insurance Archives

Texas law firm faces criminal investigation over handling of hurricane cases

Nov 16 (Reuters) – The Louisiana State Police has opened a criminal investigation into a Texas law firm that faced discipline in both federal and state court after it mishandled hundreds of lawsuits filed over hurricane property damage, according to police records.

An initial complaint from the Louisiana State Police, dated Oct. 17 and obtained through a public records request this week, said the department’s insurance fraud/auto theft unit in New Orleans is investigating McClenny Moseley & Associates, now known as MMA, for fraud, forgery, improper solicitation of clients and other potential charges. A Louisiana State Police spokesperson did not respond to questions about the investigation.

The investigation, which was first reported by local Louisiana media, originated with the Louisiana Department of Insurance, which found more than 20 insurance claim lawsuits were filed on behalf of people who said they had never hired MMA to represent them. Many of those people had never received the settlement funds from their cases, according to the complaint.

Representatives for MMA and the attorneys involved in the Louisiana cases, John Zachary Moseley and William Huye, did not immediately respond to requests for comment. Former name partner James McClenny directed questions to his attorney, who did not respond.

McClenny Moseley, which is based in Houston, filed hundreds of lawsuits in Louisiana state and federal courts last year against insurers on behalf of homeowners who suffered property damage from hurricanes Laura, Delta and Ida. In January, the firm attracted the scrutiny of judges over allegations that the attorneys improperly solicited or paid for clients through a marketing company and a roofer, brought claims against the wrong insurers, filed duplicate lawsuits or sued insurers that had already settled with their clients.

Attorneys from the firm have faced disciplinary proceedings in both state and federal court, court records show. A Louisiana federal judge has blocked the firmand its attorneys from collecting any fees in about 200 cases.

The law firm and its attorneys are also facing multiple malpractice lawsuits in state and federal court from former clients who say they lost out on their chance to pursue their insurer for compensation due to McClenny Moseley’s mishandling of their case.

In May, the Louisiana Department of Insurance hit the firm with $2 million in fines, accusing the lawyers of engaging in fraud and unfair trade practices with about 850 homeowners.

The department, which was originally tipped off by insurance defense attorney Matthew Monson, took its findings to the Louisiana State Police in October, according to the complaint.

In a statement, a department spokesperson said the police opened its investigation in “a relatively short period of time considering the enormity of the actions.”

Monson told Reuters that “there is a healthy basis” for the investigation.

Texas Supreme Court Hears Arguments in Challenge to Public Adjuster Law

Insurers and the Texas Department of Insurance hope to persuade the state Supreme Court to block a constitutional challenge to a law that prohibits roofing contractors from acting as public adjusters on their customers’ damage claims.

The high court heard oral arguments last week in a lawsuit filed by Stonewater Roofing Ltd. that charges the public adjuster licensing law, first adopted in 2005, infringes on its First Amendment right to free speech and its 14th Amendment right to due process. TDI hopes to overturn a decision by the Seventh Court of Appeals in Amarillo that found the law’s restrictions on free speech should be subject to strict scrutiny and allowed Stonewater’s challenge to proceed toward trial.

The American Property Casualty Insurers Association, National Association of Mutual Insurance Companies and the Texas Insurance Council filed a joint amicus brief on Wednesday urging the Supreme Court to grant TDI’s petition to dismiss Stonewater’s lawsuit.

“If Stonewater’s position is accepted by this Court, the Texas insurance marketplace could soon join other states in experiencing an insurance crisis,” states the brief, written by Steve Badger, a partner with Zelle Law in Dallas.

The brief says Texas lawmakers adopted the public adjuster law to protect the public from “two-Chucks-in-a-truck” contractors who walk door to door in storm-damaged neighborhoods after every major storm event.

“Unquestionably, Texas policyholders who may fall victim to unscrupulous contractors and others acting as unlicensed and unregulated claim advocates will be the ones most directly affected by the outcome of this appeal in thousands of Texas property insurance claims each year,” the brief says.

Stonewater is a family-owned roofing contractor headquartered in Tyler that operates five offices in Texas. A customer filed a lawsuit against the company alleging that Stonewater had acted illegally as a public adjuster. The suit sought to recover the nearly $1 million that the customer spent on a commercial roofing project plus treble damages and attorney fees, according to a brief that Stonewater filed with the court.

Stonewater filed a lawsuit seeking a declaration by the court that the public adjuster law violates its constitutional rights. “Though Stonewater wants to speak openly with its clients and their insurers, the Texas Legislature has made doing so a potential criminal act subject to crippling civil and administrative penalties,” the company said in a brief filed with the court.

Judge Lora J. Livingston, with the 201st District Court in Travis County, dismissed the lawsuit without writing an opinion. Stonewater appealed.

