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 won't face punishment.
Houston federal judge Alfred Bennett last month dismissed claims against Equal Access Justice Fund, adopting the report and recommendations made by a magistrate judge in September in Katherine Monson's lawsuit.
"The Court finds that Judge (Yvonne) Ho correctly determined that Plaintiff has not plausibly alleged the Equal Access defendants held the requisite knowledge that the funds at issue in this case would be used for unlawful means," Bennett wrote.
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. 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 Ho 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."
Monson's lawyers responded that it was too much money for EAJF to claim it did not closely follow how it was used, saying EAJF's duty to uphold fair lending processes, combined with the timing of loans and EAJF's review process, adequately showed EAJF was aware of the alleged scheme.
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.