With Quinn Under Attack, Counsel Vie to Lead CDS Price-Fixing Case
In the wake of a disqualification threat against Quinn Emanuel Urquhart & Sullivan, a battle has broken out among firms competing to be lead class counsel in a massive antitrust case against more than a dozen big banks. At stake are damages in the tens of billions of dollars sought by institutional investors who allege the defendants conspired to inflate the price of credit default swaps.
The scramble was set off by an Oct. 7 letter sent by Matthew Reilly of Simpson Thacher & Bartlett, who represents defendant The International Swaps and Derivatives Association Inc. One week before the deadline for lead counsel applications, Reilly informed Daniel Brockett of Quinn Emanuel that Brockett must withdraw from representing plaintiff Salix Capital US Inc. because his firm has a conflict of interest. Reilly wrote that a Quinn Emanuel partner, Daniel Cunningham, was previously primary outside counsel for ISDA and advised it on antitrust and licensing issues substantially related to the plaintiffs' claims.
Brockett responded by writing to U.S. District Judge Denise Cote of the Southern District of New York, who is presiding over the multidistrict litigation and will appoint lead counsel. In his Oct. 8 letter , Brockett stressed that Cunningham represented ISDA when he worked at Allen & Overy more than four years ago, and since then he has been "walled off" from this matter. The firm has used "strict ethical screening procedures," he said, to protect ISDA's client confidences.
Brockett also asserted that until Simpson Thacher raised the conflict claims, "virtually every firm" on the plaintiffs' side was going to support its application for lead counsel. But after the letter circulated, he wrote, those firms told Quinn Emanuel they would "reluctantly have to go in a different direction." Brockett suggested that the defendants wanted to make sure Quinn Emanuel wasn't appointed lead counsel because it's scared of the firm, noting that a survey of corporate counsel named Quinn Emanuel as one of the four firms "in-house counsel fear the most." He asked Cote to reject ISDA's attempt to sway her decision on Quinn Emanual's application to be lead counsel, and to order ISDA to make any motion for disqualification by Friday. Cote did set that date as a deadline for any party to file a disqualification motion against the firm.
With Quinn Emanuel's position in the case under siege, other plaintiffs firms have stepped forward in recent days to compete for the lead counsel role. One application was filed by Pearson, Simon & Warshaw; another was filed by the trio of Scott + Scott, Korein Tillery and Robbins Geller Rudman & Dowd; and a third was filed by Entwistle & Cappucci and Kaplan Fox & Kilsheimer.
Salix asserts in its complaint that the defendants conspired to thwart the development of alternative markets that would provide more transparency for CDS buyers. Instead, the defendants' "opaque" system, which deprived buyers of relevant market information, generated "supra competitive" profits, the plaintiffs allege.
Quinn Emanuel's Brockett sent us this message: "We think the proposed motion has no merit and, if filed, we will contest it vigorously." Simpson Thacher's Reilly declined to comment.