Infamous Florida Plaintiffs’ Firm Files For Bankruptcy. Will Strems Get His $36 Million?

The successor to a law firm that was known as “public enemy number one” by Florida’s property insurance industry after it filed thousands of unnecessary lawsuits – many of them on the same claim – has slipped into bankruptcy, putting a deep red line under an expensive and frustrating chapter in the state’s insurance litigation crisis.

“I see it as a fitting end to this whole story,” said Scott Johnson, a Florida insurance consultant and educator who has written extensively about the Scot Strems saga over the last six years.

Strems is the Coral Gables plaintiffs’ attorney who was disbarred in 2022 for multiple Bar rule and ethical violations. He had become the poster child for Florida lawyers who reportedly took advantage of the state’s one-way attorney fee statutes and led the explosion of claims litigation in recent years – a major factor behind escalating premiums and a dozen insurer insolvencies in Florida, insurance advocates have said.

“Strems was emblematic of the Florida litigation problem, in that litigation became more about the attorney’s fee than about the claim,” said Matt Lavisky, a Tampa insurance defense lawyer with the Butler law firm.

Shortly before his disbarment, the Strems Law Firm was reconstituted as The Property Advocates. Strems left the firm and sold his interest for $40 million, to be paid in annual installments until a balloon payment was due in 2030, according to court documents.

Despite apparent fees from the multitude of lawsuits, The Property Advocates, known as TPA, was unable to pay its debts, including the payments on the note to Strems and money owed to other lawyers at the firm.

“They had to pay themselves instead, it looks like,” Johnson said.

Strems has alleged, in his own lawsuit against The Property Advocates, that the firm distributed almost $30 million to shareholders at the firm and paid him just a few million toward the note.

The heads of the new firm “steered TPA on a path towards insolvency and destruction designed to enrich themselves and their friends and leave behind only a carcass of what was once an exceedingly successful law firm…” Strems’ 2023 complaint contends.

Strems is listed as the top creditor in the firm’s Chapter 11 bankruptcy petition, filed Aug. 25, with about $36 million owed to him, according to a promissory note he and the firm signed in 2020. The biggest question for the U.S. bankruptcy judge in the case may be whether the disbarred Strems, who acknowledged that he cannot find the original promissory note, will be considered a secured creditor, placed at the head of the line for payments from the firm.

Bankruptcy experts contacted by Insurance Journal said that courts often consider promissory notes to have priority in Chapter 11 payment schedules. On the other hand, in a motion filed with the court, The Property Advocates has argued that Strems’ “purported lien” was never perfected by the filing of a Florida Uniform Commercial Code financing statement, an omission that could prove fatal to Strems’ demands for the $36 million, bankruptcy lawyers said.

“The Debtor’s motion is in no way an admission that Scot Strems has a valid claim against the Debtor or a properly perfected security interest in the Debtor’s property,” the firm wrote in its motion to use cash on hand to keep the firm in operation. “The Debtor specifically reserves its rights to contest the validity of such alleged debt and security interests that may be asserted.”

For now, the bankruptcy judge has allowed TPA to use the money but granted Strems post-petition interest against the cash collateral.

It’s unclear at this point how much the firm would be able to eventually pay on its debts, even secured debts. The Chapter 11 petition shows that the law firm has less than $10 million in assets but as much as $50 million in liabilities. To put that in perspective, in 2020, the Strems Law Firm had a reported book value of more than $20 million, according to published reports.

Besides Strems, TPA says it owes disputed amounts to other lawyers once associated with the firm. These include more than $665,000 to Michael Patrick, now with the Morgan & Morgan injury law firm; and $230,000 to Gregory Saldamando, now with First Stop Legal.

Saldamando in June filed his own suit against The Property Advocates, charging that the firm had breached its employment agreement with him and failed to pay thousands of dollars in attorney fees. The case is pending in Miami-Dade Circuit Court but will likely be put on hold while the bankruptcy proceedings continue.

An exhibit in Saldamando’s complaint gives a glimpse into Strems’ state of mind as his firm embarked on filing as many as 10,000 lawsuits against insurance companies over property claims. In a 2018 email sent when Saldamando was hired, Strems wrote: “Greg, terms are confirmed. World domination!”

But like others who have attempted to conquer the world, the effort seemed to overwhelm the law firm and was marked by disorganization, mismanagement and the fomentation of bitter enemies. In the end, it collapsed in disgrace, according to court documents.

Strems Law Firm’s “inadequate staffing and lack of sufficient office procedures resulted in client neglect, case dismissals, frustrated judges, and costly sanctions on a near weekly basis,” the Florida Supreme Court wrote in its December 2022 disbarment order.

Strems, Saldamando and Hunter Patterson, the president of The Property Advocates, could not be reached for comment for this article. Strems can apply for readmission to the Bar in 2027.

Strems’ actions and his volume of litigation were so extensive and so infuriating to the Florida insurance industry that Johnson blogged about it regularly through the years and has now written a book about it all, compiling new information to go with his blog reports from his website. “Collapse of an Evil Empire” is due out later this month.

In the end, Strems and his law firms’ excessive litigation cost insurers significantly in loss adjustment expenses and heartburn. Citizens Property Insurance Corp., the state-created insurer of last resort, went so far as to sue Strems over allegations of fraud, racketeering, filing false invoices and bad faith. The insurer settled for $1 million in 2022, far less than it had initially claimed in damages.

The lawyer’s actions had something of a silver lining. By putting a face to the claims litigation crisis, it helped Florida lawmakers pass sweeping legislation in late 2022 that ended one-way attorney fees and assignments-of-benefit agreements, and clamped other limits on litigation, all of which have helped turn the tide on the distressed market in the Sunshine State, Johnson and others in the industry have said.