Covington, Morgan Lewis, Shearman: Business of Law
Covington & Burling LLP sought to overturn a judge’s ruling disqualifying the firm from working for Minnesota on a lawsuit alleging 3M Co. polluted state waters.
In oral arguments April 4 before a state appeals court panel, the parties faced off over whether Covington’s previous work for 3M on perfluorinated (PFC) compounds was substantially related to its work for Minnesota.
“Disqualification of Covington would be a devastating and quite possible fatal blow to the state’s case,” Minnesota’s lawyers wrote in court filings.
Covington lawyer William Greaney is representing Minnesota in the environmental suit. Peter Hutt, former chief counsel of the U.S. Food and Drug Administration and a senior counsel at Covington, advised 3M on matters involving PFC’s in microwave food packaging beginning in 1992.
“Mr. Hutt largely ended his work for 3M in 2000, when he transitioned his files to another Covington partner, Marialuisa Gallozzi,” Washington-based Covington said in court papers. “Like Mr. Hutt, Ms. Gallozzi provided no environmental advice to 3M nor was she asked to do.”
3M, based in Maplewood, Minnesota, said in court papers that Covington’s representation was in conflict with a prior agreement that the firm not undertake representation on “substantially related matters.” 3M claims Covington misled them about conflicts, which was why the firm didn’t object to Covington’s counsel until 16 months into the case, when the pretrial exchange of evidence was almost complete.
While the state and Covington have argued that the two matters were separate, 3M said that in taking on the Minnesota environmental matter, Covington had to change its claims about the chemical’s safety.
“In representing the state, Covington was required to attack positions it had espoused a few years earlier on 3M’s behalf,” 3M said in its court filings.
A district court judge sided with 3M, finding a conflict and disqualifying Covington in an October ruling.
The law firm, which has worked on behalf of Minnesota on environmental matters over the past 17 years, has already spent 20,000 hours in the 22 months since the case was first filed and has developed the factual legal and scientific basis for the case, according to court papers. Disqualifying Covington could derail the proceedings because the firm took the case on a contingency basis, allowing the state to afford to bring the suit.
Covington referred calls for comment to Benjamin Wogsland in the Minnesota Attorney General’s Office. Wogsland didn’t return a phone call seeking comment on the dispute. A 3M spokeswoman, Jacqueline Berry, also didn’t return a phone call seeking comment.
The appeals panel included judges Randolph Peterson, Edward Cleary and John Smith, according to Lissa Finne, a spokeswoman for the court. The court has 90 days to issue an opinion.
The lower-court case is Minnesota v. 3M Co., 27-CV-10-28862, Hennepin County District Court (Minneapolis).
ResCap Investigation Costs Expected to Rise to $82.75 Million
A court-ordered investigation in Residential Capital LLC’s bankruptcy case is estimated to cost $82.75 million, more than double an earlier calculation by the ex-judge leading the probe.
Arthur Gonzalez, a former Manhattan bankruptcy judge who was appointed as examiner last year to run the investigation, estimated the fees for advisers in a filing April 5 in U.S. Bankruptcy Court in Manhattan.
“The investigation has proven to be an enormous undertaking,” lawyers for Gonzalez said.
Gonzalez is represented by Chadbourne & Parke LLP. His conflicts counsel is Wolf Haldenstein Adler Freeman & Herz LLP.
He was appointed in July in the mortgage company’s bankruptcy to investigate transactions between ResCap and parent Ally Financial Inc. (ALLY) as well as Cerberus Capital Management, claims ResCap proposes to release, and claims against officers and directors.
Gonzalez estimated in August that the report would cost $29 million to $36 million.
In the April 5 filing, Gonzalez said his lawyers will cost $44 million, with financial professionals making $38.2 million in fees. His own fee would be $550,000. He said the report should be completed in early May.
The case is In re Residential Capital LLC, 12-bk-12020, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Admiral Plans Legal Venture After Government Bans Referral Fees
Admiral Group Plc (ADM), the U.K. auto insurer that owns confused.com, started joint ventures with two law firms after the government banned the practice of selling details of customers who have been in accidents.
Admiral will form the partnerships with Lyons Davidson and Cordner Lewis Solicitors beginning May 1, the Cardiff, Wales-based company said April 5 in a statement. The government on April 1 banned so-called referral fees paid to insurers.
Prime Minister David Cameron outlawed the fees as part of an attempt to bring down the cost of motor insurance, which has climbed by more than a third over the past four years as claims soared due to the success of lawyers working on contingency fees and spurious injuries. By bringing the legal services in-house, Admiral gets to maintain revenue from successful legal claims against other insurers.
“This is about protecting a revenue stream from law firms that has just become outlawed,” said Kevin Ryan, a London-based analyst at Investec Plc (INVP) with a sell rating on the stock. “The challenge will now be to charge the customer for using the service.”
The ventures won’t make a “material contribution” to Admiral’s profit in the foreseeable future, the insurer said.
Lehman Brokerage Trustee Seeks $25 Million in Fees, Expenses
Lehman Brothers Inc. brokerage trustee James Giddens asked a judge to approve almost $25 million in fees and expenses for the period from March to June 30, according to a filing in federal court in Manhattan.
Giddens and his law firm, Hughes Hubbard & Reed LLP, have so far received $212.7 million in fees and expenses for work on liquidating the brokerage since September 2008.
After 4 1/2 years, the defunct firm’s hedge fund and bank creditors are still awaiting their first payment. This month, Giddens will ask a bankruptcy judge to let him put $15.7 billion into a fund for customers, out of the $25.7 billion he is holding. He has said that customers will be paid in full.
