The problem was academic, really.
Academic in the sense that the career opportunities open to Daniel Brockett after he completed the doctorate he was then pursuing in philosophy would be largely constrained to teaching positions and professorships at major universities.
It was, he realized, not a goal he wanted to spend another four years pursuing, especially with the limited earning potential as a career academic.
“I was kinda sick of being poor at that point in life,” the Quinn Emanuel partner recalls. “So I thought that law school would be a good alternative. I knew I had the personality to be a stand-up litigator.”
More than 20 years later, after obtaining a law degree at the University of Pittsburgh and stints at Davis Polk & Wardwell and Squire Sanders & Dempsey, another about-face brought an equally transformative effect.
It was the mid-2000s, and Brockett had just joined Quinn in Los Angeles when he backed a firm decision to switch from representing Wall Street banks and other financial institutions – which had been his focus at Davis Polk at the start of his career – to suing them.
The move was a risky one and not altogether unanimous at Quinn Emanuel.
It proved prescient in just a few years, however, when a bubble in the $15T U.S. housing market collapsed and mortgage-backed securities that had become one of the hottest commodities on Wall Street lost much of their value. That led to the collapse of Lehman Brothers, the fourth-largest investment bank in the country; froze short-term credit markets worldwide; and sparked a financial crisis that would send unemployment surging to 10 percent in the U.S. and wipe out trillions in market value.
Afterward, predictably, “there was a tremendous amount of opportunity in litigation against the major banks, including cases involving residential mortgage-backed securities,” says Brockett, a no-nonsense litigator who has won billions of dollars in awards, verdicts, and settlements for his clients over the course of his career.
“If you had a case against a major Wall Street bank, Quinn Emanuel became the firm of choice,” he adds. “Whereas most other firms in New York are looking to represent the banks in some capacity, we decided to go adverse and that resulted in significant new business for the firm.”
Lawdragon: Impressive. And this was a black-swan event, too, not one that you could have foreseen when you decided to go up against the banks. Was there ever a serious conversation about the risk of not keeping your hand in with Wall Street?
Daniel Brockett: Definitely. There was an array of views within the firm and there was some concern expressed by partners whom we had recruited from blue-chip New York firms who had significant contacts within the banking community. Even with our decision to represent major investors in cases adverse to banks (the “buy-side” of the financial markets), we did continue to represent certain “sell-side” banks and continue to do so today.
LD: It’s a good reminder, isn’t it? In retrospect it seems so obvious that it was a brilliant decision, but at the time it was less certain. So with your move into high-stakes, non-billable litigation, what are some of the lessons of the past 10 years for you?
DB: One is that if you want to secure multibillion-dollar awards in cases, you have to be prepared to take extraordinary risks and you have to have a firm that has deep pockets which can and is willing to finance a case of that kind. You have to have extremely talented lawyers who can go toe-to-toe with the best defense firms in the world.
Quinn Emanuel has the resources and talent to take on these cutting edge cases, and we can sometimes position them for large settlements. We are somewhat unique in this respect. If you are a smaller firm, and you want to take on the entire banking industry, for example, you will often need to co-counsel with a group of other plaintiff law firms each of whom will chip in resources and money. Even then, Quinn Emanuel often gets better settlements because of our size, talent, deep bench, and credible trial threat.
LD: One of the things I’m always interested in is the pathways that people take to become lawyers, and in your case, a litigator. Have you found your philosophy studies useful in your work?
DB: I was studying logic and philosophy science, philosophy of language. More of the Anglo-American tradition, really. And I use logic, for certain. Being able to connect pieces of evidence is beneficial to telling a compelling story to a judge or jury.
LD: Interesting. At what point did you decide to specialize in litigation?
DB: After law school, I clerked for the chief justice of the Pennsylvania Supreme Court. It was 1983 to1984, and a lot of things were happening with Wall Street, and I wanted to be where the action was. I tried working on some corporate deals at Davis Polk but found litigation a more natural fit.
LD: So you went to Davis Polk. Can you tell me about some of those cases?
DB: I was representing a lot of investment banks like Morgan Stanley, handling securities defense and antitrust and merger cases. So, I was really very much representing the financial establishment in a defense capacity there. While I’m on the other side now, seeing how they make and analyze things has been very helpful to me.
LD: Did you have a particular mentor at Davis Polk who influenced you?
