Federal Judge Mulling Further Sanctions Against Hurricane Damage Law Firm
A federal judge in New Orleans has called owners of McClenny Moseley & Associates back into his courtroom again, this time to decide if the law firm should be sanctioned — and if so, how much — for making misrepresentations to insurers.
Insurance defense attorney Matthew Monson suggested that the Houston-based law firm should be required to pay $13,938,000, which is the exact amount that MMA agreed to pay for 4,268 “prescreened client leads” generated by Velawcity, a firm headquartered in Scottsdale, Arizona that says it provides “private marketplace technology for the legal industry.”
“MMA’s unprecedented bad faith driven intentional practice of misrepresentation and paying for signed contracts must come to an end immediately,” Monson says in a memorandum filed Wednesday with the U.S. District Court for Eastern Louisiana.
Magistrate Judge Michael B. North on Thursday ordered MMA co-founder Zack Moseley and New Orleans office managing attorney William R. Huye III to appear before him on March 3 to discuss potential sanctions against the law firm and its attorneys. Monson and other lawyers say MMA told insurers that it represented homeowners with hurricane damage, when actually it represented Apex Roofing Co. and other restoration contractors.
Huye admitted as much during a Feb. 1 hearing, although he said he was representing “the interests” of homeowners while pursuing claims on behalf of contractors. North ordered the law firm to submit documents that showed which cases MMA had filed on behalf of homeowners when it actually represented contractors. MMA submitted a list of 856 cases, plus nine settled claims.
The same batch of documents included contracts with Velawcity that revealed MMA was paying $3,000 to $3,500 for each client lead.
The 16-page memo that Monson filed Wednesday describes how the “pre-screening” process works. He said he received an unsolicited text message on Jan. 23 that directed him to a website, www.HurricaneDamageLawsuit.com. That website includes a tab that invites the reader to ask a few questions to see if they qualify for compensation.
Monson said he filled out the forms on the website, providing his name, phone number and other information. The next day, a man who identified himself as “Arnold” with Strategic Litigation Partners called and asked numerous questions.
During the conversation, Arnold said he worked for Velawcity. While the two men spoke, Arnold sent an email from the address “Hurricane-Ida-Velawcity-MMA@slplegal.com.” The email included a link that directed Monson to a series of instructions on how to electronically sign an attorney employment contract with MMA.
Monson said his investigation shows that Huye misled the court on Feb. 1, when he told Judge North that Velawcity does not send any leads to his law firm.
“The only way that Mr. Huye’s answer can be interpreted as honest is if Mr. Huye means that instead of leads, Velawcity provides MMA with signed contracts,” Monson’s memo says. “Either way, Mr. Huye’s representations are made in bad faith and only the highest possible sanctions would be appropriate to prevent such misrepresentations from being made in the future.”
Monson said his client, Allied Trust Insurance Co., has sent four checks to its insureds that were endorsed by MMA under “an alleged power of attorney.” He said the signatures on the checks show that the law firm deposits funds into a trust account without any participation by the insured.
Monson said Allied Trust sent an additional nine checks to MMA clients that remain “unnegotiated” months later. He said banks don’t have to honor checks that are submitted more than six months after the date they were signed.
On Thursday, after receiving the memo, North ordered MMA to submit to him the client agreements that gave it power of attorney to negotiate those checks.
The order was the latest volley in a barrage against the McClenny Moseley law firm. US District Judge James D. Cain, with the Western Louisiana District in Lake Charles, was the first judge to take notice of MMA voluminous hurricane-damage lawsuit filings. Cain has sanctioned MMA $250 each for several filings that duplicated lawsuits filed by other law firms.
Louisiana Insurance Commissioner Jim Donelon issued a cease-and-desist order to MMA last week. He said in a press release that the law firm’s “illegal insurance scheme is like nothing I’ve seen before.”
During the Feb. 1 hearing, founding partner Zach Moseley revealed that Monson had also filed a complaint against his law firm with the Louisiana State Bar. Monson made a brief mention of that Sept. 15 2022 complaint in his memorandum, noting that MMA had “opened the door” to discuss Bar complaints that normally must be kept confidential.
Donelon’s order states that MMA falsely claimed to represent Michael and Holly Caffarel on a claim for damages from Hurricane Laura. The Caffarel’s learned about the deception when Chase Bank sent them a settlement check from their insurer with its endorsement, which was required because they were the mortgage holder for the property.
Top image: This screenshot shows the HurricaneDamageLawsuit website that Velawcity reportedly uses to find clients for law firms.
- Lawsuit Against Law Firm Exposes Fee Sharing Agreement for Storm Claims
- Bankruptcy Judge Lets Directors of Failed Bank Tap into D&O Insurance
- California Overtime Law Threatens Use of Grazing Goats to Prevent Wildfires
- Increasing Cost of Claims Drives State Farm Out of Calif. Property Market