Goodwin Procter offices in Washington, D.C. (Photo: Diego M. Radzinschi/ALM)

Goodwin Procter says it committed no ethical violations while representing Bank of America in three sweeping predatory lending cases when it also began representing former bank employees whose statements form the backbone of the litigation against the bank. 

Responding to a motion to disqualify Goodwin from defending Bank of America in one case pending in the U.S. District Court for the Northern District of Georgia, the law firm countered the three plaintiff counties "have utterly failed to demonstrate that Goodwin violated any rule of professional conduct." 

The three suits stem from the collapse of the mortgage loan industry at the onset of the recession that led to unprecedented foreclosures across the nation. They contend Bank of America and two financial companies it acquired in 2008—Countrywide Financial Corp. and Merrill Lynch—targeted minority communities with thousands of predatory home loans issued without regard to borrowers' ability to repay them. 

The resulting foreclosures led to urban blight, erosion of the public tax base, loss of property tax revenue and other public costs associated with foreclosed and abandoned properties, the lawsuits filed in Georgia, Illinois and Maryland claim.

Lawyers representing the counties have sought to bar Goodwin Procter from any further role in the three pending cases, since the law firm notified them in October it now represents nine of 11 witnesses it claims have recanted or substantially modified earlier declarations against the bank. In that letter, Goodwin lawyers also forbade opposing counsel from any further contact with the witnesses.

Plaintiffs lawyers say that representing witnesses who may have been persuaded to recant or otherwise modify their earlier statements creates a serious conflict with Goodwin's defense of the bank. 

Attorneys from Goodwin's Washington, D.C., office and the Atlanta offices of Bryan Cave Leighton Paisner said that Goodwin offered legal services to the witnesses at the bank's expense only after they changed their stories. The law firm "in no way took advantage of one client in service of another," they argued.

But lawyers representing Fulton, DeKalb and Cobb counties in Georgia claim that, once Goodwin secured contradictory statements benefiting Bank of America from the witnesses who also are now their clients, the law firm exposed them to potential perjury charges. 

The case is assigned to District Judge Leigh Martin May.

In the Northern District of Illinois—where a nearly identical motion to disqualify Goodwin is pending in a case brought by Cook County—Senior Judge Elaine Bucklo expressed concern in December that Goodwin may have crossed an ethical line.

During that hearing, the judge called Goodwin's joint representation of the bank and witnesses "disturbing."

She also questioned whether Goodwin's lawyers properly informed the witnesses that they could be in legal trouble if their new sworn declarations contradict their earlier declarations.

"I really don't understand how you can represent them," she said. The judge has not ruled on the disqualification.

District Judge Paul Grimm in Maryland stayed consideration of the disqualification issue brought by Montgomery County last week until the Illinois and Georgia motions are resolved.

Atlanta attorney David Worley of Evangelista Worley, who with partner James Evangelista represents the counties in all three suits, referred a reporter to the disqualification motions. Milberg Phillips Grossman in New York also serves as plaintiffs counsel in all three cases. 

The plaintiff firms also have partnered with Chicago firms Kennedy Watkins and Wexler Wallace in the Illinois case and with the Cochran Firm and Thompson Kennedy Sampson & Tompkins in Atlanta.

Goodwin Procter and Bryan Cave referred questions to Bank of America spokesman Bill Halldin, who declined to comment. 

But bank lawyers contended in opposing disqualification that once Goodwin learned the identities of witnesses, who were not identified in the original complaints, they contacted them about their declarations. The law firm said it had no attorney-client relationship with any of the witnesses until after it secured the new, often contradictory declarations. 

Goodwin also claimed that "where appropriate," firm lawyers "disclosed the theoretical risk that such a conflict could arise in the future" if the plaintiff counties challenged the recanted declarations. But the law firm claimed the witnesses all agreed that Goodwin could terminate its representation of them and continue to defend the bank if a conflict arose.