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Insurer dubs Mostyn ‘puppet master,’ asks court to block ‘unethical’ counsel swap

By: David Yates

Southeast Texas Record

March 29, 2016

What started as an ordinary Hurricane Ike lawsuit, evolved into complex multi-party litigation, with the most recent filings accusing “puppet master” Steve Mostyn of paying for the defense of the man who sued him for malpractice.

After Ike ravaged his business, Tony Nouri sought $120,000 from his insurance provider, Underwriters at Lloyds of London, which was only willing to pay about a quarter of that amount.

In turn, Nouri hired Mostyn, who purportedly demanded millions from Underwriters at Lloyds then allegedly abandoned his client once the insurer called the claim fraudulent and went on the offensive by filing a counterclaim, court records show.

Claiming he was on the hook for Lloyd’s substantial defense costs, Nouri’s business, Rankin Road, filed a first amended third-party petition against Mostyn, the Mostyn Law firm, Mitchell Templeton, Sean Russell, Michael Ramsey and Amber Mostyn on Dec. 1 in Harris County District Court.

The Mostyn Law Firm, which is based in Houston, answered Rankin Road’s suit in late January. Murray Fogler, attorney for the Houston firm Fogler, Brar, Ford, O’Neil & Gray represented the firm at the time.

However, on March 17 Rankin Road filed a notice of non-suit, dismissing all his malpractice claims against Mostyn, along with all the aforementioned third-party defendants, with prejudice.

The following day, Rankin Road filed a motion to substitute counsel, seeking to replace its current counsel with Mostyn’s attorney, Fogler, and other attorneys from Fogler Brar, court records show.

Although Rankin set its motion for consideration by submission on March 28, the court granted the motion on March 22.

A day too late, Underwriters at Lloyds filed an objection to the attorney swap on March 23, questioning the ethical ramifications of the motion to substitute.

“This dual representation of former adversaries threatens not only Underwriter’s right to a fair resolution of its claims without Mostyn acting as a ‘puppet master’ for both itself and its former adversary (Rankin Road) … but equally threatens the integrity of the Texas Judicial System,” the objection reads.

Lloyds believes Mostyn is now “underwriting” Rankin Road’s defense, contending the move is akin to “the quarterback for Texas A&M changing uniforms at halftime and putting on a University of Texas burnt orange jersey and starting the second half of the game for the Longhorns.”

“Equally disturbing is the fact that only about 14 months ago Mostyn represented in its motion to withdraw as ‘necessary to avoid any potential conflict of interest between Rankin Road and Mostyn,’” the objection states.

“So what happened to this potential conflict of interest? Conflicts of interest or appearances of impropriety do not go away because of settlements.”

Lloyds further believes Fogler will be defending both Rankin Road and Mostyn against its motion for sanctions, creating a “potentially non waiveable conflict of interest.”

“In sum, after Mostyn withdrew in a belated attempt to avoid being tainted by the same fraud and misrepresentations their client had foisted on this court, and after Rankin Road accused Mostyn of filing false pleadings and other serious breaches of duty, they come to this court requesting to be represented by the same counsel that challenged Rankin Road’s allegations,” the objection states.

“Not only is the proposal an affront to the duty of undivided loyalty imposed on lawyers … but it also undermines the truth seeking function of this court because it is designed to cloak their joint fraud on the court from scrutiny.”

Citing ethical concerns, on March 28 Lloyds filed a motion to set aside the court’s order granting Rankin Road’s substitution of counsel, further arguing the granting was improper because it was done before the company had an opportunity to respond.

As of March 29, no ruling on the matter is on file, court records show.

Case background 

On Jan. 4 Rankin Road filed a motion for substitute service when Mostyn failed to respond to his third-party suit against him, avowing that a process server attempted to serve Mostyn four times at his Houston law office.