The appellate panel ruled that the trial court erred by dismissing Stonewater’s complaint without explaining why in writing. The panel said the restrictions in the law are subject to strict scrutiny by the courts because they are based on the content of communications and apply to specific individuals, roofing contractors. The panel did not rule on the merits of the claims, but found that Stonewater should have been allowed to proceed with its lawsuit.

Stonewater has gained support from a well-known expert in constitutional law, Vermont Law and Graduate School President Rodney A. Smolla. In an amicus brief, Smolla said that a 2018 US Supreme Court decision in National Institute of Family and Life Advocates v. Becerra supports Stonewater’s arguments.

In that 5-4 decision, the US Supreme Court ruled that a California statute that required licensed health care clinics to disseminate information about low-cost family planning services, including abortion and contraception, violated free speech rights. The majority said that professional speech is not excepted from the rule that content-based regulation of speech is subject to strict scrutiny, meaning that states must show a compelling public purpose for such restrictions.

“NIFLA correctly refused to treat licensure as a talisman working voodoo to undermine constitutional protection of free speech,” Smolla’s brief says.

A separate amicus brief filed by attorney Arif Panju on behalf of the Institute for Justice says federal Circuit Courts have invalidated laws and rules that are similar to Texas’ public adjuster law. The 5th Circuit upheld the right of a retired veterinarian to give verbal and written advice about pet healthcare, despite professional licensing rules. The 9th Circuit ruled that South Carolina could not use its rules on post-secondary education to bar a farrier from offering classes on horseshoeing.

TDI argues that restrictions similar to Texas’ public adjuster law have been adopted by 46 states without creating any undue burden on free speech or due process rights.

“Under Stonewater’s logic, most, if not all, professional licensing and practice regulations would be subject to strict scrutiny because nearly all professionals must speak to perform their jobs,” the department’s brief says.

The Supreme Court began hearing oral arguments in Stonewater’s case on Oct. 26 at its courthouse in Austin.

Accident Litigation Expert: Beware the Nuclear Settlement

Nuclear Jury Verdicts Are Not the Only Industry Concern

WASHINGTON — While nuclear verdicts in accident litigation are obviously a major concern in the trucking industry, it’s actually the nuclear settlements that litigation expert Steve Wood said are even more problematic.

“What doesn’t get talked about enough is the idea that carriers are settling cases for an amount that is much more than they need to,” said Wood, a senior litigation consultant with Courtroom Sciences, an Irving, Texas-based firm that advises law firms and legal departments on litigation matters. “That’s really the danger in this industry that should be focused on — in addition to nuclear verdicts.”

Wood spoke on the matter during an Oct. 4 session at American Trucking Associations’ Safety Management Council’s 2023 conference.

“Although nuclear verdicts are the ones that get in the paper, the truth of the matter is that only about 3% of lawsuits go to trial,” he said. “Nuclear verdicts actually are exceedingly rare.”

Still, concerns over nuclear verdicts are causing motor carriers to settle out of court for a heavy amount of money. “This is the world we live in,” Wood said.

While generally defined as jury awards of $10 million or larger, Wood defines a nuclear verdict as any that is larger than expected. “If you have a case that should be worth $500,000, and it comes in at $5 million, that’s a nuclear verdict,” he said.

But whether an accident lawsuit goes to court or gets settled in the offices of large law firms, there are a number of actions a motor carrier can take to help their chances for a better outcome, according to Wood.

Sometimes the damage for a reasonable settlement or trial verdict occurs at the video deposition level, especially when drivers or safety managers give their testimony prior to mediation, settlements or trial, he said. That’s where plaintiff attorneys are very aggressively focusing on hot-button words like “risk, safety, danger, harm, always, never, must, should” to get witnesses to agree to a “heightened duty of safety.”

“The reason they do that is because it’s the old adage that ‘It’s not what you say, it’s how you say it,’ ” Wood said.

They’re trying get carrier witnesses nervous, angry, flustered and looking defensive, he said. They want these witnesses to appear evasive, emotional and uncomfortable, he said.

“They love to show those responses to a jury,” Wood said. “Bad depositions can lead to large verdicts when a lawsuit goes to trial.”

Another problem can simply be what’s found on a carrier’s website.

“Your corporate websites are ripe for the taking,” Wood said. “Assume that in any litigation, plaintiff counsel is going right to your company website and are looking for anything they can use. His hit list is certainly on your website.”

Count on a plaintiff attorney asking your safety manager questions based on such company statements as “safety is our top priority or safety is our No. 1 priority.”

If asked by a plaintiff attorney if safety is your top priority, a safety manager or top executive who says anything but yes is trapped, Wood stressed.

