Latham & Watkins and Manatt Phelps & Phillips are the targets of a malpractice lawsuit filed by ECC Capital Corp., which accuses the firms of botching a deal to sell its mortgage-origination business and a subprime-loan portfolio to Bear Stearns & Co.

The deal in question closed in 2007, but the two companies wound up battling over it in court until reaching a settlement and finalizing terms last July. Now that the legal wrangling with Bear Stearns is over, ECC Capital is going after the law firms that represented it during the transaction.