Louisiana Courts Still Tidying Up After Storm of McClenny Moseley Lawsuits

By Jim Sams | October 30, 2023

In December 2022, before much was known about how McClenny Moseley & Associates in Houston was able to set up shop in New Orleans and sign-up thousands of Louisiana clients in less than a year, US District Court Judge James D. Cain shared some strong words with the law firm’s managing attorney in Louisiana.

“What I’m trying to get you to understand is you have dumped a mess on this court,” Cain told R. William Huye, who had opened up MMA’s New Orleans office in 2021.

Cain and other Louisiana judges are still trying to clean up that mess.

The 3,267 hurricane-damage lawsuits that MMA filed in Louisiana federal courts forced another wave of litigation, one that spawned lawsuits in both Louisiana and Texas that involve litigation finance investors, mortgage companies, damage estimators and property owners.

Investors who reportedly loaned the law firm $30 million sued to get their money back. MMA sued 20 mortgage companies that refuse to endorse $20 million in insurer settlement checks. Law firms that took over MMA’s cases filed lawsuits to keep MMA from interfering with their work. Property owners sued because MMA’s lawyers told insurers that it represented them and filed lawsuits on behalf of “clients” they had never met.

New Orleans insurance defense attorney Matthew Monson said the root of the matter can be traced to the investors who loaned MMA millions to finance the law firm’s “litigation harvesting.” There is no public record that shows the purpose of those loans. It is known that after securing the funding, MMA paid $13.9 million to an online marketing company based in Arizona called Velawcity for “pre-screened client leads” that cost $3,000 to $3,500 each.

“The story is not really about MMA. It’s about what is the extent of investment in illegal schemes to sign up clients in all lines of business,” Monson said.

“I think this is the future of how cases are being harvested. The days of an attorney waiting for his phone to ring because of a radio advertisement or bill board are already over.”

Disappointed investors

Equal Access Justice Fund and the EAJF ESQ Fund, both managed by B.E. Blank in West Palm Beach, Florida, filed a lawsuit against MMA in Harris County, Texas on Sept. 1. The funds claim the law firm defaulted on a total of $30 million that it borrowed through a series of loans made from September 2021 to November 2022. MMA pledged fees the attorney fees earned from its cases as collateral for those loans, the suit says.

Judge Cain effectively stripped much of that collateral away on Aug. 22 when he signed an order stating that MMA, because if its misconduct, had no right to fees from any of the lawsuits it filed in the Western District of Louisiana. B.E. Blank filed a motion to intervene in that disciplinary action, but Cain denied it. The investment house has filed a notice that it is appealing to the 5th District Court of Appeals.

B.E. Blank refused to answer questions about its investment in MMA lawsuits. It did issue a statement saying that it strives to partner with law firms that adhere to the highest ethical standards.

“While we do not believe that McClenny, Moseley, and Associates intentionally sought to undermine the Louisiana bar rules, we acknowledge that questions have been raised about the manner in which the firm brought new clients on board,” the statement says. “We admittedly don’t have all the facts, as our role was to lend funds—not litigate cases.”

‘Tableau of misconduct’

McClenny Moseley was a prolific litigator.

Federal court records show that the law firm filed 2,455 lawsuits in the Western District of Louisiana in 2022, with 1,642 of those cases filed from Aug. 23 to Aug. 26 — just before the two year statute of limitations for lawsuits related to Hurricane Ida was about to expire. MMA also filed 656 lawsuits in the Eastern District of Louisiana and 156 lawsuits in the Middle District.

Judges in the Western and Eastern Louisiana took notice when they learned that many of those lawsuits were filed against the wrong insurance company, duplicated lawsuits that had been filed by other law firms, or sought damages for claims that had already been settled. Cain in the Western District, and Judge Michael North in the Eastern District, discovered later that MMA had not even signed retention agreements with many of the homeowners they purported to represent.

Some of the homeowners had signed contracts with Apex Roofing and Restoration after being solicited by sales representatives who walked door to door in hurricane-damaged neighborhoods. Others were signed up by Velawcity, which sent thousands of text messages and emails to potential hurricane damage claimants that provided a telephone number to a call center staffed by non-attorneys.

US District Court Judge Michael B. North summed up MMA’s misdeeds in a March 16 order, saying that the numerous cases that he was forced to clean up because of the law firm’s action are an example of what happens “when ego and greed become a lawyers’ guiding principles.”

“In these consolidated cases, the court and the parties — indeed, our entire legal community — are confronted with an unprecedented tableau of misconduct by a Texas-based law firm, assisted in its misdeeds by an Alabama-based roofing contractor and an Arizona-based, modern-day case runner.”

‘Illegal barratry scheme’

At least three groups of property owners who were caught up in MMA’s marketing blitz have filed separate lawsuits seeking damages.