“They can say, ‘Well, let’s pull up your website. Doesn’t your website say this?’ Now you’re stuck,” Wood said.

“Eliminate all the safety language from your website. It’s 100% unnecessary,” he said. “There’s no reason for it, and it opens you up for attack. At the end of the day, we know that people want to operate safely. You don’t have to tell them that.”

Wood said to instead focus website language on such subjects as company history and customer service, for example.

A carrier’s goal overall in a trial should be to convince juries that reasonable monetary awards are all that’s needed to make a victim whole. Be aware that plaintiff attorneys will try to convince juries to inflict punitive damages requiring companies to make changes, and send a message to the industry that all carriers — not just the one on trial — must change their behavior.

The bottom line with plaintiff attorneys is ‘Show me your money,’ ” Wood said. “They look at you like an ATM machine. They hate the trucking industry because they’re the big bad company that everybody is afraid of. So I’m going to hit them for quick, easy money.”

Insurance Law Cutting Out Attorney Fees Perplexes Texas Supreme Court

The Texas Supreme Court justices responding to a federal appellate certified question appeared perplexed about the lack of guidance on how or if attorneys could get paid on property-damage insurance claims.

The justices heard oral argument this week on Rodriguez v. Safeco Ins. Co. of Indiana, a case that came to them from the U.S. Court of Appeals for the Fifth Circuit. A federal trial court granted the insurer summary judgment and the homeowner appealed.

The appeal argued that when Safeco invoked the policy appraisal provision after litigation began, and paid damages and interest, a Texas insurance law created by the legislature in 2017 did not intend to eliminate attorney fees.

In examining the 2017 Texas Prompt Payment and Claims Act, the Fifth Circuit decided it could not interpret the law and asked the Supreme Court to weigh in on the issue.

Melissa W. Wray of Daly & Black, arguing for the homeowner, said the intent of the law is to promote prompt payment of insurance claims by imposing liability for statutory interest, attorney fees and prejudgment interest on insurers who do not pay claims in accord with the act’s deadline.

“Safeco asks the court to adopt an interpretation of the statute that would, in the context of attorneys fees, ignore the claim payment deadlines that the legislature has put in place and effectively redefine prompt payment of a claim to mean payment of a claim at any time up until the moment before the trial judge enters the final judgment,” Wray said.

Throughout the hearing, the justices grappled with a phrase in the law—”the amount to be awarded in the judgment”—and Justice Brett Busby began by referring to caselaw, Ortiz v. State Farm Lloyds (Texas 2019), where the supreme court said there is no claim for breach of contract when the insurer pays the appraisal award.

“So, wouldn’t the ‘amount to be awarded’ in the judgment for your claim under the insurance policy be zero?” Busby asked.

Wray drew a distinction, moving away from a breach of contract claim, to argue damages was not necessarily relevant to an “amount to be awarded,” because the only defined term in the statute was a “claim.”

“Safeco wants to interpret that as the amount of unpaid policy benefits for which the insurer remains liable at the time of judgment. Those words aren’t used in the statute,” Wray said.

When Safeco’s representative, Mark D. Tillman of Tillman Batchelor, rose to speak, the justices repeatedly tried to pin him down on when the language of the statute allegedly read attorney fees out of the act.

“There has to be the possibility that a plaintiff can obtain a judgment,” Tillman argued. “The legislature clearly tied the ability to award attorney’s fees to, in the future, obtain a judgment. That simply cannot happen here.”

Justices Busby, Jeff Boyd and Evan Young took turns arguing that point.

Boyd said Tillman was embracing the absurd argument that, speaking hypothetically, a $50 million building could be destroyed and insurance company disagrees with the amount damages claimed.

“You have five years of litigation, finally get to a jury trial, the jury finds for the insured, and you file your JNOV and the judge denies it and the judge says ‘send me an order. I’m going to sign a final judgment awarding all this money,’ and your client at that moment can write a check and avoid all attorney’s fees,” Boyd said.

Busby jumped in, “You’re getting back to my question then. Where is the moment … when you’re looking at what is ‘to be awarded?’ To Boyd’s point, it’s not the day before the judgment is signed. So in the life of the case, when is it?”

Tillman said that in this particular case, the appraisal amount was paid immediately.

“I understand, but we have to write the rule not just for your case,” Busby said.

Justice Young asked, “What will inform the answer to that question if it’s not in the text of the statute?”

Tillman finally said he did not know.

Then we go right back to Justice Boyd’s hypothetical. I’m with him. I don’t understand where the line is if that’s the only thing the statue says and the only thing we’re guided by,” Young said.

Tillman argued Boyd’s hypothetical scenario was an extreme case and one he had never encountered in the real world. He told the courtnot to “throw the baby out with the bathwater” using an extreme example to overturn a statute intended to curb abuses by trial attorneys that led to its passage in the first place.