On Jan. 20 the Mostyn Law Firm and Amber Mostyn answered the suit, asserting a general denial and joining the other third-party defendants in their motion to sever and abate Rankin Road’s claims, court records show.

Templeton and Russell had filed a motion to reconsider the court’s order denying their motion to sever and abate on Dec. 9, arguing that any liability Mostyn may have to Rankin must be determined in a separate trial after the Lloyds’ claims against it have been resolved.

Declining to remain silent on the matter, Lloyds filed a response to the motion on Jan. 21, contending Rankin Road would be unable to put on evidence of its defense if the case were to proceed to trial without Mostyn.

“Indeed, if the claims against Mostyn were severed, the jury charge would make no mention of Mostyn at all and Rankin Road would be unable to have its defense assessed by a jury,” Lloyds’ response states.

“Rankin Road would then be forced to either admit to (Lloyds’) case, ensuring a judgment for (Lloyds) but preserving the ability to pursue Mostyn, or dispute (Lloyds’) case, but allow Mostyn to use these defensive admissions in the subsequent trial.”

Lloyds argued that if the court had severed the claims against Mostyn, Rankin Road would not have had a vehicle to ask the jury to apportion fault.

“This, undoubtedly, is the strategy,” the response stated.

Judge Debra Ibarra Mayfield, 165th District Court, signed an order denying the Mostyn defendants’ motion to reconsider severing on Jan. 25, finding their argument had no merit, court records show.

The petition against Mostyn stems from a complaint filed in 2010 on Rankin Road’s behalf against Underwriters at Lloyds of London, Gulf Coast Claims and two individuals.

The Mostyn Law Firm, which has reaped hundreds of millions of dollars from insurance providers in the aftermath of Ike, represented Nouri at the time.

According to the petition against Mostyn, Nouri and his business submitted a claim for insurance proceeds after Ike made landfall on Sept. 13, 2008, seeking a little more than $120,000 to repair his business. Lloyds paid $32,988.70, claiming the other damages sought were preexisting or unrelated.

In turn, Nouri responded to a Mostyn advertisement, hoping for a “quick and fair resolution,” according to his malpractice complaint against the attorney.

Nouri, who had previously never been involved in civil litigation, says he was unfamiliar with the process, so he handed over all documents related to the matter to Mostyn and put his trust in the Houston law firm.

“Prior to filing suit, Mostyn sent an initial demand letter to (Lloyds) on behalf of Rankin Road for $3.2 million,” the petition states. “The $3.2 million claim was entirely a creation of Mostyn, made without Rankin Road’s knowledge, input or consent.

“Nouri asked why Mostyn was making a $3.2 million dollar claim for repairs to his building that he bought in 2000 for $850,000. Mostyn’s agents told him to trust his attorneys.”

Nouri maintains Mostyn never bothered to cure his lack of understanding or inform him of the possible consequences, asserting that he had very little communication with his lawyers throughout the litigation process.

At Mostyn’s instruction, Nouri says he never spoke to the experts the law firm sent to inspect his property, yet the experts included “boilerplate language” in their reports stating that they met with the “homeowner” (even though it was a commercial building) and that Nouri identified the damage caused by the hurricane.

Nouri goes on to allege the experts included damages that were already paid for from a separate claim, and that Mostyn continued to press for millions of dollars, having Nouri, an “unsophisticated litigant,” sign off on discovery responses without reading and understanding them.

Seeking court costs and attorney’s fees, Lloyds and the other defendants filed a counterclaim on Jan. 21, 2014, alleging Rankin Road’s Ike claim was fraudulent, groundless and brought in bad faith or for the purpose of harassment, court records show.

On Jan. 29, 2015, Mostyn filed a motion to withdraw as Nouri’s counsel, citing “an alleged conflict of interest,” the petition states.

Nouri accused Mostyn and his attorneys of negligence and breach of fiduciary duty.

Lloyds is represented by the Houston law firm Cozen O’Connor.

Case No. 2010-25885


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