HOUSTON - A lender that fronted millions of dollars to a legal marketing company caught up in allegations property owners were taken advantage of by a Texas law firm shouldn't be let off the hook, the plaintiff in a class action lawsuit says.
Lawyers at McClenny, Moseley & Associates pursued hurricane-damage claims for clients who didn't know they had hired the firm, allegations in Texas and Louisiana say. Katherine Monson filed a class action against it and others in March 2023 in Houston federal court.
The scheme was allegedly this: The marketing firm Velawcity sent unsolicited messages to property owners and a roofing company called Apex was dispatched to get those individuals to sign an Assignment of Benefits, which allowed it to negotiate with insurers.
Apex would hire MMA to do that, which often led to lawsuits naming plaintiffs who had no idea they were ever represented by MMA, court records say. Those companies are also named as defendants in Monson's lawsuits, which alleges an unsolicited text message didn't identify it was sent on behalf of MMA.
Plus, MMA was not named on a website to which the text provided a link. After clicking "See If I Qualify," it became known that everything had been a legal representation, and she sued for barratry.
Court records show EAJF gave MMA a $10 million loan in 2021-22, then another $15 million later in 2022. MMA paid Velawcity at least $14 million for at least 4,628 clients. Monson's lawyers added EAJF as a defendant in an amended complaint, but U.S. Magistrate Judge Yvonne Ho on Sept. 19 recommended EAJF be dismissed.
"Monson overstates her position by arguing that it does not 'take much of an inference to conclude' MMA provided EAJF extensive business plans, financial projections, and a description of how MMA planned to obtain its clients to repay the loans," Ho wrote.
"Even if MMA logically would have provided some projections and plans to EAJF, it requires a quantum leap to assume that MMA would have further disclosed its intent to employ unlawful barratry as part of its plan. Monson supplies no facts to bridge that gap."
It will be up to District Judge Alfred Bennett to adopt or reject Ho's recommendations. On Oct. 3, Monson's lawyers urged the latter when they filed their objections to Hu's findings.
"It was too big of a loan to be disinterested, and subject to an extensive due diligence review process to help EAJF understand risks and liabilities including but not limited to identifying any legal risks, regulatory compliance, financial and operational viability, and other actions necessary to reduce the risks to the lender," they wrote.
"Considering EAJF's duty to conduct and uphold fair lending processes... the pattern and timing of the lending history combined with the diligence review process revealed MMA's scheme, and EAJF knowingly proceeded."
Attorneys at MMA have faced disciplinary action over the alleged scheme, though the Fifth Circuit has found one of them wasn't given the chance to fight a nine-month suspension and a federal judge didn't fully explain why he was taking attorneys fees from MMA.
The alleged scheme has the FBI's New Orleans division looking for victims to bolster a criminal probe.
The Louisiana Department of Insurance issued fines totaling $2 million against MMA, its founding partners – James McClenny and John Zachary Moseley – and MMA’s former Louisiana managing partner, William Huye III. The fines were based on suspected deception and not paying out insurance claim settlement funds.