An article in the Times-Picayune, Law Firm Accused of Fraud in Louisiana Hurricane Suits Files for Bankruptcy in Texas, caught my attention. I know many of the players involved in this law firm. Many have scattered to the hills and are trying to avoid association with what they have been doing to solicit and then improperly work on cases in Louisiana, Texas, Colorado, Oklahoma, Alabama, and Florida.

The lesson to policyholders is to check the references and track records of everybody you deal with following an insurance loss. Do not trust Internet advertising. Do not trust people for references that you have not known for a long time. Never feel pressured to sign a contract from an attorney, public adjuster, or restoration contractor. While you need professional help with your insurance claim, hire reputable professionals with a long proven record of integrity and results.

McClenny, Moseley & Associates, aka MMA, filed for Chapter 11 bankruptcy. This is commonly referred to as “reorganization” bankruptcy. It is a legal process designed primarily for businesses, allowing them to continue operating while restructuring their debts. It is particularly well-suited for large organizations with substantial assets and complex debt structures, but it can also be utilized by small businesses seeking to restructure their financial obligations.

Unlike Chapter 7 and Chapter 13 bankruptcies, which can be initiated by creditors through involuntary petitions, Chapter 11 bankruptcy is typically a voluntary process initiated by the debtor. The filing must include detailed financial documents, such as lists of assets, liabilities, income, expenditures, and a statement of financial affairs.

Upon filing, an automatic stay immediately takes effect. This stay halts most collection activities against the debtor or the debtor’s property, providing a period of respite during which the terms of reorganization are negotiated and confirmed. I assume that the Texas-filed Monson class action for improper case-running against MMA 1 will be stayed because of this filing.

One of the distinguishing features of Chapter 11 is that the debtor generally remains in control of their assets and operates the business as a “debtor in possession” (DIP). The DIP retains management responsibilities and powers akin to those of a trustee, including the ability to hire professionals like attorneys and accountants, which must be approved by the court. However, significant decisions, such as selling major assets, entering into new lease agreements, or shutting down operations, require bankruptcy court approval.

Chapter 11 bankruptcy provides the last lifeline for businesses facing overwhelming debt, allowing them to restructure under court supervision while continuing to operate. This type of flexibility makes it a preferred bankruptcy choice for businesses. Still, it requires careful planning, ongoing management of creditor relationships, and diligent adherence to the reorganization plan approved by the court. It is hard for me to imagine that a law business that is based on trust will survive, given the circumstances of MMA’s now-disclosed activities and downfall. But one never knows.

I anticipate that some class action plaintiff attorneys will file suits voiding the contracts and debts of their policyholder clients based upon improper solicitation by those working for MMA. This case-running scheme was discussed in Digital Case Runners and MMA.

The bottom line is that this firm’s activity not only involves the Internet case-running scheme, which the Monson class action has raised, but the direct case-running activities by unlicensed people in Florida and other states, which have been noted in Barry Zalma’s insurance fraud newsletter. A class action could save massive amounts of fees for MMA-represented policyholders.

The list of creditors by MMA is impressive. It has over two hundred people and entities, including many policyholder law firms. These creditors have a meeting scheduled on May 15. It will be interesting to read what types of claims they have and the business dealings they were involved with MMA.

Thought For The Day

It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.
—Warren Buffett

1 Monson v. McClenny Moseley & Assocs., N0. 4:23-cv-00928 (S.D. Tex.).