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Say what you like about controversial Texas trial lawyer Steve Mostyn — at least he's effective.

Mostyn is a hot-button character in Texas, where he has won hundreds of millions of dollars fighting insurance companies on behalf of homeowners after storms like the catastrophic Hurricane Ike — and spent millions of those dollars supporting political causes he favors. After Hurricane Sandy, Mostyn set up shop in New York, taking on clients who wanted to contest lowball insurance payouts for repairs to their flood-damaged homes. Mostyn joined forces with lawyers representing Deborah Ramey, a homeowner flooded out by the storm. Now, largely as a result of Mostyn's intervention, Ramey's case has cracked wide open. Mostyn has become a central character in a widening court battle over insurance company practices in the Sandy cases. And the game is breaking Mostyn's way.

Legal wrangling has raged for months in the U.S. District Court for the Eastern District of New York between flood insurance carriers and New York homeowners flooded by Sandy. In November, Federal Magistrate Judge Gary Brown penalized lawyers for Wright Insurance for what he called "reprehensible gamesmanship" in the Ramey case (see "Judge Slaps Insurance Company Lawyers in Sandy Flood Case," 11/25/14, and "Federal Judge Upholds Penalty on Sandy Flood Insurance Company Lawyers," 1/12/15). The judge ruled — and an appeals court agreed — that the insurance company and its engineers had improperly reversed the investigating engineer's conclusions in the flood claim, and then tried to hide the resulting paper trail from the court.

February brought a series of dramatic developments in the increasingly rough court battles. New York State prosecutors raided the offices of engineering firm HiRise, carting out box after box of records, after New York licensed engineer Harold Weinberg charged HiRise with forging his signature and seal to an altered report. Wright Insurance company replaced its legal team after the lawyers were hit with sanctions — and Wright's new lawyers offered to settle with homeowner Ramey for the full amount of policy coverage on her demolished house.

After punishing Wright's original legal team in November, Judge Brown had already scheduled a second hearing at Steve Mostyn's urging, to consider whether Wright itself, and not just its attorneys, should be hit with penalties for contempt of court. This happened after the judge figured out that Wright executive Jeff Moore had been sitting in the courtroom during the first sanctions hearing, keeping silent as Wright's lawyers appeared to mislead the court about Moore's knowledge of altered engineering reports in the Ramey claim.

At the second hearing on February 18, Mostyn called Jeff Moore as a witness. But the insurance CEO declined to speak, citing his Fifth Amendment Constitutional right against self-incrimination because of New York's criminal investigation.

FEMA representative Brad Keiserman, newly named by FEMA to handle the agency's response to legal and political pressure growing out of the Ramey case, was also at the February hearing. Keiserman backpedaled hard: he personally apologized to homeowner Ramey for her difficulties, and told the court that FEMA was prepared to negotiate new terms with all the 1,500 or so homeowners still suing over Sandy-related claims. All this because of a chance event — Ramey's accidental discovery of an undisclosed engineering report blaming the flood for her home's destruction — and Mostyn's aggressive effort to uncover the facts about the earlier engineering investigation and shine a light on the way the insurance company handled the case. But to Mostyn's apparent disappointment, the disciplinary hearing ended inconclusively: the judges postponed action, deciding in effect that it was more important to pursue new settlement offers than to investigate insurance company impropriety.

But improper insurance company actions appear to lie at the heart of Steve Mostyn's legal strategy going forward. Mostyn has advised Ramey to settle her claim. But Ramey's case may be the least of Wright's, or FEMA's, worries. Mostyn has filed a wide-ranging federal complaint against a whole basket full of defendants, based on the federal Racketeering Influenced and Corrupt Organizations (RICO) statute — a move that could expose multiple insurance companies, their engineering contractors, and maybe even their attorneys to triple damages if Mostyn prevails. And after Judge Brown's rulings and orders prompted FEMA to order the release of previously undisclosed documents in thousands of flood claims, Mostyn now says his review of the documents indicates that there may be as many as 10,000 cases where back-office managers altered the conclusions of field engineer investigation reports. If that's true, there is a lot of money on the line.

