Dogecoin plaintiffs lawyers move to oust Musk, Tesla counsel after ‘leaked’ sanctions letter

(Reuters) – I’m still scratching my head over a new motion in a class action accusing Elon Musk and Tesla of fleecing investors in the cryptocurrency Dogecoin out of billions of dollars by selling off coins after Musk’s hype drove up their value.

On its face, the motion, filed by plaintiffs counsel Evan Spencer of Evan Spencer Law, seeks to disqualify Quinn Emanuel Urquhart & Sullivan and Tesla in-house lawyer Allison Huebert from representing either Tesla or its CEO. Right now, Quinn Emanuel and Huebert represent both Musk and the electric carmaker in the securities fraud case.

Spencer argues that Musk and the company have conflicting interests because Musk allegedly acted alone, mostly through his Twitter account, to manipulate the Dogecoin market. Spencer asserts that Tesla, which he accuses of owning a crypto wallet that sold Dogecoin, might have a cause of action against Musk, making their conflict irreconcilable even though New York allows lawyers to represent companies and their officers concurrently.

That’s not the most intriguing part of the filing, though.

A big chunk of the motion is dedicated to Spencer’s rebuttal of a June 15 New York Post story that he attached as an exhibit. The Post story, in turn, describes a June 9 letter to Spencer from Musk and Tesla defense counsel Alex Spiro of Quinn Emanuel, who threatened to seek sanctions against Spencer for filing a “demonstrably false” amended complaint.

In the June 9 letter, which Spencer also filed as an exhibit to his new motion, Spiro said Spencer was well aware, before he filed a third amended complaint earlier this month, that there was no factual basis for the allegation that Musk and Tesla owned crypto wallets that sold Dogecoin when prices were peaking. Spiro claimed that neither Musk nor Tesla owned the wallets cited in Spencer’s complaint — and that the complaint was fatally flawed because neither the company nor its CEO have ever sold Dogecoin.

“No competent attorney,” Spiro told Spencer in the letter, “could form a reasonable belief that the third amended complaint is well-grounded in fact.”

Spencer’s new disqualification motion accused Spiro of leaking his June 9 letter to the New York Post. That conduct, Spencer said, “violated a myriad of ethics rules and demonstrated that [Quinn Emanuel’s] continued defense of this case poses a serious risk of trial taint.”

The motion, which called the Spiro letter a “brazenly false and bizarre” attack on Spencer’s integrity, asserted that Quinn Emanuel must be sanctioned for interfering with Spencer’s client relationships by leaking Spiro’s letter to the Post.

Spencer said that after the Post story ran, he “needed to perform considerable damage control” with a client who read the article because his client could not believe “that Mr. Spiro, who is a partner in Quinn Emanuel and a lawyer for celebrity A-list clients, would lower himself to lying in the press.”

I’ll pause here to note that I reached out to Spiro, Spencer, Tesla lawyer Huebert and a company spokesperson. None of them responded. In a motion to dismiss a previous version of the lawsuit, Quinn Emanuel argued on behalf of Musk and Tesla that the entire case was “a fanciful work of fiction that fails to state any actionable claim.” Musk’s “innocuous and often silly tweets” about Dogecoin, according to defense lawyers, cannot possibly be considered anything other than “quintessential puffery.”

I won’t venture a guess about the ultimate fate of Spencer’s motion to disqualify Quinn Emanuel, although it does seem to me that his allegation of interference with his client relationship via a news story is a stretch. (Spencer cited a case in which a defense lawyer was disqualified for denigrating a plaintiff’s lawyer during a 90-minute meeting with the plaintiff outside the presence of his counsel.)

What struck me about the motion, though, is that it draws new attention to the very same article that troubled Spencer’s client — and puts the accusatory Spiro letter that prompted the Post story into the public record. Moreover, by going on the attack against Quinn Emanuel and Spiro in a closely watched case, Spencer pretty much guaranteed an avid audience for both.

The Post story will now be read by people who never saw the original. And Spiro’s letter, which was quoted sparingly in the Post story, can now be read in its entirety by anyone who’s interested.

I can certainly understand why Spencer was angry about the Post story and blames Quinn Emanuel for leaking a sanctions threat that was not publicly docketed in the case (until Spencer’s own filing). Spencer seems to have no doubt that Quinn Emanuel was responsible for the leak, accusing the firm of “dirty” tactics.

There’s no doubt that by fashioning his refutation of the article and Spiro letter as a motion to disqualify Quinn Emanuel Spencer assured a big readership for his contention that the amended complaint is solid.

The question is whether he’s done the case more harm than good by amplifying defense claims that it’s not.

I specifically asked Spencer that question in an email. I also specifically asked about Spiro’s assertion in the June 9 letter that the insider trading case is fatally flawed because Musk and Tesla never sold Dogecoin. Spencer did not respond. In the disqualification motion, he said there’s no reason to trust Spiro’s representations in the letter, which “contains no affidavits or evidence in support and consists entirely of hearsay and arguments.”

Spiro’s June 9 letter threatened that Musk and Tesla would sock Spencer with a motion for sanctions under Rule 11 of the Federal Rules of Civil Procedure if he did not withdraw the amended complaint by June 12. As of Tuesday afternoon, there’s no such motion in the docket.

I can’t wait to see how Quinn Emanuel, Tesla and Musk respond to Spencer’s defiance. The one sure thing in this case is that whatever they do, there will be headlines.

Read more:

Elon Musk is accused of insider trading by investors in Dogecoin lawsuit

Elon Musk seeks to end $258 billion Dogecoin lawsuit

Tesla’s Elon Musk found not liable in trial over 2018 ‘funding secured’ tweets

Reporting By Alison Frankel; editing by Leigh Jones

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