COUNSEL FOR THE PLAINTIFF HE TOOK ASBESTOS COMPANIES FOR MILLIONS. HE SCARED TOBACCO COMPANIES INTO OFFERING UP BILLIONS. WHO IS DICKIE SCRUGGS, AND WHY IS EVERYBODY SO AFRAID OF HIM?
By TIM CARVELL

(FORTUNE Magazine) – Imagine that you are the head of a large corporation. Your general counsel walks into your office. He is sweating. "We're being sued," he says.

By whom?

"Seven thousand people."

This is what it is like to be targeted by Dickie Scruggs. It is an unnerving experience, and it is one that over 100 asbestos manufacturers endured throughout the 1980s. Scruggs, 51, a plaintiffs lawyer operating out of the sleepy Gulf Coast town of Pascagoula, Miss., has built an enormously lucrative practice by amassing impossibly huge numbers of plaintiffs and then suing the hides off corporations on their behalf. Scruggs says his strategy is a simple one: "I like to get the stakes so high that neither side can afford to lose."

Now imagine the same conversation as before, but your general counsel is trembling, in addition to sweating. How many people are suing you?

"Two hundred million."

This is what it has felt like to be a tobacco company of late, as Scruggs, in league with his close friend and ally Mike Moore, the attorney general of Mississippi, has recruited 41 states to file suit against the seven biggest tobacco companies, a steady escalation of pressure that prompted them to agree in June to a $368.5 billion global settlement. For Scruggs the settlement was the culmination of four years of work--four years of securing explosive documents, reassuring nervous whistle blowers, and flying around the country in his Learjet--and his job isn't done yet; he still has to sell the settlement to Washington, a town that is not especially keen on outsiders who show up with a deal and say, essentially, "Here. Sign this."

But that's where Scruggs' other strength comes in. In addition to being expert at bringing corporate counsel to the bargaining table, Scruggs knows how to deal with them once he's got them there. In asbestos he proved time and again that he has an almost magical ability to close a deal--and remarkably, to remain friends with his adversaries afterward. As a judge who watched Scruggs settle one case on the morning it went to trial puts it, "He's the best I've ever seen at getting people to agree. He is a master." That's not to say that Scruggs couldn't fail. But no one who has dealt with him on asbestos would bet on it.

In a way, it is appropriate that Scruggs has found himself negotiating a deal on behalf of the government, for Scruggs carries himself as if he has the full authority of the United States behind him. Scruggs spent five years in the Navy, flying A-16 Intruders from an aircraft carrier in the Mediterranean, and he still possesses from those days a military man's erect posture, clipped haircut, and flyboy cocksureness. It's hardly surprising that the first time Scruggs met Merrell Williams Jr., the whistle blower whose stolen documents proved essential in cracking the tobacco industry, Williams was reluctant to speak to him because he was certain that Scruggs was an FBI agent. "He sure looks like one, doesn't he?" Williams asks.

Scruggs' air of resolve is not just a pose; when Moore was looking for a lawyer to handle the tobacco case--that is, to foot the bill for a multiyear case, involving an untested legal theory, against an industry that had never spent a dime to settle litigation--he turned to Scruggs. The reason, he says, was simple: "If we were going to pursue the most powerful industries in the world, I needed someone I could trust. I needed someone who had the resolve not to quit on me. I couldn't afford to have someone who would give up."

Scruggs' current position at the center of the biggest corporate liability settlement of all time may be especially surprising to anyone who knew him in the mid-1980s. Back then he was just a small-town lawyer who was missing out on a gold rush in his own back yard. The gold rush was asbestos litigation, which had built steadily throughout the 1970s and exploded in 1982 when an attorney in Biloxi named Ron Motley won a million-dollar verdict in Mississippi's first-ever asbestos trial. Trial lawyers are a cautious herd: Few of them are willing to take on a new industry, but once someone has shown that it can be done, a stampede ensues. Which is exactly what happened in asbestos: After Motley's win, lawyers raced to find clients. There were few better places to look than shipyards, which were prime consumers of asbestos. The biggest employer in Scruggs' hometown? The Ingalls Naval Shipyard, which employed 30,000 workers, and which used a cornucopia of asbestos-laden supplies.

