14-05-2025
Texas law firm can sell off 6,000 tort cases in bankruptcy deal to repay funders
May 14 (Reuters) - A bankrupt Texas law firm facing allegations it filed lawsuits on behalf of people it did not represent can sell off thousands of mass tort cases as part of a settlement it struck with a pair of litigation funders, according to court records.
Chief U.S. Bankruptcy Judge Eduardo Rodriguez in Houston on Wednesday approved the settlement between MMA Law Firm and litigation backers Equal Access Justice Fund and EAJF ESQ Fund in a deal that could allow MMA to sell more than 6,000 of its cases, filings show.
The cases include claims in mass litigation over heartburn drug Zantac, weed killer Roundup, and cow's milk-based baby formula for premature infants. The settlement assigns 75% of the proceeds of those sales to the litigation funders, which say they are owed nearly $38 million from MMA.
The remainder of the sale proceeds will go to the firm's other creditors. But the funds must receive at least $18 million from the sale, the settlement agreement said.
Representatives for MMA and the funds did not immediately respond to requests for comment.
Avi Moshenberg, an attorney representing the unsecured creditors in the bankruptcy, welcomed the judge's ruling and said the deal is 'an enormous step toward getting the creditors paid.'
The deal resolves a bitter fight playing out in both Texas state court and the U.S. Bankruptcy Court between the Florida-based funds and the troubled law firm MMA, formerly known as McClenny Moseley & Associates.
MMA, its founder Zach Moseley and its other attorneys drew scrutiny from several federal judges in Louisiana and prompted an investigation by the FBI after the firm filed thousands of lawsuits in Louisiana state and federal courts in 2022 against insurers on behalf of homeowners who suffered property damage from hurricanes Laura, Delta and Ida.
The status of the FBI investigation is unclear. Representatives for the New Orleans FBI office did not immediately respond to a request for comment.
The judges held hearings in 2023 over allegations that MMA attorneys improperly solicited or paid for clients through a marketing company and a roofer, filed lawsuits on behalf of people it did not represent and mishandled checks for clients from settlements, according to court records.
Attorneys from the firm have faced disciplinary proceedings in both state and federal court, court records show. Separately, law enforcement in Louisiana has also said they are investigating the firm.
MMA, facing a lawsuit from the litigation funders in Texas state court, filed for bankruptcy in April 2024.
As part of the settlement with the litigation funders, MMA and Zach Moseley will continue to work on some of the firm's cases, although Moseley will not receive a salary increase or bonus until the firm's debts to the funds have been paid, the filing said.
The court filings did not address whether any of the 6,000 cases that the firm can sell off include those that were under investigation.
In cases brought by attorneys for MMA as part of the bankruptcy filing, which include claims against rival law firms over fees in MMA hurricane damage cases the other firms took over, MMA is slated to keep the majority of the recoveries, according to the agreement.