“Then why not just embrace it and say, ‘Yeah, that’s an extreme hypothetical, not going to happen, but the statute says it and if it’s a problem there’s no judicially discernable way to draw that line, leave it to the legislature to fix that,” Young suggested.

The court also heard from amicus attorney Kyle D. Hawkins of Lehotsky Keller Cohn, who spoke in favor of the insurance company, but as representative of the U.S. Chamber of Commerce, American Tort Reform Association and Texans for Lawsuit Reform.

This case also attracted friend of the court briefs from the Texas Civil Justice League, Texas FAIR Plan Association, American Property Casualty Insurance Association, National Association of Mutual Insurance Companies, and Insurance Council of Texas.

Five More Indicted in Staged New Orleans Crashes

A federal investigation into staged accidents with trucks in the New Orleans area that seemed to be slowing a bit in recent months came back this month with a roar.

Prosecutors announced five more indictments and seemed to be closing in on yet-to-be-identified lawyers involved in the scam to intentionally cause automobile accidents with tractor-trailers to defraud trucking and insurance companies.

U.S. Attorney Duane Evans for the Eastern District of Louisiana earlier this month announced the indictments of Antone Clark, 33; Shirley Harris, 38; Adonte Turner, 25; and Tiffany Turner, 52, all of New Orleans; and Dimitri Frazier, 31, of Westwego, La.

The five defendants were charged with one count of` conspiracy to commit wire fraud. Clark and Harris also were charged with two counts of wire fraud.

The indictment also alleges that five unidentified “co-conspirators” participated in furtherance of the conspiracies. One of the co-conspirators mentioned in the latest indictment, Cornelius Garrison, an alleged ringleader, was murdered in September 2020, amid reports that he had been cooperating with federal investigators. His death occurred only four days after he was indicted.

If convicted, all five face a maximum penalty of five years for the conspiracy count. Clark and Harris also face up to twenty 20 years on the wire fraud counts.

The new indictment brings to about 60 the number of individuals who have been charged, pleaded guilty or been sentenced in the federal investigation known as “Operation Sideswipe.” The government has estimated that as many as 150 staged accidents with trucks have occurred in recent years and that scammers have collected judgments totaling millions of dollars dating to 2015 in fraudulent lawsuits.

According to the latest indictment, defendants Clark and Harris intentionally collided with a tractor-trailer operated by God’s Way Trucking of Statesboro, Ga., on April 24, 2017, in the area of Interstate 10 near the Crowder Boulevard exit in New Orleans.

The indictment also alleges that on Nov. 13, 2017, Frazier, A. Turner and T. Turner intentionally struck a tractor-trailer operated by Whitestone Transportation of Moselle, Miss., in the area of Interstate 10 near Paris Road in New Orleans.

All five are accused of making false police reports, filing fraudulent lawsuits, lying during deposition testimony and seeking unnecessary medical treatment to support their fraudulent claims.

The two trucking companies were insured by Canal Insurance Co. of Greenville, S.C.

So far, the only attorney representing the scammers, Danny Keating Jr., has been charged in the investigation. However, there have been references to several other unidentified attorneys in the “factual basis” of Keating’s plea agreement that are believed to have represented the accident scammers in fraudulent lawsuits. None has yet been charged.

Although Keating was first charged in late 2020, he has yet to be sentenced. His sentencing has been postponed several times.

The new indictment was the latest development in the so-called crash-for-cash schemes against unknowing truckers. Prosecutors said each of the schemes has been orchestrated by a “slammer,” or driver, paid by a local attorney who filed fraudulent lawsuits against the trucking companies on behalf of the participants in the staged accidents.

Trucking companies that travel through the New Orleans area have since 2019 been alerted to the staged accidents by attorneys with trucking companies and insurance clients who were victims in the schemes. In 2019, attorneys representing victims and potential victims identified similarities among at least 30 separate cases.

Nearly all of the staged accidents have included multiple people in a claimant vehicle, sideswipe allegations with commercial vehicle trailers, minimal damage to the claimant vehicle, little to no damage to the insured trailer and commercial vehicle drivers who are either unaware of or have denied fault in a crash.

The FBI, Louisiana State Police and the Metropolitan Crime Commission have been participating in the investigation.

Americans Pay $1,300 ‘Tort Tax,’ Fixing Legal System Would Grow Economy by 2 Percent – Pacific Research Institute

Americans pay a “tort tax” of $1,300 per person thanks to lawsuit abuse, and reforming the legal system could boost the U.S. economy by 2 percent over time, finds a new study released today by California-based, nonpartisan, free-market think tank, the Pacific Research Institute.

