Recent federal court decisions have ratcheted up financial pressures on McClenny, Mosley & Associates, the Houston law firm facing federal disciplinary proceedings related to a mass-filing about 1,600 property-claims lawsuits in western Louisiana last year.
Magistrate Judge Kathleen Kay ruled last month in one of those cases, Jacob Semmes v. Liberty Mutual Fire Insurance Co., that MMA’s contingency-fee arrangement with plaintiff Semmes is unenforceable and invalid.
“The contingency-fee contract between MMA and Mr. Semmes is unenforceable because it violates a rule of public order, and the gravity of MMA’s lapses from sound professional conduct outweigh the value of any services the firm may have provided to Mr. Semmes,” Kay said in the Sept. 22 decision.
The contract – which mirrors others filed by MMA on behalf of victims of Hurricane Laura and other severe storms – also can’t be enforced because it was an example of a “runner-based solicitation of clients,” a practice called case running, according to the decision. The contract signed between MMA and Semmes came through a third-party marketing company called Velawcity, which MMA paid $3,000 to $3,500 per client contract, according to Kay.
“In its motion to intervene, therefore, MMA seeks to enforce a contingency-fee contract between an attorney and client procured via a non-attorney case runner that may have engaged in the unauthorized practice of law,” the judge concluded. “Any contracts arising out of this illegal relationship violated Louisiana law prohibiting payment in exchange for procuring clients and prohibiting the practice of law by those not licensed to do so.”
Among the 1,600 property insurance claims filed by MMA, many contained irregularities, according to Kay’s decision.
“Early review of the cases by the court raised multiple issues including duplicate filings, cases filed against insurers who had no policy in place with the plaintiff, and cases filed on behalf of plaintiffs who had already settled their hurricane claims with the insurer,” the ruling said.
In another federal case filed in the Southern District of Texas last month, two attorneys who represented MMA, Dale Jefferson and Raul Suazo of the firm Martin, Disiere, Jefferson & Wisdom LLP, filed a motion to withdraw from their representation arrangement.
“The withdrawal is necessitated because of financial issues and more particularly issues associated with coverage involving MMA defendants’ insurer, thus leaving a significant likelihood that counsel will not be compensated for its time,” the motion states.
Insurance defense attorney Matthew Monson said MMA could be veering toward bankruptcy.
“With well over $50 million in claimed damages in filed litigation and the increasing inability to obtain legal fees, it is not a stretch that the solvency of this firm is in serious question,” Monson told the Louisiana Record in an email.
He also noted that many attorneys representing the Houston firm have filed legal motions seeking to withdraw from MMA cases because they haven’t been paid.
MMA has argued that the law firm performed substantial legal work for Semmes in his insurance claim and ought to be able to recover the amount at trial, but Kay concluded that contracts arising out of an “illegal relationship” violated Louisiana law.