Bogus lawsuits? Judges penalize law firm over hundreds of insurance cases

A Louisiana federal district judge dismissed a lawsuit, finding the counsel did not represent the plaintiff, and the defendant insurance company asked that the Houston law firm and its attorneys be referred for disciplinary proceedings.

U.S. District Judge Lance Africk of the Eastern District of Louisiana on Feb. 9 entered an order dismissing Franatovich v. Allied Trust Insurance after concluding the plaintiff’s supposed attorney did not have an attorney engagement agreement with the plaintiff when he filed the lawsuit.

Counsel for the insurance company, Matthew Monson, showed an alleged pattern of the law firm McClenny, Moseley & Associates in Houston of preparing hundreds of hurricane damage claims based on alleged unethical practices.

The case at issue involved the home of Tricia Rigsby Franatovich and a protest by Allied Trust that it had worked to settle a claim in one lawsuit in good faith when it was surprised to be confronted with a second claim with the same set of facts.

Franatovich testified to the court that she had never retained McClenny, Moseley & Associates.

‘This fraudulent scheme’

Monson noted that Franatovich’s situation was hardly an isolated incident where the McClenny Moseley firm is concerned.

Monson cited the case of Michael and Holly Caffarel to describe McClenny Moseley’s alleged pattern of behavior.

The law firm had been working with an Alabama-based roofing company, Apex Roofing & Restoration, which had representatives block-walking neighborhoods across Louisiana to solicit clients for roofing repairs.

The Caffarels signed two Apex Roofing documents, one being a work order and the other an assignment of benefits that bestowed all legal rights to Apex.

Once the appraisals were submitted, a McClenny Moseley partner based in Louisiana, Richard William Huye III, allegedly contacted the Caffarels’ insurer on behalf of Apex Roofing, but never communicated with the Caffarels, according to court filings.

McClenny Moseley received payment by checks and forwarded the checks to Chase Bank. It was only after Chase sent the checks to the Caffarels for their endorsement, and seeing the law firm’s name as a co-recipient of the money, did the Caffarels become aware of a law firm’s involvement, according to court filings.

The language of the assignment-of-benefits, or AOB, contract prohibits the insurance company from paying claims directly to contractors, Monson noted in the Allied Trust motion.

“For Apex Roofing to receive the Caffarels’ insurance proceeds, it needed a way to get around the AOB prohibition contained in the Maison Insurance Company policy. As such, Apex Roofing wrongfully conspired with Mr. Huye and MMA to present the claim to Maison Insurance Company through MMA and Mr. Huye falsely acting as counsel for the Caffarels,” Monson stated.

“This fraudulent scheme insured that MMA would receive an unwarranted fee and Apex Roofing would obtain the balance of the funds issued by Maison Insurance Company,” he said.

The Caffarels contacted and retained the Monson Law Firm.

Over the ensuing months, Monson established that McClenny Moseley had a conflict of interest, and got McClenny Moseley to endorse the checks just as the insurance company was going through bankruptcy.

‘I think it’s a criminal forgery’

Monson also cited evidence showing the McClenny Moseley firm was already well known in the Western District of Louisiana as well. In that district, Judge James David Cain Jr. conducted a lengthy hearing in December that went against Huye and McClenny, Moseley & Associates.

Monson cited the example of Melvin Addison III, who testified he did not sign a contract with a McClenny Moseley partner and didn’t want their services.

Cain ordered Huye to transfer funds he had received from Allstate to the trust account of Addison’s attorney, Tom Filo.

A third-party attorney on that case, Todd Townsley, testified, “I think it’s a criminal forgery, and I want to make a record.”

Hundreds of cases paused

In all, the judge, Cain, issued sanctions against McClenny Moseley, and stayed 1,642 cases filed by the firm, Monson noted.

The judge also ordered McClenny Moseley to reimburse defense attorneys $15,914.

Cain’s order stated in part the court “determined that there are filings by plaintiffs that have already settled lawsuits, duplicate filings, and filings for damage to property that is outside the typical geographical area where reported damage was caused by Hurricanes Laura and Delta. Consequently, the court has concerns about this law firm’s representation and due diligence in preparing their pleadings in the vast number of Hurricanes Laura/Delta lawsuits filed in the Western District of Louisiana.”

Too reliant on tech?

Monson proposed the theory that McClenny Moseley was in this predicament in large part because it invested millions in technology to boost its case numbers. He cited McClenny Moseley principal Zach Moseley’s public statement that the firm signed up 15,000 cases thanks to its investment in “technology and AI.”

Monson noted that his own wife, Katherine Monson, received an unsolicited text message on her cellphone from an entity that directed her to a website that, after putting her through a six-question screening process forwarded her to McClenny Moseley. Every day for the next 120 days, she received solicitations from Velawcity, an Arizona-based legal advertising firm, to sign with the McClenny Moseley firm, Monson said.

Monson complained on Allied Trust’s behalf that another monetary sanction against McClenny Moseley would not be enough, given the firm’s apparent vast resources.

“The filing fees alone for the 1,642 cases MMA filed and that are subject to the Western District’s stay order exceed $660,000,” Monson stated. “Undersigned counsel requests that this honorable court refer MMA and its attorneys for disciplinary proceeding.”

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