Insurance companies tend to be aggressive in their legal defense of their nickel-and-dime claims management. That's especially true in the case of flood claims, where the federal government reimburses insurance companies for their legal costs. That federal outlay is mounting in Sandy cases. Trial lawyer Chip Merlin, who is fighting insurance companies in four hundred New York and New Jersey Sandy-related cases, and following Mostyn's efforts intently, says: "That's a question for the federal government to ask. How can you guys spend so much money defending these lawsuits rather than try to get some compromise and resolution?"

"The 'write-your-own' insurance companies and their attorney have no incentive even worry about it," says Merlin, "because all their attorney fees are being reimbursed by FEMA. Under normal circumstances, if an insurance company denies a claim and the insurance company gets sued, the insurance company has to pay its own legal fees. So they're going to look for a compromise before they spend $100,000 defending a $40,000 claim. But in these flood cases, there's no down side to the insurance carriers for just sloughing off all these costs to the government."

"In our cases, on the flood cases, almost every single hearing we go to — every single proceeding — there are at least two flood attorneys," says Merlin. "This is on small cases, where it would really only take one to properly handle it. But on the private side — because we also have all the wind cases that we are fighting — the insurance companies only show up with one attorney. There's a lot of costs going on that I just shake my head about — especially because most of the National Flood Insurance Program cases are small cases."

Mostyn's filings in his proposed RICO cases hinge in part on these perverse incentives in the Federal program. Mostyn's briefs characterize the relationship among the insurance companies and the engineering firms they hired to inspect damaged houses as an elaborate scam, orchestrated by the engineering firms, and calculated to milk the National Flood Insurance Program (NFIP) coffers of continual fees — all while denying homeowners the insurance awards they deserved.

The RICO anti-racketeering law that Mostyn is invoking was designed mainly as a tool for federal prosecutors to use in targeting organized crime. The law does provide for private citizen suits against fraudulent conspiracies; still, Mostyn will have to work hard to get courts to buy into the application of this statute to a collection of small flood-insurance cases. And even if Mostyn gets over that hurdle, winning a full-on RICO case won't be easy — or quick. Opening procedural maneuvers in the case are already scheduled to extend into next summer, to say nothing of discovery, depositions, and the inevitable appeals.

But the RICO class-action suit gives Mostyn a big hammer to swing. RICO brings the prospect of treble damages, the opportunity to drag in thousands of additional cases, and the  likelihood of a jury trial (always a stomach-churning gamble for deep-pocket defendants). In the past, RICO suits in cases alleging insurance malfeasance that have made it past the early procedural objections have typically been settled before trial. And instead of a deep-pockets insurance company with federal backing facing down individual homeowners one at a time, the insurance companies may now have to defend a case where they could lose tens or even hundreds of millions of dollars in one whack — and they're up against a seasoned, savvy opponent with a winning track record, and with his own millions to spend in the effort. So by bringing the RICO action, Mostyn has already tilted the playing field back in favor of flooded-out homeowners. Regardless of what happens in coming weeks and months, it's a whole new game in New York.

Here's a roundup of last week's news coverage in the story.

Newsday: "Long Island engineering firm raided in Sandy probe," by Frank Eltman and David B. Caruso

New York Times: "Hurricane Sandy Victims Say Damage Reports Were Altered," by David W. Chen

International Business Times: "Hurricane Sandy Victims Sent Altered Engineering Reports Could Number Up To 10,000," by Catherine Dunn

New Jersey 101.5: "Sandy damage claim denials come under new scrutiny," by Fred Tucillo

Asbury Park Press: "Senators call for NJ probe of dubious Sandy reports," by Russ Zimmer

New York Law Journal: "Hearing Delayed as FEMA Vows to Resolve Sandy Disputes," by Andrew Keshner

Bloomberg Business: "FEMA in Settlement Talks Over Sandy Flood Insurance Claims," by Christie Smythe

Newsday: "FEMA, lawyers to resume Sandy negotiations on Sunday," by Joe Ryan

NPR: "After Sandy: Insurance Claim Battles Cost Homeowners, Taxpayers," by Charles Lane

NPR: "FEMA In Talks To Settle Sandy Flood Insurance Claims," by Charles Lane