And yet for all of this, Scruggs fell into asbestos litigation almost by accident, and two years into the stampede, at that. It happened in 1984, when he'd lost a product-liability case; he was home, "having a drink and licking my wounds," when the phone rang. It was a juror from the trial, impressed with Scruggs (if not with his client's case), looking for an attorney to represent him against asbestos manufacturers. Scruggs took the case, but he still would have ended up a minor player in the asbestos warfare--save for one small quirk: Unlike the other lawyers in town, Scruggs was so certain he could win that he fronted his client several hundred dollars to have his symptoms diagnosed. Word spread fast, and by the time Scruggs filed his suit, that first plaintiff had been joined by 661 other current and former Ingalls employees. The suit, filed against Combustion Engineering, sought damages of $10,000 for each of them. Scruggs had raised the stakes, and the company blinked; within a month, it settled out of court for an undisclosed amount.

It was a pattern that would repeat itself throughout the 1980s. Scruggs would file a case, and before it hit the courtroom he would settle it. Settlement was beneficial for both Scruggs and the companies: He and his clients received cash, guaranteed, without having to wait out an appeal and without chancing the possibility that the company would fall into bankruptcy before paying up. And the companies didn't have to face a jury culled from the 70,000 voters in Jackson County, nearly half of whom worked at Ingalls. Harold Grissom, who represented an asbestos manufacturer in negotiating a settlement with Scruggs, says Scruggs' approach and his circumstances enabled him to extract money from corporations--in some cases without regard to their degree of culpability. "Truth be known," Grissom says, "any case has a settlement value. I don't care if it's the most ludicrous case that can be filed, there's still gonna be a cost of defending the litigation, the expenses, the attorneys' fees, and so on." Small wonder that until 1991--seven years and millions of dollars into his asbestos practice--Scruggs never actually tried an asbestos case in a courtroom.

If in retrospect Scruggs' strategy seems like shooting fish in a barrel, it was actually risky at the time. What if Motley's victory was a fluke? What if the asbestos companies refused to settle? What then? That is the flip side to Scruggs' approach, a side that he doesn't seem to think much about. As he says, he gets the stakes so high that neither side can afford to lose. That is certainly the case for the companies he targets, but it's also true for him. In asbestos, Scruggs had a considerable sum invested in his litigation--money spent not only on diagnoses for his clients but also on the research and discovery that were necessary to intimidate companies into settlement. The money came from loans, from Scruggs' bank account, and from the proceeds of his initial asbestos settlements. Scruggs didn't blink at spending the money; his wife, Diane, explains that she's the worrier, while Dick is the risk taker. "He felt that he was doing the right thing and that it would work out," she says. "And it did. Now, how he knows this and where his crystal ball is, I don't know." (This was not Scruggs' toughest sell to his wife: That came back in 1980, when he decided to abandon defense law in Jackson and open his own firm in his hometown of Pascagoula. Jackson isn't a metropolitan hub of bustle and commerce, but next to Pascagoula, it's Paris in the '20s. Diane balked, but Scruggs ultimately convinced her that things would work out--although the story goes that if you squint just right, you can make out ten fingernail-sized scratch marks in the road heading south from Jackson.)

Scruggs' willingness to gamble all-or-nothing found its ultimate expression in the giant consolidated asbestos case tried in 1993, which surely stands as one of the oddest product-liability cases ever to grace a courtroom. The case was prompted by the enormous backlog of asbestos cases in Jackson County, a backlog Scruggs had done much to create: 11,000 plaintiffs were awaiting their day in court, and he represented more than a third. The court was looking for a way to dispose, equitably, with as many plaintiffs as possible. At Scruggs' urging--and over the objections of the manufacturers--the court arranged for ten representative plaintiffs to file suit against those companies that had refused to settle. The verdicts in those ten cases would resolve the "common issues" for 6,400 other plaintiffs awaiting trial. In effect, the case was a class-action suit in sheep's clothing.

