Troubled plaintiffs firm could still collect fees from Hurricane Ida claims

If MMA used unethical or illegal conduct to obtain the client engagements, then the contracts are null and void and MMA is not entitled to fees or costs from the firm Morris Bart. If, however, the contracts were entered into without unethical or illegal conduct on MMA’s part, then MMA may be entitled to some share of the fees even if the firm later committed unethical or illegal acts during its representation of its clients.

The court’s opinion, written by appeals court judge Allison Penzato sitting for Justice William Burris, comes amid another chapter in the tortured fight over money and misconduct by the embattled law firm and its handling of thousands of damage claims in the aftermath of Hurricane Ida in 2021 along the Louisiana Gulf Coast.

MMA’s conduct in its Hurricane Ida cases casts doubt on whether the firm could successfully meet the standard laid out by the Louisiana court.

As previously reported by Legal Newsline, Morris Bart took over an estimated 2,000 property insurance cases from MMA after the Houston-based firm faced misconduct allegations for mass-filing questionable claims in Louisiana. MMA’s cases were stayed, firm attorneys were sanctioned, and the Louisiana Supreme Court suspended the license of MMA’s lead attorney on the cases.

In his summary judgment order from January of this year, Judge Hanen described concerns surrounding MMA’s handling of the Hurricane Ida cases that arose from its use of a marketing firm called Velawcity to promote MMA to potential clients and to help with client intake. “Some courts became particularly concerned with MMA's management of such a substantial docket and whether its use of Velawcity and other marketing strategies violated the State's ethical rules,” Hanen wrote.

In fact, chief magistrate judge Michael North of the Eastern District of Louisiana – where some of these cases were filed – held several hearings on the issue of MMA’s conduct, calling Velawcity a “modern-day case runner,” a term used to describe the practice of non-lawyers who are paid to solicit clients for lawyers. The use of case runners is a crime in Louisiana.

North noted that the MMA-Velawcity arrangement “violated multiple ethical rules and, quite possibly, Louisiana law,” and called the relationship “a brazen, multi-faceted campaign… to directly solicit prospective clients and to obtain written contingency-fee contracts from those persons… before the 'client' ever spoke with a lawyer associated with MMA, much less any lawyer." These findings led the Louisiana court to levy Rule 11 sanctions against the firm.

In the months following North’s sanctions order, all Louisiana-licensed MMA attorneys resigned from the firm and withdrew from the Hurricane Ida cases that MMA had filed.

That led to the firm’s rapid financial decline, and in April 2024, MMA filed for bankruptcy in the Southern District of Texas, declaring in its filing that “[a]fter negative orders were entered by Louisiana District Courts and the licenses of MMA’s attorneys were suspended in Louisiana, MMA was no longer able to represent clients in that state.”

MMA then sued Morris Bart, claiming that the fees Morris Bart collected from the cases it assumed from MMA are part of the debtor’s estate in bankruptcy. Because Morris Bart sought a jury trial to resolve the factual issues, the case was withdrawn from the bankruptcy court for continued proceedings in the district court.

And that’s when Judge Hanen asked for the Louisiana Supreme Court’s views on whether, under Louisiana law, MMA’s conduct precluded its recovery of fees and costs. In essence, the Supreme Court ruled, if MMA did not act unethically or illegally in soliciting the engagements, it still had an avenue for recovery. But even then, Louisiana precedent laid out a framework to apportion the fees between MMA and Morris Bart, and factors such as unethical or illegal conduct by MMA during its representation of clients and its withdrawal from the cases could affect how much MMA could collect.

In parallel proceedings, Judge Hanen granted Morris Bart’s motion for summary judgment and held that MMA had, prior to filing for bankruptcy, affirmatively waived its “right to collect any attorneys' fees or costs from any case pending in the Eastern District of Louisiana.”

MMA appealed that ruling, and the case is currently stayed pending MMA’s appeal.