'Agents of chaos:' How a Texas law firm undermined Louisiana's hurricane recovery

May 7—LAKE CHARLES — For Jacob Semmes and his family, the fallout from Hurricane Laura went much deeper than the roughly $36,000 they've spent so far to make their home livable again. While helping clean up the city in the days after the storm, Semmes fell and shattered his elbow, leaving him unable to work.

When he caught his bearings after numerous surgeries, Semmes realized the deadline to sue his insurer to recover what they had spent was fast approaching.

"That's when I turned to MMA," the 37-year-old father of two said, referring to the Texas law firm McClenny, Moseley and Associates.

Semmes was among thousands of clients MMA signed up in Louisiana after hurricanes Laura, Delta, Zeta and Ida. Its unorthodox methods for recruiting clients and handling their cases have produced an epic legal entanglement, drawn the attention of the FBI and gotten in the way of families rebuilding from storms.

"Thanks to out-of-state opportunists like McClenny, Moseley and Associates, and their far-flung agents of chaos, the damage was only just beginning," U.S. Magistrate Judge Michael North said of the storms' aftermath.

Many clients didn't even know they were being represented by the firm. Others, like Semmes, heard nothing from MMA after signing a retainer and have since had their cases transferred to other lawyers because the firm has been suspended from practice.

"I never talked to a lawyer," Semmes said of his dealings with MMA.

The Houston firm's downfall began in October, when U.S. District Judge James Cain in Lake Charles took note of the unusually high number of cases filed by the firm — and the fact that some seemed shoddy. Problems ranged from duplicate filings to suits addressing claims already settled, or lawsuits where there was no insurance policy.

Subsequent hearings in Louisiana's Western and Eastern federal districts revealed a smorgasbord of questionable — and potentially criminal — practices.

'May not even know they sued'

One way MMA obtained clients was through a marketing company, Velawcity. Contracts between the two companies show that the firm paid at least $13 million to Velawcity for sign-ups on a per-client basis, a potential violation of state law.

In a series of hearings, homeowners reiterated a common chorus: They had never heard of the firm and didn't intend to hire it. Instead, MMA allegedly used generic disaster claim websites and a call center operated by Velawcity to sign up and communicate with clients.

Meanwhile, many clients were simply checking if they had a claim and didn't realize they were triggering legal action, according to a former staffer who fielded calls from confused clients.

According to that staffer, who asked to remain anonymous out of fear for their reputation, the firm's New Orleans office received daily calls from people who had no idea they had signed on with MMA.

Many, the staffer said, only found out that they were being represented when their insurer refused to speak with them over it.

A recent hearing put this on full display. After discovering a series of cases where there seemed to be no insurance policy, U.S. Magistrate Judge Kathleen Kay asked 16 plaintiffs to appear in her courtroom. Only one showed up.

"They may not even know that they sued," Kay said. Similar hearings have been scheduled in courthouses from Lafayette to Shreveport.

'Someone to put a roof on my house'

The case of a Hammond woman, whose proceedings brought to light damning evidence against the firm, highlighted another problematic method for obtaining clients, this one involving a roofing company.

"I just needed someone to put a roof on my house," said Tricia Franatovich, who signed a contract with Alabama-based Apex Roofing and Restoration to fix damages caused by Hurricane Ida.

But by signing the contract, Franatovich agreed to assign the rights to her claim against the insurer — at least those related to roof repairs — to the roofer, according to court documents.

Apex then engaged MMA, which sent out a demand letter. This practice, an attorney for the roofing company said, was meant to ensure the repairs would be paid for.

In hundreds of cases acquired in this way, MMA told insurance firms it was acting "on behalf of" homeowners instead, despite never having talked to many of their purported clients, court testimony and documents showed.

Much as when people had unknowingly signed up through Velawcity, some homeowners would find out they had a lawyer when their insurers refused to talk to them. Others would receive checks from their insurance companies made out to a law firm they'd never heard of.

Peter Butler, a New Orleans-based attorney for Apex, places the blame on MMA. The law firm, Butler said, was hired to represent Apex, not the homeowners, and should have never pretended that they did.

Butler said the firm no longer uses assignment of benefits clauses in Louisiana. The company has sued MMA for malpractice.