But while Scruggs was the lead plaintiffs lawyer, he didn't do much of the trial work in the case. His quiet, methodical style serves plaintiffs best in negotiation; for the courtroom he needed a bomb thrower--and he had one in Ron Motley, the flamboyant attorney whose million-dollar judgment began the asbestos gold rush. Whenever his asbestos cases actually made it to court, Scruggs brought in Motley, and the two were a fearsome combination: In the courtroom Motley waved the stick, pressuring corporations until they ran to Scruggs, who held out the carrot of a deal. It was no different in the consolidated case. As the trial lumbered along through four months of testimony--conducted in a hall at the county fairgrounds, since no courtroom was big enough to hold all the trial's participants--Motley flayed witnesses while Scruggs cut deals. Four companies settled out during the trial--one when the jury had already been deliberating for two days. When the jury reached its decision, seven companies got off without paying a dime. Four plaintiffs didn't receive a dime. And three companies were ordered to pay a cool $12 million to the six remaining victims--whose verdicts set precedents for thousands of other plaintiffs. (Two of the companies settled their remaining suits; the third, Westinghouse Electric, has appealed the verdict.)

With all this pressure and intimidation, it might be expected that the companies Scruggs dealt with would loathe him. But remarkably, those who have negotiated with Scruggs tend to view him favorably--a phenomenon largely due to the fact that Scruggs doesn't come off as your typical swaggering negotiator. He doesn't bluff, and he doesn't grandstand. What he does is offer a blunt, honest appraisal of where he and everyone else in the room stand, and he proceeds from there to cut the best bargain he can, effectively eliminating the coyness and mind games that tend to impede negotiations. James Stutts, who represented Westinghouse Electric in dealing with Scruggs, says Scruggs is "a straight shooter, and he doesn't try to jerk you around." Scruggs' forthrightness even won him a fan in George Cusick, whose company, Rock Wool Manufacturing, was sued into bankruptcy during the asbestos wars. In the course of that onslaught of litigation, Cusick faced 150,000 cases brought by lawyers all over the country, and he says that "there are some lawyers that are just--you wouldn't invite 'em to your dinner table. Dickie I would be glad to kill a goat and sit around and drink wine with. I feel that Dick Scruggs was an honorable man."

Scruggs' disarming approach to negotiation may have been the key to subverting tobacco's traditional defenses of lawsuits and intimidation. Long before he could sit down at the table with the tobacco companies themselves, Scruggs had to win the trust of those who could help him. Take, for example, Merrell Williams, the legal temp who in 1988 unearthed a cache of documents showing that Brown & Williamson lawyers had long known that cigarettes were deadly and that nicotine was addictive. By the time he met Scruggs in 1993, Williams was so terrified of recriminations from the tobacco industry--and so poor from defending himself against lawsuits--that he was sleeping in his boat and was scared half to death. Over time, Scruggs managed to reassure Williams that he would stand between him and anything Brown & Williamson might do; in return he obtained the documents, his first big weapon in the tobacco wars. To make good on his promise to protect Williams, Scruggs helped him secure a loan on a house--and a boat and two cars--and gave him a $3,000-a-month job as a "consultant." Some have charged that Scruggs bought his evidence. But both Williams and Scruggs say that there was no cash-for-documents deal. Furthermore, Williams says he plans to repay Scruggs, and asserts that without his help, "I'd be dead today." Scruggs is more blunt: "There's probably a gray area that we got into there," he says. "As a result of that, a lot of good has come out of this, so I'm willing to take the criticism."

Scruggs didn't provide a boat or a job to another whistle blower, Jeffrey Wigand, but he provided something equally important: At a time when Wigand was being hounded by a nasty PR assault orchestrated by Brown & Williamson, and receiving death threats, Scruggs became Wigand's ally. "He made a commitment that he would protect me and not let them rip me apart, and he lived up to that promise," Wigand says. The night before Wigand was to give his deposition in Mississippi's case--possibly flouting a court order in Kentucky and risking a jail term--he stayed at Scruggs' home, guarded by men carrying Uzis. The morning of the deposition, Scruggs came to Wigand and quietly said, "Listen. If you want out of this, you can have out." Wigand walked around the yard, spoke to his attorneys, thought awhile, and then returned to Scruggs. "Fuck it," he said. "Let's do it."

Scruggs has since made good on his word to protect Wigand. The morning that the tobacco deal was announced, the press was kept waiting for several hours while Scruggs, Moore, and the other states' negotiators pressed their final point: immunity for Wigand and other whistle blowers. Brown & Williamson, still bitter, refused, but finally gave in to pressure from the other tobacco companies. Immunity for whistle blowers is part of the deal that's been submitted to Congress.