NYU School of Law Picks Columbia’s Trevor Morrison as New Dean
New York University School of Law named constitutional law expert and Columbia Law School professor Trevor Morrison as its new dean. He succeeds Richard Revesz, who will step down from the position on May 31, according to a statement.
“I am very pleased that Trevor Morrison will be NYU Law’s next dean,” NYU President John Sexton said in the statement. Sexton, who was dean of the law school from 1988 to 2002, picked Morrison from a slate of candidates prepared by a search committee.
Revesz, who held the post for 11 years, will remain on the law school faculty and direct NYU’s newly formed Marron Institute on Cities and the Urban Environment, according to the statement.
“It gives me great comfort and confidence to know that leadership of the Law School is passing into Trevor’s very capable hands. He has the talent, energy, and vision to take an already exceptional institution to new levels of excellence,” Revesz said in a statement.
Virginia Lawyer Pleads Guilty in $100 Million SBA Loan Fraud
A Virginia lawyer pleaded guilty in a fraud scheme that prosecutors said resulted in more than $100 million in losses in loans guaranteed by the U.S. Small Business Administration.
Seung E. Oh, 44, of Great Falls, entered her plea to money laundering and conspiracy to commit bank fraud April 5 in federal court in Baltimore.
Oh used her law firm and a settlement company she owned to “facilitate loan closings for deals that would otherwise fail to meet the lending parameters of the banks making the loans,” according to her plea agreement.
Oh and other conspirators misrepresented to banks and to the SBA the true amount of money involved in loan closings, “and/or the true names of the parties taking part in the transactions,” the plea agreement says.
Taxpayers, through the SBA, guaranteed 75 percent to 90 percent of each loan, leaving the lenders on the hook for the rest, according to an e-mailed statement from U.S Attorney Rod Rosenstein’s office.
Oh collaborated with Joon Park and Loren Park, brothers who owned Jade Capital, a Virginia loan brokerage, in arranging for the fraudulent loans, according to Rosenstein’s statement.
Oh faces a maximum penalty of 30 years in prison for the bank fraud conspiracy charge and as many as 20 years for money laundering.
Joon Park pleaded guilty to bank fraud conspiracy and is scheduled for sentencing on May 28. Four other participants in the scheme already have been sentenced.
The case is U.S. v. Park, 11-cr-00600, U.S. District Court, District of Maryland (Baltimore).
Morgan Lewis Advises MetLife on Sale to Cetera Financial Group
Cetera Financial Group Inc., the brokerage backed by private-equity firm Lightyear Capital LLC, agreed to buy two of MetLife Inc. (MET)’s broker-dealer affiliates with $25 billion under management.
Morgan, Lewis & Bockius LLP was MetLife’s legal counsel. Law firm Sutherland Asbill & Brennan LLP advised Cetera.
The Morgan Lewis team was led by business and finance partner R. Alec Dawson and included business and finance partner Sheryl Orr and investment management and securities industry partner John Ayanian.
Sutherland’s attorneys on the deal include partners B. Scott Burton and Douglas Leary.
MetLife agreed to sell Tower Square Securities and Walnut Street Securities, which have about 850 advisers, the New York-based insurer said April 5 in a statement. After the deal is completed, El Segundo, California-based Cetera will have more than $130 billion in client assets, the firm said in a statement. The companies didn’t disclose the price.
Lightyear Capital, founded by former Paine Webber Group Inc. Chief Executive Officer Donald Marron, 78, is among firms building brokerage businesses as they seek stable revenues from advising individual investors on their portfolios. The New York-based private-equity firm started Cetera about three years ago when it bought the ING Advisor Network.
The deal allows MetLife, the largest U.S. life insurer, to focus on its “core distribution relationships, including its affiliated broker-dealer organization,” Eric Steigerwalt, the company’s executive vice president, said in the statement. The insurer still owns the New England Securities Corp. and MetLife Securities broker-dealers.
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Lateral Moves Round-Up: Shearman, Lowenstein, Nelson Mullins
Shearman & Sterling LLP expanded its financial regulatory practice with the addition of David L. Portilla, who recently served as a senior policy adviser to the U.S. Treasury Department’s Financial Stability Oversight Council office. He will join as counsel in the firm’s New York office on April 8, Shearman said in a statement.
Christopher C. Loeber has joined law firm Lowenstein Sandler LLP as partner in the firm’s insurance coverage practice in Roseland, New Jersey. Previously, he was a partner at Morgan, Lewis & Bockius LLP.
Barnes & Thornburg LLP announced that Peter M. Reyes Jr. has joined the firm’s Minneapolis office as a partner in the intellectual property department. He was previously at Cargill, Inc., the firm said.
In Washington, Nelson Mullins Riley & Scarborough LLP announced that Dwight Smith joined the firm as a partner to counsel clients on financial and regulatory issues. A former deputy chief counsel for business transactions at the Office of Thrift Supervision, he was previously senior of counsel at Morrison & Foerster LLP, the firm said.
Banking and mergers and acquisitions lawyer Annette L. Tripp joined Thompson & Knight LLP as a partner in the finance practice group of the firm’s Houston office. Prior to joining Thompson & Knight, she was a partner at Sutherland Asbill & Brennan LLP in Houston.
In Boston, Saul Ewing LLP added Peter Lauro and Melissa Hunter-Ensor as partners in the business and finance, life sciences and intellectual property and technology practices. Lauro and Hunter-Ensor are registered patent attorneys. Both lawyers were previously at Edwards Wildman Palmer LLP.
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