McClenny Moseley & Associates, the embattled law firm that filed thousands of hurricane-damage lawsuits in Louisiana, raised a total of $40 million from private investors, one of its founding partners said during a court hearing on Tuesday.
Zachary Moseley provided that information under direct questioning from US District Judge James D. Cain Jr., according to insurance defense attorney Matthew Monson, who attended the hearing in Lake Charles, Louisiana. Cain asked specifically about how much money MMA had obtained from the Equal Access to Justice Fund. Moseley replied, “we raised $40 million in total,” another person who attended the hearing, who asked to remain anonymous, said.
Monson, who was one of the first attorneys to call attention to MMA’s misrepresentations to insurers, said it was his impression after hearing the exchange that Moseley meant all of the $40 million came from the Equal Access to Justice Fund.
The revelation raises new questions about the role of litigation funding in the justice system. While third-party investment in lawsuits is a widely accepted practice, Monson said it could be inappropriate for investor money to be used to improperly solicit clients.
“Nobody can use runners,” he said. He added that he is not accusing the investors of any wrongdoing because he doesn’t know how MMA spent the money.
The law firm’s actions, however, have been condemned by Cain and other US District Court judges.
Cain called Tuesday’s hearing to hear from MMA attorneys whom the court suspended from practicing law in the Western Louisiana district after discovering that the firm had lied to insurers about who it represented and filed lawsuits on behalf of a restoration contractor, sometimes without telling the property owners that it was suing their insurers purportedly on their behalf. Cain also inquired about the status of funds held in client trust accounts.
Monson said Cain asked Moseley directly about the Equal Access to Justice Fund. The judge did not explain why he was interested in the fund and made no comment after Moseley told him how much money had been raised.
The Claims Journal previously reported that MMA paid $13.9 million to an internet marketing firm called Velawcity to sign up clients with hurricane-damage claims. The law firm paid $3,000 to $3,500 for each “prescreened client lead.”
Cain did not ask, and Moseley did not say, how the Equal Access to Justice Fund money was used.
Securities and Exchange Commission filings show that it is a hedge fund based in West Palm Beach, Florida, managed by B.E. Blank & Co. The company said in a statement filed last December that it has raised $213.1 million from 15 investors since its formation in March 2018.
B.E. Blank’s website says the company believes in “conscious capitalism” to generate sustainable returns. “Our capital can help create a world where attorneys utilize their talents as accelerating forces for bettering society,” the website says.
B.E. Blank partner and senior investment team member Benjamin E. Blank did not return a telephone message and email by the Claims Journal on Wednesday.
Cain’s questions about the hedge fund took up only a small portion of Tuesday’s hearing. The judge spent most of the day dealing with orders that suspended six MMA attorneys from practicing law in the Western Louisiana district. Three of the attorneys asked the judge to lift suspensions that were imposed for terms ranging from six months to a year.
Three of MMA’s former Louisiana attorneys — Claude F. Reynaud, Cameron S. Snowden and Grant P. Gardiner — appeared in court on Tuesday. Each of them said they were unaware that MMA filed suits on behalf of homeowners it did not represent. They said they did not participate in the law firm’s marketing efforts.
Cain said that he will take the lawyers’ comments “under advisement” but took no other action on the suspensions Tuesday. The judge did, however, conduct some housekeeping in order to safeguard MMA client trust accounts.
Cain ordered Moseley to transfer any money being held for clients in Louisiana to a trust account in Louisiana registered with the Louisiana State Bar and the Office of Disciplinary Counsel. He also directed Moseley to provide detailed information about MMA’s accounts with Veritex Community Ban and Oakwood Community Bank and deliver to his office any undeposited checks from insurers for hurricane claim settlements.
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