Lake Charles, Louisiana – The Equal Access Justice Fund and EAJF ESQ Fund, two Florida-based hedge funds specializing in litigation investments, have requested permission to intervene in a disciplinary proceeding involving the Texas law firm McClenny, Moseley & Associates and its attorneys in a Louisiana federal court. This move comes after U.S. District Judge James Cain barred the firm’s attorneys from collecting any proceeds from hundreds of lawsuits it had filed concerning hurricane damage.
The court suspended a group of attorneys from McClenny, Moseley & Associates in March, and subsequently, in August, Judge Cain issued a ruling preventing them from collecting any fees, costs, or expenses related to over 200 lawsuits filed in the Western District of Louisiana.
In their court filings, the Equal Access Justice Fund and EAJF ESQ Fund disclosed that they had collectively lent $30 million to the law firm and its founders, John Zachary Moseley and James McClenny, as part of agreements executed in 2022. The expected proceeds from the lawsuits secured these loans. Regrettably, the law firm is now in default, leaving the lenders concerned about their investments. It is worth noting that the funds are concurrently pursuing a separate lawsuit against the law firm in Texas state court, as indicated in court records.
The lenders expressed concern to Judge Cain, asserting that their rights to the lawsuit proceeds had been decided without their knowledge or involvement. In a written filing, they emphasized, “The Lenders need a seat at the table because the existing parties have not adequately represented (nor are they expected to represent adequately) the Lenders’ interests.”
In an emailed statement, a representative for the funds clarified that their primary aim in seeking intervention was to safeguard their financial interests, which are limited solely to the attorney proceeds arising from the cases. “We expect our borrowers to adhere to the highest ethical standards in the practice of law,” the representative stated.
Currently, representatives for McClenny Moseley attorneys Moseley, Grant Gardiner, Claude Reynaud, and Richard William Huye have not responded to requests for comments. Garrison Jordan of Chehardy Sherman Williams, who represents McClenny, declined to comment.
The Equal Access Justice Fund, established in 2018, disclosed in a 2022 U.S. Securities and Exchange Commission filing that it had secured over $213 million from investors. Meanwhile, EAJF ESQ Fund, founded in 2022, reported in a June filing that it had raised more than $52 million.
McClenny Moseley initiated hundreds of lawsuits in Louisiana state and federal courts last year, representing homeowners who suffered property damage from hurricanes Laura, Delta, and Ida. In January, the firm came under judicial scrutiny due to allegations of improper client solicitation, erroneous claims against insurers, duplicate lawsuits, and suits against insurers that had already reached settlements with their clients.
During a hearing before Judge Cain in August, Moseley revealed that the firm had secured approximately $40 million from investors for its hurricane-related cases, according to a transcript of his testimony.
According to court records, the Western District of Louisiana suspended McClenny Moseley’s attorneys from practicing in the district in March, with an extension of the suspension in June. Moseley has also faced suspension in the Eastern District of Texas, as indicated in court records.
In a significant move, the Louisiana Supreme Court took the “extraordinary action” in May of staying all of the firm’s hurricane cases in state court. Furthermore, the court contacted its clients to connect them with new legal representation. Huye, the firm’s primary attorney in Louisiana, had been indefinitely suspended from law practice in March.
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