A Texas law firm that opened Louisiana offices and paid a third party to sign up cases was found guilty of having obtained clients via illegal case running. The law firm paid a legal advertising company, Velawcity, $3000 to $3500 per signed contract. The federal court order ruled as follows:1      

A contract that violates a ‘rule of public order’ is unenforceable under Louisiana law. ‘A contract is absolutely null when it violates a rule of public order, as when the object of a contract is illicit or immoral. A contract that is absolutely null may not be confirmed. Absolute nullity may be invoked by any person or may be declared by the court on its own initiative.’ La. Civ. Code. art. 2030. ‘ ‘No principle of law is better settled than that a party to an illegal contract or an illegal transaction cannot come into a court of law and ask it to carry out the illegal contract or to enforce rights arising out of the illegal transaction.’ ‘ Vidrine v. Abshire, 558 So. 2d 288, 292 (La. App. 3 Cir. 1990) (quoting Bergeron v. Mumphrey, 38 So. 2d 411, 414 (La. Ct. App. 1949)).

Louisiana has strong public policies against runner-based solicitation of clients, a practice sometimes known as ‘case running,’ and against the practice of law by non-attorneys. Louisiana law makes it ‘unlawful for any attorney to pay money or give any other thing of value to any person for the purpose of obtaining representation of any client.’ La. Stat. Ann. § 37:219(A). ‘No person, firm, or entity shall solicit employment for a legal practitioner.’ La. Stat. Ann. § 37:219(B)(1). Because ‘[t]he legal system and the profession suffer actual injury when a lawyer engages in runner-based solicitation, a felony under state law,’ the Louisiana Supreme Court has confirmed a ‘strong public policy’ against case running. … Louisiana law also makes it unlawful for a non-attorney to practice law.

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Mr. Semmes attests in his affidavit that he received a letter from MMA in August 2022 advertising their services as lawyers for Hurricane Laura claims. He called the number in the letter and was connected to a call center. After speaking with someone at the call center, he received an email through which he was invited to electronically sign a retention agreement with MMA, pursuant to which MMA would pursue his Hurricane Laura claim.

Combined with what we know from the documentary record, it is clear Mr. Semmes’ first point of contact was with a third-party marketing firm, Tort Network LLC, d/b/a Velawcity. MMA has previously explained that it obtained signed client retainers was via a call center:

If someone reaches out to MMA asking for a contract it would get directed to the advertiser who may manage the incoming call center, they would answer questions, they would collect some information and send the DocuSign contract to the client which the client would then review, decide if they do want to sign on, and if it signs on, then they would come to [MMA].

Among the items in Mr. Semmes’ MMA file was an intake survey marked with the Velawcity logo and a contingency fee contract created the same day. An Order and Reasons issued by Magistrate Judge North of the Eastern District of Louisiana describes, among other things, the contractual relationship between MMA and Velawcity and satisfies this court that MMA had an arrangement whereby it agreed pre-pay Velawcity a Fixed Rate of $3,000 or $3,500 for each pre-screened and signed contingency-fee agreement Velawcity provided to MMA. …

MMA obtained its contingency fee contract with Mr. Semmes through a third-party marketing firm, Velawcity, a modern-day case runner that MMA pre-paid for client contacts. In its motion to intervene, therefore, MMA seeks to enforce a contingency fee contract between an attorney and client procured via a non-attorney case runner that may have engaged in the unauthorized practice of law. Any contracts arising out of this illegal relationship violated Louisiana law prohibiting payment in exchange for procuring clients and prohibiting the practice of law by those not licensed to do so. Contingency fee agreements like the one signed by Plaintiff are thus absolutely null and unenforceable.

The crazy thing about this illegal case running scheme is how some large mass action law firms are exposing themselves to class action lawsuits requiring that they return all their fees based upon this illegal case running scheme. Paying anybody for a signed-up case or client is unethical in every ethics class law students are taught.   

Velawcity advertises the following:

How Does Velawcity Do It?

Velawcity has three uniques that set us aside from the rest of the industry:

Infrastructure: Capitalized, Marketplace, and ABS

Stewardship: Moral, Ethical, and Prudent

Community: Influence, Relationships, and Thought Leadership

Not in Louisiana and not in most jurisdictions. If you were solicited in this manner, you were a bought and paid-for client who was illegally duped into signing a contract. Your lawyers were unethically paying for you to be their client. You should seek counsel so you do not have to pay any attorney fees they are charging you.   

For policyholders, do your due diligence before selecting your attorneys. What should a policyholder look for, and the criteria for selecting a great insurance attorney and insurance law firm?    

Extensive experience and dedication representing similarly situated policyholders are good criteria. Look for attorneys who seem to specialize in the particular field of insurance law of your dispute and are leaders in that area of law.

What is their track record of success? Not what they write but what they can prove. An attorney with a strong track record in insurance disputes will likely be more effective in handling your case.

What is the attorney’s reputation and peer reviews regarding your case? Check online reviews, testimonials, and ratings to gauge client satisfaction. Are there peer recognitions with awards, publications, or recognitions from legal and trade organizations that indicate a high level of expertise to help you with your property insurance claim?

While many attorneys advertise that they practice nationally or have many offices, can you get in touch with them? What is their availability? Your attorney should be easily accessible via phone, email, or in-person meetings, which today can be face-to-face or virtual.

What are the firm resources? Can a one or two lawyer firm adequately help you when the insurance company overwhelms that firm with manpower? Do they say they “work with other law firms” when they really mean they settle your case for less and then look for co-counsel at the last minute when you will refuse a bad settlement?

Here are the most basic questions to ask the attorney you are considering handling your insurance and bad faith case—if the actual attorney will not answer, run from that firm:

  • What is your experience with cases similar to mine?
  • What is your approach to handling cases?
  • How will you keep me informed about my case?
  • What are the possible outcomes and timelines?
  • Why should I trust you and your law firm to properly represent me?

For a dedicated policyholder insurance practice, Merlin Law Group attorneys only represent policyholders who are victims of bad faith and wrongful insurance claim practices, which lead to claims denials and delays. Call if your claim is denied or delayed, or write us at this link.     

Thought For The Day

The secret to my success is that we have gone to exceptional lengths to hire the best people in the world.

—Steve Jobs

1 Semmes v. Liberty Mut. Fire Ins. Co., No. 2:22-cv-03494 (W.D. La. Sept. 22, 2023).