NEW ORLEANS (Legal Newsline) - A lawyer who worked at a Houston law firm that has run afoul of the law will get a second chance to show he shouldn't have been suspended for nine months.
The U.S. Court of Appeals for the Fifth Circuit on March 25 agreed that attorney Claude Reynaud was owed a hearing before Western Louisiana federal judges extended a 90-day suspension for nine more months.
Reynaud formerly worked at McClenny, Mosely & Associates, which is now facing a criminal investigation over how it handled hurricane-damage insurance lawsuits for property owners.
The firm is accused of using a contractor to earn an assignment of benefits, which means the contractor was free to negotiate with the property owner's insurer. To do so, the contractor allegedly hired MMA without the property owners' knowledge, leading MMA to take a portion of what was obtained from the insurer as attorneys fees while the property owner never realized they were represented by counsel.
In May, 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, the complaint states.
The MMA law firm has faced discipline proceedings in both state and federal courts in Louisiana. MMA was identified by federal Judge Michael North as an “agent” for the roofing firm, but Apex is now suing MMA and alleging the construction company was not aware of the law firm’s alleged scams.
MMA also was reported to have received tens of millions of dollars from a Florida-based hedge fund to finance its mass filings of property insurance claims. A bill that would have imposed more transparency in such third-party litigation financing agreements was vetoed this year by Gov. John Bel Edwards.
Reynaud claimed he was caught in the mess by simply allowing other MMA lawyers to use his account for the federal court database known as PACER to file these claims before they expired.
In June, a judge in U.S. District Court for the Western District of Louisiana suspended Reynaud and other at MMA, the maximum allowable duration for one judge to issue.
But a vote of other judges or the chief judge of the district could exceed that, which occurred unanimously later that month. Reynaud was given an extra nine months, which he challenged before the Fifth Circuit.
The appeals court found the vote of all judges was improper. Though Reynaud and other MMA attorneys requested individual hearings, all Reynaud was allowed to speak to was the firm's Interest on Lawyers' Trust Account.
The Western District should have given each attorney "notice and an opportunity to be heard," rules state.
"The district court in this case issued its June 8, 2023 order to extend Reynaud's suspension without the opportunity for a hearing but after obtaining the approval of other judges," the Fifth Circuit ruled.
"And 'unless and until [an] amendment [of the Rules] occurs, attorneys have the right to rely upon the rules.'"
The matter is remanded to the Western District to conduct a hearing on any suspension past the initial 90 days. Though Reynaud said he simply gave his PACER account to others, it will be alleged that he contributed to MMA's client communication issues.
The court has concluded Reynaud "sent [clients] into the abyss because most people got no answers."