One of those actions was filed by Katherine Monson, the wife of defense attorney Matthew Monson. She filed a class-action complaint in the US District Court in Houston that also names Tort Network LLC, the owner of Velawcity, as a defendant. The suit seeks damages in excess of $5 million for “unlawful acts of barratry,” meaning the improper solicitation of clients.

Another lawsuit filed by lead plaintiff Wayne J. Adams and eight other Louisiana property owners in Harris County court seeks $1.8 million in penalties from MMA and Tort Network as compensation for the “illegal barratry scheme.” The lawsuit notes that under Texas law litigants who are illegally solicited can seek a $10,000 civil penalty for each solicitation.

The third lawsuit was filed by Louis Carter III in the Louisiana 21st District Court in Tangipahoa Parish. Carter alleges that he signed an assignment of benefits form after a representative for Apex knocked on is door. MMA then falsely told his insurer that the law firm was representing him even though Carter had never heard of the firm and preferred to deal with his insurer directly, the lawsuit says.

The lawsuit has been transferred to the US District Court for Eastern Louisiana. Huye, MMA’s former managing attorney in New Orleans, filed a motion to dismiss the case on May 17. He argues that Carter signed an arbitration agreement when he signed his assignment of benefits agreement with Apex Roofing.

Damage estimates

Companies that MMA hired to provide damage estimates have their own disputes with the law firm.

PCG Claims, headquartered in Franklin, Tennessee, filed a lawsuit in Harris County on Aug. 21 seeking to recover $9,354,628.46 that is says it is owed for field inspection services. The company said MMA agreed to pay $250 per hour for its services.

Global Estimating Services, filed a lawsuit in April against MMA in Harris County court seeking $9,685,862.99 for field inspection services that it provided to the law firm. The company alleges MMA failed to make scheduled payments on the debit.

Global Estimating’s parent company, Access Restoration Services, also filed a lawsuit against MMA in Harris County at about the same time. ARS says it loaned MMA $3 million after it was promised a 542% return on the investment. Instead, the law firm defaulted, the lawsuit alleges.

Curiously, 17 former field inspectors for GES have also filed a lawsuit in Harris County — but against their former employer. They allege they are owed for overtime and bonuses that were promised but never paid.

Uncashed checks

While those lawsuits move through state and federal courts, judges in Louisiana have been working to resolve the cases filed by MMA. Toward that end, Judge Cain ordered founding partner John Zachry Moseley to turn over the law firm’s financial documents.

Cain called Moseley to his court room in Lake Charles on Aug. 8 to answer questions about money held by the firm on behalf of its clients. He noted that MMA was holding on to $20,042,940 in settlement checks from insurers that had not been deposited into trust accounts.

Moseley replied that mortgage companies had refused to endorse the checks. He said MMA has filed 20 lawsuits against mortgage lenders in an attempt to negotiate the uncashed checks.

Federal court records confirm that those lawsuits were filed against multiple mortgage companies. One example is MMA’s lawsuit against Bank of America, where it alleges it is entitled to $67,707.66 in fees and $15,800.68 in costs for services provided to eight mortgage holders in Louisiana, Texas and Florida.

MMA says the bank has refused to endorse the settlement checks made out those to homeowners even though MMA provided disbursement statements showing that the firm is entitled to a portion of the money. Bank of America answered that MMA had failed to present it with a valid attorney fee lien.

“I think there’s over 900 mortgage companies in the state of Louisiana,” Moseley told Cain during the Aug. I hearing. “Some were willing to work with us, some were not.”

Cain told Moseley that he and his staff will take over the task of disbursing the settlement money.

“I’ll probably sort out with the State Bar a mechanism for a trustee to be appointed,” he said. “I’ll get with the insurance companies on getting these checks reissued.”

In the meantime, sanctions against MMA continue to pile up. On Oct. 10, Magistrate Judge Kathleen Kay in Shreveport ordered MMA to pay $8,535.52 in attorney fees and costs to Matthew Monson’s law firm. Kay said in her order that MMA filed a lawsuit on behalf of a Louisiana homeowner against Homeowners of America Insurance Co. even though the carrier does not write homeowners policies in Louisiana and did not insure MMA’s client, Johnny Venzant.

Monson said other law firms that took over MMA cases are making the same mistake. Court records show that attorney Mark Ladd with the Galindo Law Firm — another Houston law firm that set up shop in Louisiana to take on hurricane-damage claims — filed a lawsuit on behalf of a former MMA client against Homeowners of America for alleged Hurricane Ida damage.

To make matters worse, the plaintiff in the suit is named as Starwood Gwendolyn when her name is clearly Gwendolyn Starwood, Monson said. The lawsuit was filed on the two-year anniversary of Hurricane Ida making landfall, which means the statute of limitations has now expired and Starwood’s claim is now prescribed, Monson said.

“Just like MMA, Galindo law is another Houston-based firm that came to Louisiana to get on the Hurricane Ida bandwagon,” Monson said. “Unfortunately in this instance, they have deprived Ms. Starwood of the right to proceed against the proper insurer.”

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