The Cost of Suing Banks (Law Firm View)

From AmLaw - J.P. Morgan Drops Linklaters

Many New York law firms have long believed that suing banks is risky business, even if the defendant is not one of their clients. Now we know why. J.P. Morgan has dropped Linklaters as one its preferred outside firms, and according to The Lawyer, the drastic move was a response to Linklaters' representation of Barclays in a suit against Bear Stearns and its two recently indicted former hedge fund managers. (We told you about the suit last week, noting that it provided some pertinent facts for the Bear Stearns prosecutors.)

Back when Linklaters and its New York litigation trophy hire, Larry Byrne, filed the Barclays suit late last year, Bear Stearns was an independent investment house with a nasty problem. Neither the firm nor Byrne could have foreseen Bear's subsequent death spiral and shotgun wedding to J.P. Morgan. And then Linklaters was stuck, unable to drop Barclays but on the wrong side of litigation against Morgan, one of its top 10 clients worldwide.

But we could argue that however surprised Linklaters was by J.P. Morgan's acquisition of Bear Stearns, the law firm should have known the Barclays suit was a dicey proposition. Unlike the giant insurance companies, big banks rarely sue each other. And they're quite often codefendants. So even if Bear had remained independent, when Linklaters filed the Barclays suit, it was walking away from future assignments in which Bear and J.P. Morgan were both defendants. Linklaters, which isn't commenting on the severed J.P. Morgan relationship, appears to have learned a tough lesson about building a New
York-based litigation practice.

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