“Frivolous lawsuits reduce economic opportunities, jobs, and tax revenues while increasing costs for all Americans,” said the study’s co-authors Dr. Wayne Winegarden and Kerry Jackson. “As our study shows, policymakers can help grow the economy, reduce inflation, and boost tax revenue by embracing reforms to end lawsuit abuse.”

The PRI study cites 2021 research from the Perryman Group estimating that the full costs to the U.S. economy from lawsuit abuse is 4.24 million lost jobs, $429.35 billion in lost economic output, and more than $110 billion annually in lost federal, state, and local tax revenue. Winegarden and Jackson calculate that this is a “tort tax” of $1,300 per person.

As Congress has debated various economic “stimulus” measures in recent months, the PRI study shows that tort reform can over time help mitigate the risks of an economic slowdown by reducing costs to businesses, lowering prices for consumers, and incentivizing economic activity.

Tort reform would also generate new tax revenue to fund important priorities without the harmful effects of raising taxes or dramatically increasing the burden of federal spending that drives up inflation. Most importantly, it would bring Americans relief from the current affordability crisis.

Winegarden and Jackson note that tort reform does not prevent people who suffer injuries from attempting to receive just compensation through the court system.

“Abusive lawsuits exploit the courts for personal gain but impose widespread losses that have contributed to the long-term decline in U.S. economic growth,” the authors conclude. “Effective tort reforms safeguard access to the court system while minimizing frivolous and meritless litigation.”

The PRI study makes the case for reforms that would curb the ability for the legal system to be a financial jackpot for attorneys cashing in on meritless claims, including:

Prohibiting state attorneys general from hiring private lawyers using contingency arrangements, which would close a growing loophole where private litigators use the power of AGs offices to enrich themselves;
Increasing penalties for filing clearly frivolous cases and capping fees litigators can receive from judgments and settlements in the plaintiffs’ favor; and
Reducing the costs for defendants fighting meritless claims by requiring plaintiffs’ attorneys to compensate defendants for their legal costs.

Kia, Hyundai and the United States of Litigation

Perhaps you’ve heard about the lawsuit filed by seven U.S. cities, all run by Democrats, against two Korean car companies — Kia and Hyundai — for the alleged crime of (no fooling) making their cars too easy to steal.

If you needed proof that in the United States of Litigation, anybody can sue anybody for just about anything, this lawsuit is Exhibit A.

The cities allege that the car companies failed to equip their vehicles with the kind of technology that would prevent cars from starting without a key. Apparently there were videos on TikTok showing wannabe thieves how easy it is to steal a Kia or a Hyundai.

So instead of cracking down on car thieves — that might be seen as harsh, you know, as “anti-criminal” — progressive cities figured it was a lot easier to crack down on car companies. Welcome to America circa 2023.

Baltimore, which joined St. Louis, Cleveland, San Diego, Milwaukee, Seattle and New York City in demanding that Kia and Hyundai pay damages for “public nuisances” resulting from auto thefts, said that “Vehicle theft poses a serious threat to public safety — it goes hand in hand with reckless driving, which in turn causes injuries and death.” Oh wait, there’s more. “It also results in increased violence,” according to the lawsuit, “as car owners may attempt to stop someone attempting to steal their vehicle.” The lawsuit also contends that, “It consumes scarce law enforcement and emergency resources and deprives the public of safe streets and sidewalks.”

Rather than go to court and contest the charges — where, who knows, a jury might decide that having a car, even if it’s not yours, is a fundamental American right — Kia and Hyundai settled … for $200 million. Most of the money, we’re told, will go to people whose cars were stolen.

Leave it to the Wall Street Journal to inject a note of sanity into this craziness. “It’s nice to hear progressive cities say they care about crime,” the Journal editorial board wrote, “but how about targeting the criminals rather than what they steal?”

But that, of course, would make too much sense. I mean, why blame criminals for stealing cars when you can blame car companies for making cars that, supposedly, are too easy to steal? Not too many years ago this would be seen as some kind of joke. Not anymore.

So, where will this thinking lead us? Well, for openers, should progressive cities sue drugstore chains for their decision to put stuff they sell on shelves — that are accessible to looters?

Is it the fault of looters for looting — or is it the fault of drug store operators for making it so easy to loot?

And should cities run by Democrats sue companies that make tasty, sugary, cookies and cakes that are so delicious that Americans can’t resist them … and get fat?

Before you say, “That’s ridiculous,” consider this: If those tasty, sugary treats didn’t taste so good, people wouldn’t eat them and we wouldn’t have an obesity problem in this country.

What about thieves who break into your home while you’re at work and steal your TV, your jewelry, your couch and anything else they can get their hands on?