MMA's dealings with both Velawcity and Apex Roofing are now the subjects of class-action lawsuits in Texas and Louisiana. A Lake Charles plaintiff's attorney also filed a racketeering lawsuit against the firm.

A lawyer familiar with the investigation says the FBI has contacted him to provide documents related to it. The FBI said it cannot "confirm or deny the existence of an investigation."

Louisiana Insurance Commissioner Jim Donelon has also fined the firm and three of its partners a total of $2 million.

MMA has not responded to repeated requests for comment. In court, its lawyers have said they were simply trying to ensure storm victims received their fair share.

Velawcity did not respond to a request for comment.

'Blood in the water'

The fallout from the scandal, plaintiff's attorneys worry, might lead to legislation that would undo some of the protections enjoyed by Louisiana homeowners who sue their insurers.

"It's like blood in the water," said Alex Koby, chief marketing officer for Daly & Black, another Texas-based law firm handling insurance lawsuits in Louisiana.

Koby previously worked for Disaster Solutions, a company with close relationships to MMA, and produced a video that showed Huye bragging that the firm "broke" the Western District court's system with its tsunami of filings.

His concerns aren't unfounded.

Matthew Monson, an insurance company attorney at the center of the fight against MMA, says the current system encourages bad actors to profit off disasters and threatens the state's fragile insurance landscape.

"They create claims that wouldn't have been disputed," Monson said. "Now the bill is coming due for all of us."

Monson has long advocated for changes to Louisiana laws that entitle plaintiffs to attorney's fees. "This is a public policy discussion that needs to happen," he said.

And it's happening.

A bill that would ban assignment of benefits clauses recently passed the state's House of Representatives.

It "really was designed to make sure we never see a repeat of this and that we keep companies like MMA and Apex Roofing out of Louisiana," said Rep. Gabe Firment, R-Pollock, the bill's author.

Firment said he is aware of the risks of tinkering with homeowners' rights. "In no way do we want to interfere with the policyholder's right to seek legal recourse or to hire an ethical attorney," he said. "This is strictly aimed at the bad players."

'The clock is ticking'

In the meantime, the state's judicial system has to grapple with the challenge of informing thousands of former MMA clients that they need to find new lawyers.

In the state's federal courts alone, there are 2,204 pending cases that list William Huye, formerly with MMA, as the attorney of record. Huye has been temporarily suspended from practice in Louisiana and left the firm April 1, according to his own testimony. According to the former staffer and attorneys familiar with the situation, no licensed attorneys remain in the firm's Louisiana office.

That hasn't kept MMA from practicing law in the state, however, according to Austin Marks, an attorney with Morris Bart, whose firm has taken over roughly 1,000 former clients from the disgraced firm so far.

During a recent court hearing, Marks described an incident in which a legal courier arrived at a client's house to deliver documents that would allow MMA to execute a settlement and take its fees.

"No attorney had ever explained the settlement to him," Marks said. "But that was McClenny Moseley's entire business model." His firm is now asking the Eastern District to prohibit MMA from practicing law in Louisiana.

In the Western District, the court ordered a letter to be sent to clients informing them that they needed new representation. Not everyone got one.

"I haven't heard anything," said Deirdre Declouette, whose lawsuit over damages to her Oberlin home from Laura is still pending. Semmes, of Lake Charles, also said he did not receive notice from the court.

In the Eastern District, the situation is even trickier. While the deadlines to file cases for Laura and Delta passed months ago, with MMA filing over 1,500 cases days beforehand, Ida survivors can still file suit until Aug. 29.

"We know who has filed lawsuits. The big problem is: Who are the clients who have not filed lawsuits yet?" said attorney Francis Lobrano, who leads the court's settlement process for Ida cases.

Until a policyholder's suit is filed, their information won't be available to the court, making it difficult to track down how many people need new representation.

"Everybody recognizes the problem, everybody recognizes the clock is ticking," Lobrano said.

The potential scope of the issue is enormous. MMA Founding Partner Zach Moseley has claimed the firm had a total of 15,000 clients in Louisiana.

"This is totally unprecedented," Lobrano said. "This has never happened before on this scale."

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