A restoration contractor that helped finance an effort by McClenny Moseley & Associates to file thousands of hurricane-damage claims in Louisiana wants its $3 million investment back.
Access Restoration Services US filed a lawsuit in a Texas state court in Houston that accuses MMA and founding partner John Zachary Moseley of selling unregistered securities. The suit says Moseley promised a 429% return on its investment in nine months. ARS says it wired $3 million to MMA in December 2021, but hasn’t received any of that money back.
“Upon information and belief, MMA is not registered to sell securities in the state of Texas,” the complaint says. “Nevertheless, MMA and Moseley solicited and obtained the investment agreement from plaintiff. Said investment agreement constitutes a security, and upon information and belief MMA did not register such security, in violation of the Texas Securities Act.”
The lawsuit, filed April 21 in Harris County District Court, is the latest in a series of legal actions taken against MMA. A Louisiana Circuit Court judge and US District Court judges in Lake Charles and New Orleans have barred the law firm from prosecuting any of the hundreds of lawsuits its lawyers have filed against insurers. The Louisiana Supreme Court has also suspended the law license of MMA’s managing attorney in Louisiana, William R. Huye III.
During hearings before District Court judges, MMA lawyers revealed that they had paid Velawcity, an Arizona-based legal services marketing firm, $13.9 million for “pre-screened client leads.” The law firm filed lawsuits on behalf of clients who had already hired other attorneys, forcing federal judges to sort out who actually represented the claimants.
Insurance defense attorney Steve Badger, a partner with the Zelle law firm in Dallas, posted a copy of the ARS lawsuit on his
LinkedIn page Wednesday.
“Despite being MMA’s investment partner, ARS is also retained by MMA as an expert witness in litigated matters,” Badger said in his LinkedIn post. “While this investment scheme was apparently going on, in January 2022, I deposed the ARS VP of global operations, Nathan Normoyle, in a MMA hail damage claim. And, no, he didn’t disclose this relationship to me.”
Badger said that in February 2022, the owners of ARS formed a Texas company called Global Estimating Services, which apparently “existed for the primary purpose of writing estimates in MMA’s Louisiana hurricane cases.”
“So, from this new lawsuit and public records, it appears that not only was GES writing estimates in MMA’s Louisiana hurricane matters, the owners of GES, through their related company ARS, may have also invested in and had a financial interest in the outcome of MMA’s Louisiana hurricane matters,” Badger wrote.
Online records maintained by the Texas Secretary of State’s office confirm that Giuseppe Gagliano and Domenico Gagliano of Toronto, Canada are listed as managers for both ARS and Global Estimating Services. The two companies list the same address in Conroe, Texas.
ARS’s lawsuit against MMA says the company agreed to loan the law firm $3 million to finance litigation over Hurricane Ida damage. Moseley said the investment would bring 1,000 new clients, or $3,000 per client. Moseley projected $33,000 in attorney fees and promised to pay ARS 15% of those fees, or $4,950 per client.
According to the lawsuit, Moseley went on to say that his law firm had been an average attorney fee recovery of $85,000, which if it continued would net a $12,870 payout to the lenders. That worked out to a 429% return in nine months, or an annual return of 572%.
“Moseley’s solicitation and the agreement further represented to plaintiff that MMA ‘used very conservative modeling projections in order to show that even if MMA wasn’t able to recoup half of average settlement value, lender’s returns would still be over 50% on an annualized basis,” the suit says.
The lawsuit also says MMA promised to give the lenders access to a portal where they could track the status of the hurricane lawsuits. ARS says it had access only briefly, “until it inexplicably became inaccessible.”
During hearings before district court judges, Huye admitted 856 instances where his firm told insurers it represented property owners, but actually represented Apex Roofing and Restoration.
MMA did file thousands of hurricane lawsuits in Louisiana, before US District Judge James Cain Jr. in Lake Charles learned about the “mass filings” and conducted an interrogation that ultimately stopped the law firm’s Louisiana litigation in its tracks.
Other US District Court judges followed up with their own inquiries. The law firm admitted that it told insurers it represented homeowners when it actually was representing Apex, an Alabama-based restoration contractor.
In a March 16 order, Chief Magistrate Judge Michael B. North in New Orleans said MMA had “engaged in a pattern of misconduct never before seen here.”
“The record in these cases establishes that they have undertaken a brazen, multi-faceted campaign to enrich themselves with ill-gotten contingency fees paid to them by unwitting insurance companies ostensibly on behalf of named insureds that they and their firm did not represent,” North’s order says.
ARS in its lawsuit, seeks the return of the $3 million that it loaned MMA to fund those lawsuits. The company also asks for punitive damages for violations of the Texas Securities Act, prejudgment and post-judgment interest and attorney fees.
New Orleans insurance defense attorney Matthew Monson, who was among the first to call attention to MMAs mass court filings, posted this missive in reaction to the ARS lawsuit: “Would you admit to investing in an illegal scheme? Yes, if you want your $3 million back,” Monson said.
Top photo: Aiden Locobon, left, and Rogelio Paredes look through the remnants of their family’s home destroyed by Hurricane Ida, Sept. 4, 2021, in Dulac, La. (AP Photo/John Locher, File)
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