Is it really their fault that the lock on your front door was so easily breached? Shouldn’t we target our anger at the real culprit: The companies that make crummy locks?

Isn’t it bad enough that with so many Americans having nothing good to say about criminals — do we really want to pile on and blame them for stealing stuff from your house?

So here’s what I’m thinking: If you can’t resist eating cookies and cakes, let me know. If you steal from stores because it’s really easy to steal from stores, send me a note. If you break into houses to take stuff that doesn’t belong to you, give me a call. Maybe we could get a few class action lawsuits going and get multi-million-dollar settlements from corporations that would rather pay up than go to court.

And while we’re at it, maybe we should just toss common sense over the side and join those progressives who don’t believe in personal responsibility, which apparently is an idea whose time has come — and gone.

Bernard Goldberg is an Emmy and an Alfred I. duPont-Columbia University award-winning writer and journalist. He was a correspondent with HBO’s “Real Sports with Bryant Gumbel” for 22 years and previously worked as a reporter for CBS News and as an analyst for Fox News. He is the author of five books and publishes exclusive weekly columns, audio commentaries and Q&As on his Substack page. Follow him on Twitter @BernardGoldberg.

‘Agents of chaos:’ How a Texas law firm undermined Louisiana’s hurricane recovery

‘Agents of chaos:’ How a Texas law firm undermined Louisiana’s hurricane recovery

Firm that signed up thousands of clients accused of a litany of abuses

LAKE CHARLES — For Jacob Semmes and his family, the fallout from Hurricane Laura went much deeper than the roughly $36,000 they’ve spent so far to make their home livable again. While helping clean up the city in the days after the storm, Semmes fell and shattered his elbow, leaving him unable to work.

When he caught his bearings after numerous surgeries, Semmes realized the deadline to sue his insurer to recover what they had spent was fast approaching.

“That’s when I turned to MMA,” the 37-year-old father of two said, referring to the Texas law firm McClenny, Moseley and Associates.

Semmes was among thousands of clients MMA signed up in Louisiana after hurricanes Laura, Delta, Zeta and Ida. Its unorthodox methods for recruiting clients and handling their cases have produced an epic legal entanglement, drawn the attention of the FBI and gotten in the way of families rebuilding from storms.

“Thanks to out-of-state opportunists like McClenny, Moseley and Associates, and their far-flung agents of chaos, the damage was only just beginning,” U.S. Magistrate Judge Michael North said of the storms’ aftermath.

Many clients didn’t even know they were being represented by the firm. Others, like Semmes, heard nothing from MMA after signing a retainer and have since had their cases transferred to other lawyers because the firm has been suspended from practice.

“I never talked to a lawyer,” Semmes said of his dealings with MMA.

The Houston firm’s downfall began in October, when U.S. District Judge James Cain in Lake Charles took note of the unusually high number of cases filed by the firm — and the fact that some seemed shoddy. Problems ranged from duplicate filings to suits addressing claims already settled, or lawsuits where there was no insurance policy.

Subsequent hearings in Louisiana’s Western and Eastern federal districts revealed a smorgasbord of questionable — and potentially criminal — practices.

‘May not even know they sued’

One way MMA obtained clients was through a marketing company, Velawcity. Contracts between the two companies show that the firm paid at least $13 million to Velawcity for sign-ups on a per-client basis, a potential violation of state law.

In a series of hearings, homeowners reiterated a common chorus: They had never heard of the firm and didn’t intend to hire it. Instead, MMA allegedly used generic disaster claim websites and a call center operated by Velawcity to sign up and communicate with clients.

Meanwhile, many clients were simply checking if they had a claim and didn’t realize they were triggering legal action, according to a former staffer who fielded calls from confused clients.

According to that staffer, who asked to remain anonymous out of fear for their reputation, the firm’s New Orleans office received daily calls from people who had no idea they had signed on with MMA.

Many, the staffer said, only found out that they were being represented when their insurer refused to speak with them over it.

A recent hearing put this on full display. After discovering a series of cases where there seemed to be no insurance policy, U.S. Magistrate Judge Kathleen Kay asked 16 plaintiffs to appear in her courtroom. Only one showed up.

“They may not even know that they sued,” Kay said. Similar hearings have been scheduled in courthouses from Lafayette to Shreveport.

‘Someone to put a roof on my house’

The case of a Hammond woman, whose proceedings brought to light damning evidence against the firm, highlighted another problematic method for obtaining clients, this one involving a roofing company.

“I just needed someone to put a roof on my house,” said Tricia Franatovich, who signed a contract with Alabama-based Apex Roofing and Restoration to fix damages caused by Hurricane Ida.

But by signing the contract, Franatovich agreed to assign the rights to her claim against the insurer — at least those related to roof repairs — to the roofer, according to court documents.

