestic litigation brought by pesky trial lawyers. Accordingly, I can’t say that I think much of the Paul Minors of the world and their predatory practices in dealing with manufacturers and insurers. So I decided to roll up my sleeves and look at the underlying claims that formed the basis of the suit that led to these charges against Teel.
Into the Weeds of a Tricky Insurance Case
The case has to do with a policy written by an insurer for the benefit of a bank to
cover liability arising from automobiles that the bank financed. In
theory of course, the bank’s borrower is supposed to insure his car.
What happens, however, when the borrower allows this policy to lapse?
That is the nature of the back-up coverage that was provided here. The
insurer had written such a policy, and the bank was arguing that it
was failing to pay on the policy.
There were two kinds of coverage in question in this suit, a “forced place” insurance contact and “umbrella” coverage. Car buyers would financed the purchase of a car through the bank. The bank, wishing to protect its collateral, would require the buyer to maintain insurance on the car.
If the buyer failed or did not obtain such insurance, then the bank “force-placed” insurance coverage on the car and charged the premiums and interest to the buyer, on top of the loan.
Some buyers began to question this practice and began to sue the banks asserting various claims including fraud, breach of fiduciary duty, breach of duty of good faith and fair dealing, breach of contract, violation of various statutes, violation of civil rights, negligence, loss of property rights, loss of reputation, injury to credit, creation of fictitious indebtedness, and mental and emotional distress.
The bank had both a Commercial General Liability (CGL) policy and an umbrella policy with the same insurer. The bank’s CGL policy covered claims of liability for bodily injury, property damage, and personal injury caused by an “occurrence,” that is to say, an accident. The umbrella policy provided additional insurance limits but not wider coverage.
Bodily injury under the CGL policy included mental and emotional distress. The underlying claims against the bank included allegations that the plaintiffs suffered such distress. Property damage under the policy included not only physical injury to tangible property, but also the loss of use of tangible property that is not physically injured. The underlying claims against the bank included allegations that the plaintiffs suffered vehicle repossessions which fit the definition of property damage.
Under the CGL policy, the insurer had a duty to defend the bank if there was any basis for potential liability of the insured for covered claims if you read coverage language the way the bank understands it. The bank asked the insurer to provide coverage and a defense, but the insurer declined to do so.
Now the litigation that Teel had was between the bank and the insurer, not the plaintiffs’ claims against the bank. This was a dispute between two
large, financially sophisticated parties–not a crazy or abusive tort
case. The issue was the interpretation of specific insurance contract
language. It would really depend, as a state law matter, on the
position that Mississippi’s highest court took on a contract
construction issue. My sense is that the bank’s claim stated what I
would call a “plausible argument with substantial equities,” but the
insurance company also had some strong points on how the case might
go. Of course the insurance company had written the contract
language, which is why, as a general premise, ambiguities would not be
settled in its favor.
In the end, there was a substantial liability at stake, and the
insurer opted to limit that liability by entering into a settlement.
The insurer and the bank asked Teel to help mediate or broker a
settlement. It seems clear that Teel indicated in the settlement
process that he was not likely to come out their way on the contract
interpretation issue. The insurer could of course have charged ahead
to trial, and appealed its case on the merits up the Mississippi
appellate system. Since the question was how the contract was to be interpreted, it would have been the equivalent of a whole new trial in the appeals court. That is to say, whatever Teel did wouldn’t have mattered.
The insurer and its highly qualified counsel decided to settle. They made a calculated judgment. In fact, they knew at the time that the Mississippi Supreme Court was going to decide the precise issue they had before Judge Teel. How? Because the Fifth Circuit Court of Appeals, recognizing the absence of controlling precedent on the point, had certified the question to the Supreme Court for a decision. (Ramsay v. OmniBank, 215 F.3d 502 (5th Cir. 2000).) In settling, the insurer and its lawyers took a calculated risk: they bet that the Mississippi Supreme Court was going to come down on the side of the banks.
They were wrong. In fact, on March 28, 2002, the Mississippi Supreme Court handed down a split decision which came out on the insurance company’s side and against the banks on the question of how the contract was to be interpreted. United States Fidelity & Guaranty Co. v. OmniBank, 812 So.2d 196 (Miss. 2002)(en banc 5-3). I haven’t done the full exercise, but it does appear from reviewing the opinion that the court divided in a very predictable way: the judges who were backed by the Democrats supported the banks, and the judges who were backed by the Republicans supported the insurance industry. Robin Hood, I’d say, was missing from the picture–as he usually is in modern commercial litigation.
Buyer’s Remorse for the Insurance Industry
It looks to me like the prosecution of Judge Teel was motivated by a very emotional case of buyer’s remorse on the part of the insurance company and its lawyers. As it turned out, they didn’t call things correctly. The Supreme Court went their way. The criminal prosecution offered a way to get restitution and overturn the settlement. This is, to put it mildly, not an appropriate use of the criminal justice system. But it’s just the sort of use to which the Bush Justice Department is itching to put it.
Now, I don’t agree with the view that Judge Teel took in the case. In fact, I would have come out on this matter exactly where the Mississippi Supreme Court did: in favor of the insurance industry. After all, I
am an insurance company lawyer. On the other hand, the position taken
by the Bush Justice Department in prosecuting this case comes
suspiciously close to saying that failing to adopt the attitude of an
insurance company lawyer is inherently corrupt. That posture is, put
quite simply, asinine. But with the full weight of the United States
trotted out behind it, and with a curiously sympathetic judge, it might well sound credible to a jury.
The question is not really whether Judge Teel was right, but whether what he did was crooked. And on that point, no credible evidence was offered that he did anything wrong. I’ve scrutinized the record, and I’m convinced that he did nothing wrong, in fact.
Next, I’ll take a deeper look at what happened at the second trial in Jackson.
I have asked U.S. Attorney Dunnica Lampton for comment but have not heard back. If I do, I will update this piece.
In the next installment: a criminal prosecution focuses on corruption allegations and involves two judges in the dock. But attention quickly comes to focus on the one sitting on the bench.