Two litigation funding firms are seeking to intervene in disciplinary proceedings against McClenny Moseley & Associates after a federal judge in Louisiana ruled that the law firm has no right to any attorney fees for 201 hurricane-damage claims.
The Equal Access Justice Fund and EAJF ESQ Fund said in a petition filed Monday that the Aug. 22 order by US District Judge James D. Cain impairs their right to collect $30 million in loans they made to MMA. They said that MMA had pledged attorneys’ fees and other income as security.
“Lenders have a perfected security interest in the case proceeds at issue,” the motion filed by New Orleans attorney Thomas M. Flanagan says. “Yet neither the lenders nor any other party received notice or an opportunity to be heard regarding the law firm’s interest in case proceeds before the court adjudicated that issue.”
The litigation funds have also filed a lawsuit in Harris County, Texas court seeking recovery the $30 million loaned to MMA — $15 million from each fund. The lawsuit states that the parties agreed to resolve any disputes in binding arbitration, but asks the court to confirm and enforce the decision of the arbitrator.
Both investment funds are managed by West Palm Beach, Florida financier B.E. Blank & Co. The Claims Journal reported last month that Judge Cain asked MMA founder Zachary Moseley during an Aug. 8 hearing how much he money he had borrowed from the Equal Access to Justice Fund. Moseley replied that the law firm had raised $40 million in total from investors.
A Texas contractor, Access Restoration Services, has filed a lawsuit against MMA alleging the law firm defaulted on a $10 million loan.
MMA’s use of an internet marketing firm and door-to-door solicitations by a restoration contractor to obtain clients for its new satellite office in New Orleans prompted US District Court judges in both the Western and Eastern Districts of Louisiana to sanction the law firm. They discovered through a series of hearings that the law firm had filed claims on behalf of property owners it did not represent, filed lawsuits that duplicated claims made by other attorneys and told insurers that they represented property owners when actually they were acting on behalf of restoration contractors.
The Louisiana Department of Insurance fined the company $2 million saying its misrepresentations amounted to insurance fraud. The Louisiana State Bar’s Office of Disciplinary Counsel indefinitely suspended the law license of R. William Huye III, MMA’s New Orleans office manager.
Cain on Aug. 8 ordered Moseley to disclose all monies held in client trust funds for Hurricanes Laura, Delta, and Ida damage claims. MMA submitted a list of payments to trust funds for 201 cases filed within the Western District of Louisiana in totals ranging from $15.15 to $150,000.
On Aug. 22, Cain issued an order stating that MMA is not entitled to any attorneys’ fees, costs or expenses from those cases. The amount held for the 201 cases amounts to $3,209,020.75, according to the documents provided by MMA.
Attorneys for the litigation funds said in the petition that Cain did not have jurisdiction to rule as he did without first consulting with all interested parties.
“The lenders were never given a chance to present these arguments,” the petition says. “They therefore seek leave to intervene to voice their concerns and defend their interests before this court and/or before a reviewing court.”
After filing the petition, the litigation funds filed a second pleading asking for an expedited hearing. Cain had not yet ruled on those motions as of late Tuesday.
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