Apex then engaged MMA, which sent out a demand letter. This practice, an attorney for the roofing company said, was meant to ensure the repairs would be paid for.

In hundreds of cases acquired in this way, MMA told insurance firms it was acting “on behalf of” homeowners instead, despite never having talked to many of their purported clients, court testimony and documents showed.

Much as when people had unknowingly signed up through Velawcity, some homeowners would find out they had a lawyer when their insurers refused to talk to them. Others would receive checks from their insurance companies made out to a law firm they’d never heard of.

Peter Butler, a New Orleans-based attorney for Apex, places the blame on MMA. The law firm, Butler said, was hired to represent Apex, not the homeowners, and should have never pretended that they did.

Butler said the firm no longer uses assignment of benefits clauses in Louisiana. The company has sued MMA for malpractice.

MMA’s dealings with both Velawcity and Apex Roofing are now the subjects of class-action lawsuits in Texas and Louisiana. A Lake Charles plaintiff’s attorney also filed a racketeering lawsuit against the firm.

A lawyer familiar with the investigation says the FBI has contacted him to provide documents related to it. The FBI said it cannot “confirm or deny the existence of an investigation.”

Louisiana Insurance Commissioner Jim Donelon has also fined the firm and three of its partners a total of $2 million.

MMA has not responded to repeated requests for comment. In court, its lawyers have said they were simply trying to ensure storm victims received their fair share.

Velawcity did not respond to a request for comment.

‘Blood in the water’

The fallout from the scandal, plaintiff’s attorneys worry, might lead to legislation that would undo some of the protections enjoyed by Louisiana homeowners who sue their insurers.

“It’s like blood in the water,” said Alex Koby, chief marketing officer for Daly & Black, another Texas-based law firm handling insurance lawsuits in Louisiana.

Koby previously worked for Disaster Solutions, a company with close relationships to MMA, and produced a video that showed Huye bragging that the firm “broke” the Western District court’s system with its tsunami of filings.

His concerns aren’t unfounded.

Matthew Monson, an insurance company attorney at the center of the fight against MMA, says the current system encourages bad actors to profit off disasters and threatens the state’s fragile insurance landscape.

“They create claims that wouldn’t have been disputed,” Monson said. “Now the bill is coming due for all of us.”

Monson has long advocated for changes to Louisiana laws that entitle plaintiffs to attorney’s fees. “This is a public policy discussion that needs to happen,” he said.

And it’s happening.

A bill that would ban assignment of benefits clauses recently passed the state’s House of Representatives.

It “really was designed to make sure we never see a repeat of this and that we keep companies like MMA and Apex Roofing out of Louisiana,” said Rep. Gabe Firment, R-Pollock, the bill’s author.

Firment said he is aware of the risks of tinkering with homeowners’ rights. “In no way do we want to interfere with the policyholder’s right to seek legal recourse or to hire an ethical attorney,” he said. “This is strictly aimed at the bad players.”

‘The clock is ticking’

In the meantime, the state’s judicial system has to grapple with the challenge of informing thousands of former MMA clients that they need to find new lawyers.

In the state’s federal courts alone, there are 2,204 pending cases that list William Huye, formerly with MMA, as the attorney of record. Huye has been temporarily suspended from practice in Louisiana and left the firm April 1, according to his own testimony. According to the former staffer and attorneys familiar with the situation, no licensed attorneys remain in the firm’s Louisiana office.

That hasn’t kept MMA from practicing law in the state, however, according to Austin Marks, an attorney with Morris Bart, whose firm has taken over roughly 1,000 former clients from the disgraced firm so far.

During a recent court hearing, Marks described an incident in which a legal courier arrived at a client’s house to deliver documents that would allow MMA to execute a settlement and take its fees.

“No attorney had ever explained the settlement to him,” Marks said. “But that was McClenny Moseley’s entire business model.” His firm is now asking the Eastern District to prohibit MMA from practicing law in Louisiana.

In the Western District, the court ordered a letter to be sent to clients informing them that they needed new representation. Not everyone got one.

“I haven’t heard anything,” said Deirdre Declouette, whose lawsuit over damages to her Oberlin home from Laura is still pending. Semmes, of Lake Charles, also said he did not receive notice from the court.

In the Eastern District, the situation is even trickier. While the deadlines to file cases for Laura and Delta passed months ago, with MMA filing over 1,500 cases days beforehand, Ida survivors can still file suit until Aug. 29.

“We know who has filed lawsuits. The big problem is: Who are the clients who have not filed lawsuits yet?” said attorney Francis Lobrano, who leads the court’s settlement process for Ida cases.

Until a policyholder’s suit is filed, their information won’t be available to the court, making it difficult to track down how many people need new representation.