DB: Not really. Henry King, Bob Wise, Lew Kaden were all influential. It was a great firm, though, and I got a lot of excellent training. I began to see how to try cases, and I did have an opportunity to try a big case while I was there. I was deputized and became a trial lawyer for the attorney disciplinary committee. I tried a case against a prominent personal injury lawyer for a pattern of ethical violations. And I was in front of a state court judge.
LD: And then later, you went to Squire Sanders, is that right?
DB: Yes. It was 1990, and New York was going through a huge recession. There was a general consensus in the legal community that there was going to be a huge dropoff in business in the city, and I wanted to raise my kids in the Midwest, where I grew up. So I accepted a job at Squire Sanders and moved back to my hometown of Cleveland. It was very much going home. I stayed there for 12 years, then got a call from Quinn Emanuel, asking me to join them. So I went to California, while my family stayed behind in Cleveland. And then I moved back to New York, which had been the plan all along.
LD: So you’ve been at Quinn since its formative years.
DB: It was in a formative phase, certainly, when I arrived. I was there when it was just a New York office and California offices and I witnessed the huge growth.
LD: You’ve certainly done some amazing work there. Are there cases you’re working on now that you find fascinating – that you can talk about?
DB: There’s an interest-rate swaps case against 11 of the major banks that are alleged to have blocked electronic platforms for trading swaps – a type of financial instrument – from getting into the market.
The broader context is how the banks have extraordinarily benefited for many, many years, even decades, from what’s called the over-the-counter system, where if you want to do an interest-rate swap (or trade any derivative) with a bank, you need to call somebody on the phone and they’ll give you a quote, they’ll give you pricing and you don’t really have the ability to go shop around. The search costs of getting quotes from multiple banks are very, very high. And in that environment, you know the bank’s margins are also very high.
Now if you had, instead, an electronic platform where everybody could go and you had transparent pricing and lots of liquidity, the banks would be forced to transact in these products at much tighter spreads. So they don’t want the electronification of the markets, especially in these derivative products like interest-rate swaps. This is a case about how they allegedly got together even after the Dodd-Frank Act, which was a big push towards more transparency in the markets, and conspired to block these platforms from entering the market.
LD: Fascinating. And how far along is the case?
DB: The class certification is fully briefed, and we’re awaiting a decision on that.
LD: Tell me about some of the others.
DB: The stock-loan case is another case that’s very active now. It’s a similar claim, but it involves a completely different industry. This has to do with how hedge funds have to borrow stock from pension funds and others when they want to do short sales. Basically, a short sale is a bet that a stock’s price is going to fall. Investors who think that will happen can borrow stock, sell it, then repurchase it once the price goes down. At that point, they can return the borrowed shares to the owner and pocket the difference.
And so this is a case about how the banks allegedly put themselves in the middle of these stock loan trades, requiring the pension funds to deal with them to lend the stock and then the banks in turn would allow the hedge funds that were doing the shorting to borrow the stock. And it’s also very much a case of banks having allegedly worked together to make sure that the market evolves in a way that’s most favorable to them. Of course, in fairness, the banks would disagree with these statements and would give a different description of the case.
LD: I love that you’re taking on these big cases against banks and other financial institutions.
DB: It’s very interesting work. And the firm is supporting these cases financially and we have a partner firm, Cohen Milstein. They are excellent lawyers and we work well with that firm. I have many others, but that’s an example of two that are going on right now.
LD: What case would you say was the most fascinating of your career?
DB: When I was at Squire Sanders, I represented British Petroleum in a suit against Chinese actors over the theft of very important, viable technology to build large chemical plants for the production of acetic acid. It’s used in many industries, including textiles, and this happened at a time when acetic acid had been designated as a priority industry by the Chinese government. The processes for developing chemicals such as that are extremely difficult to develop independently; it often takes years and major investments. BP found out about the theft when some vendors that dealt in specialized parts for these plants were given specifications for equipment from some Chinese companies and they recognized the technology as BP’s and told BP about it. So we sued the Chinese government in the U.S. and tried to block the export of the equipment to China.
LD: So there was international intrigue.
DB: Exactly. And they defended by saying that they bought the technology on the open market, and so therefore they had a free title. Delving into it, there was a translator at a plant in the Soviet Union where BP licensed this technology who had stolen all the manuals and sold them to the Chinese for $1M.
LD: How fun. So you were a detective in a sense, tracking all of this down?
DB: Right. Ultimately, it entailed a series of cases, but we won an injunction to block the export of the reactor piece of equipment. All the cases were very successful.