The whistle blowers were only the beginning: As he and Moore tried to raise the stakes and force the industry to settle on a national basis, Scruggs had to convince other states that suing tobacco was worth their time and effort. But only six states signed on to the litigation until the watershed moment in early 1996, when Liggett chief Bennett LeBow decided he'd had enough; Scruggs, Moore, and a battalion of lawyers descended upon LeBow and came up with a deal that swapped LeBow's cooperation and a cut of Liggett's future profits for exemption from almost all pending litigation. With that the floodgates opened. The attorneys general of half a dozen states summoned Scruggs and Moore, and the pair flew out to each one in Scruggs' Learjet, persuading the AGs that their plan would work. Within a year, 16 more states had filed suits against tobacco.

As the states came on board, tobacco agreed to talk, and Scruggs coordinated summit meetings that featured a host of traditional foes: tobacco CEOs and anti-tobacco activists, doctors and lawyers, trial attorneys and class-action lawyers, all centered around the core negotiating team of Scruggs and Moore on the states' side and Phil Carlton, the attorney for the companies, on the tobacco side. Scruggs' honesty impressed both sides of the table: Matt Myers, who represented the Campaign for Tobacco-Free Kids, says he was wary of any dealings with tobacco but was reassured by Scruggs' and Moore's commitment, including their participation in anti-tobacco efforts unrelated to their case. "That was atypical of a litigator," Myers says. "And it goes well beyond what was in Dick Scruggs' or the state of Mississippi's narrow financial interest. They never sacrificed their own interest, but their commitment to the issue went well beyond it from the very beginning." That commitment impressed Carlton too: "I think [Scruggs] had his moments of frustration, just like I did," he says, "but deep down, he never wanted it to stop. He's been very determined in this process, and that has been an enormous factor in bringing the negotiations to the point we're at now."

With the settlement written, Scruggs' work is almost done. Now he just needs to sell the package to Washington--which has, at times, flummoxed even this veteran dealmaker. Despite the guidance he's receiving from his brother-in-law, Senate Majority Leader Trent Lott, Scruggs says he's been thrown by some surprises in selling the deal, especially the shellacking it has taken from such stalwart health activists as former FDA chairman David Kessler and Health and Human Services Secretary Donna Shalala--neither of whom, he notes, have been able to exert much authority over tobacco but who now charge that the settlement doesn't go far enough. "I am amazed at Donna Shalala," Scruggs says. "They can't even get $34 million out of Congress in funding for tobacco enforcement. Here's a settlement, where the industry's gotta put $300 million into it every year"--he laughs--"and they say, 'That's horrible! It weakens the FDA!' " He's rolling now: "You tell me how $300 million weakens it, when all they have is $15 million. The whole thing is ego, okay? The game is, your idea is horrible. Go back and change a comma, change a word, call it their idea, and now, they've saved it, they've fixed it, and it's their plan."

Whether the national deal passes or not, Scruggs certainly won't be hurting for cash. He's already helped settle Mississippi's lawsuit against tobacco manufacturers for $3.6 billion, and while he doesn't yet know what his fee will be for that suit--in the state's suit, as in the national settlement, his compensation will be determined by a board of "fee czars"--it should be enough to cover his costs and then some. Scruggs has also been retained by 20 other states to represent them in their tobacco suits; assuming that even one or two of those cases come up a winner, Scruggs is poised, national deal or no, to vault from being a millionaire plaintiffs lawyer to a billionaire one. Friends mention that at least some of that money will quietly go to charity; Scruggs has paid for college educations for kids who couldn't otherwise afford it and is known in Pascagoula as much for his gifts to his hometown as he is for his lawsuits. But at least some of that money will in all likelihood be channeled back into Scruggs' next case. Pressed for hints as to where his practice will take him next, Scruggs simply chuckles. "I have no idea," he says, then muses, "I'm sure there are some out there. There are other industries that are asking for it."

Somewhere, then, the executives of some unsuspecting corporation are going about their daily business, oblivious to the fact that one day, Dickie Scruggs is going to knock on the door, present them with a lawsuit, and offer to make a deal.

Pray for them.