“Everybody recognizes the problem, everybody recognizes the clock is ticking,” Lobrano said.

The potential scope of the issue is enormous. MMA Founding Partner Zach Moseley has claimed the firm had a total of 15,000 clients in Louisiana.

“This is totally unprecedented,” Lobrano said. “This has never happened before on this scale.”

Here’s why more than 60% of Fortune 500 companies are incorporated in Delaware

Delaware is the second-smallest state in the U.S. But it’s home to more than 60% of Fortune 500 companies, the state says, including Google parent company Alphabet, Amazon, CVS Health, and CNBC parent company Comcast.

“[Delaware] has a lot of appeal for basically three main reasons: convenience, flexibility and predictability,” Roey Gilberg, corporate counsel for LegalZoom, told CNBC.

One of Delaware’s major advantages is its Court of Chancery, which is a separate court system specifically for handling corporate cases.

The court is “widely respected as an authority on business matters trusted by both business and legal communities, honestly, all over the world, as a place where the rules are well developed,” Gilberg said.

The predictable case law also gives investors peace of mind. More than 90% of U.S.-based companies that went public in 2021 were registered in Delaware, according to the state.

Delaware law is also attractive to many small businesses.

Cleanster.com, a platform for finding cleaning services for homes and short-term rentals, is incorporated in Delaware despite both co-founders being based in Montreal, Canada.

“When you want to go global and you’ve incorporated in Canada, no one is going to look at you at all,” said Cleanster.com co-founder and CEO Gloria Oppong. “Delaware protects both ourselves, the entrepreneurs, and also the investors eventually that are going to be joining on.”

In addition to the attractive court system, Delaware provides some tax incentives for businesses, but saving on taxes may not be enough of an incentive for small businesses to incorporate in Delaware.

“It’s a misnomer that Delaware is a tax haven for corporations,” said Gigi Tewari, assistant professor at Widener University Delaware Law School. “So many people believe that, I should incorporate my business in Delaware because I’m going to save so much on corporate tax. Actually, Delaware is on the higher end for corporate tax.”

150 million reasons why nuclear verdicts need to be addressed

Werner recently settled a lawsuit for $150 million, but the facts of the case may surprise you, including that the carrier is avoiding a nuclear verdict.

On July 28, Omaha, Neb.-based Werner Enterprises published a news release announcing a $150 settlement of a crash lawsuit in Texas. Based on that hefty sum, one would think that the facts of the case are stacked against the carrier. That’s not the case at all.

From the news release:

“In May 2020, a passenger vehicle traveling on Interstate 30 near Sulphur Springs, Texas, stopped in the travel lane of the highway at approximately 5 a.m. Three adults walked away from the vehicle, leaving two children inside. Shortly thereafter, a Werner truck (traveling below the speed limit) struck the parked vehicle. The two children tragically died in the resulting collision. The investigating officers placed no fault on Werner or its driver, and one of the adults from the passenger vehicle was criminally charged in connection with the deaths of the children. The parents of the children subsequently filed a lawsuit against Werner and its driver. Out of respect for the family, Werner is not publicly disclosing the names of the individuals involved.”

Why is Werner settling the case for a nine-figure sum?

“The circumstances of this tragic accident were set in motion by the decision to park a vehicle on a highway in the lane of travel, as indicated in the investigating officer’s report,” Werner’s Chief Legal Officer Nathan Meisgeier said in a statement. “Nonetheless, corporate defendants are facing ‘nuclear verdicts’ in courtrooms across the country, including in Texas.”

Sounds like Werner is afraid of a nuclear verdict.

However, $150 million is considered nuclear by anyone’s standards. That being said, Werner appears to be on guard for an even bigger verdict against it despite the facts of the case (that we know of).

Nuclear verdicts are a major problem within the trucking industry. They are so bad that carriers are settling cases that they probably should win.

However, life does not always reflect reality. That is especially true in the courtroom.

Even though cases exceeding the $750,000 insurance minimum account for only 1% of truck-involved cases, the impact of nuclear verdicts are strong. An American Transportation Research Institute study from two years ago reveals that eight-figure jury verdicts against trucking companies are skyrocketing.

The average nuclear verdict with no children involved is about $2 million. However, when a child is introduced to the equation, the number shoots to $42.3 million.

Texas is a playground for personal injury lawyers who love to sue trucking companies. In the past, they have enjoyed nuclear verdicts. That may be why Werner decided to settle. With children involved, that $150 million could balloon to something much larger if the company was found negligent in the case.

What can truckers do about the nuclear verdict issue? Contact your state and federal lawmakers and let them know how the industry is being impacted. Refer to ATRI’s study when discussing details.

Go to FightingForTruckers.com for easy access to your lawmakers. LL