Bank of America filed a motion late Monday to disqualify Quinn Emanuel Urquhart & Sullivan as counsel to AIG in the
insurer's $10 billion suit claiming BofA, Merrill Lynch, First
Franklin Financial, and Countrywide misrepresented the
mortgage-backed securities they sold AIG. According to BofA's
lawyers at Munger, Tolles & Olson, a Quinn Emanuel partner who
reviewed a draft of AIG's complaint previously worked at Munger
-- and was privy to confidential information about how Merrill
Lynch and its mortgage origination unit First Franklin intended
to defend against MBS claims. Munger asserted that its former
partner, Marc Becker, has a direct conflict of interest that
should result in Quinn Emanuel's removal from the AIG case.
"Quinn undertook this representation without even
requesting a conflict waiver and screened Becker from
involvement in this case only after defendants raised the
issue," the Munger disqualification motion said. "By then it
was too late -- Quinn had represented AIG in preparing this
lawsuit for months, and Becker had already been involved in
drafting the complaint and a significant motion in the case.
Quinn's flouting of the ethical rules mandates
disqualification."
Munger's filings, first spotted by my Reuters colleague
Noeleen Walder, disclose a trove of information about what
happened between AIG and BofA in the months before AIG filed
its $10 billion suit in July. They also raise the possibility
that Bank of America will move to disqualify Quinn Emanuel in
other cases involving MBS allegations against Merrill or First
Franklin, including suits by the Federal Housing Finance
Agency, Allstate, and Massachusetts Mutual.
Quinn Emanuel's counsel, Gregory Joseph, said Munger's
disqualification motion is purely tactical. "Marc Becker
practiced at Munger Tolles for 19 years as a highly respected
and trusted associate and partner. They know perfectly well
that he would not share any confidential information and he
never did," Joseph said in an email. "Bank of America doesn't
want to face Quinn Emanuel on the other side. Its motion never
even addresses the governing standard -- whether there is any
risk of trial taint -- because of course there isn't." (Quinn,
as I've reported, pioneered MBS litigation and has filed dozens
of suits for MBS investors, including most of the FHFA's
cases.)
Here's the back story: Marc Becker was a partner at Munger
Tolles until 2008, when he moved to Quinn Emanuel's London
office. According to declarations by Munger partner Marc Dworsky and former First Franklin general counsel and CEO Mark Malovos, Becker worked with First Franklin officers to craft an
MBS defense strategy while he was a Munger partner. "Through
his communications with Merrill Lynch and First Franklin
representatives, Becker had access to highly confidential
information and analysis regarding First Franklin's home loan
origination business," the Dworsky declaration said. "Even more
significantly, Becker was provided First Franklin's internal
projections of its exposure in connection with mortgage
originations -- the sensitivity and confidentiality of which is
self evident."
Munger's filings said the firm first became aware of
Becker's alleged conflict in September, as partners reviewed
Munger Tolles' past work for Merrill Lynch and First Franklin.
On Sept. 19, the firm sent a letter to AIG counsel Michael
Carlinsky of Quinn, asserting that Becker had worked on Merrill
Lynch and First Franklin matters, that Quinn Emanuel had not
requested or received a waiver of conflict from either of them,
and that both Becker and Quinn Emanuel should be disqualified
as a result. Munger said it was first raising the issue with
Quinn in a letter, rather than in a court filing, "given the
importance of the issue." The Munger letter asked Quinn to
disclose whether Becker had worked on the AIG complaint.
At the same time, Quinn partner John Quinn emailed Munger
partner Brad Brian. "Can we talk about Marc Becker and AIG v.
Merrill?" Quinn's email said. After Brian asked what the
problem was, Quinn replied, "Needless to say, Marc in London,
has had and will have nothing to do with case." (Here's the
full email exchange.)
Nevertheless, Quinn Emanuel was concerned enough about
Munger's letter that it brought in Joseph, whose Sept. 26 letter to Munger Tolles is a fascinating document. In it,
Joseph asserted that BofA has been trying to knock Quinn
Emanuel out of representing AIG since last January, when AIG
and BofA signed a tolling agreement. In March or April,
according to the Joseph letter, BofA informed AIG that it could
participate in the talks that eventually produced the proposed
$8.5 billion deal with Countrywide MBS investors -- but only if
it ditched Quinn Emanuel.
Moreover, the Joseph letter asserted, BofA has its own
conflict problem. The bank's associate general counsel,
Christopher Garvey, worked on AIG matters as a partner at
Goodwin Procter, and though AIG waived the conflict for
prelitigation talks, Joseph wrote, AIG didn't realize Garvey
was still technically a Goodwin partner "seconded" to BofA.
"Goodwin represented AIG in mortgage lending matters," Joseph
wrote. "If BofA pursues its reckless charge against Quinn
Emanuel, AIG will be forced to address Mr. Garvey's conflicts,
and this will not be limited to Mr. Garvey but extend to all
whom Mr. Garvey has tainted."
Munger called Joseph's assertion about Garvey "flatly
incorrect" and "a smokescreen raised in an attempt to deflect
attention from Quinn's breach of its ethical duties" in an Oct. 4 reply to the Joseph letter. More importantly, the Munger
letter said, Joseph hadn't answered its question: Did Becker
work on the AIG case against BofA?
It turns out that he did, as Joseph conceded in a second
letter to Munger Tolles. Becker wasn't part of Quinn's AIG
team, Joseph said, but had spent a total of 5.8 hours reading
and suggesting structural changes in a draft of the original
complaint and then reviewing AIG's remand motion after BofA
removed the case from New York state supreme court to federal
court. Joseph said, however, that Becker never disclosed any
confidential information about Franklin Financial or Merrill
Lynch. (The Quinn partner didn't even remember, according to
Joseph's first letter, that he'd done MBS work for those Munger
clients.)
Munger's response was to file Monday's disqualification
motion. Quinn Emanuel, as Munger noted in a footnote, is no
stranger to such motions: It successfully moved to disqualify
the Glaser Weil firm from representing MGA Entertainment in the
Bratz doll dispute because a former Quinn lawyer had moved over
to the Glaser firm. (Quinn Emanuel has also been in a
long-running effort to remove Apple counsel Bridges & Mavrakis
in the Samsung patent case in San Jose.)
(An earlier version of this story transposed the names of
the sender and recipient of an email about Marc Becker. The
correct sender is John Quinn of Quinn Emanuel and the recipient
is Brad Brian of Munger.)
(Reporting by Alison Frankel)
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Twitter: @AlisonFrankel
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