(Courtesy photo)O'Melveny Fends Off Bankruptcy Trustee's $54M Malpractice Claim
A federal judge rejected arguments that an arbitrator was biased against the trustee because the arbitrator's son couldn't get a summer associate position job at either O'Melveny & Myers or Gibson, Dunn & Crutcher.
November 05, 2019 at 11:09 AM
4 minute read
A federal judge in Los Angeles on Monday confirmed an arbitration award absolving O'Melveny & Myers of claims that it bungled a nearly decade-old representation, defeating a $54 million lawsuit filed by its ex-client's Chapter 7 trustee.
In her 34-page ruling dated Friday, District Judge Christina Snyder rejected the contention by the Chapter 7 trustee of Aletheia Research and Management that the arbitrator was biased because he blamed the trustee for his son's failure to secure summer associate positions at both O'Melveny and Gibson, Dunn & Crutcher, the firm representing O'Melveny and its lawyers in the malpractice dispute.
Snyder wasn't persuaded by the arguments of Jeffrey Golden, a partner at Weiland Golden Goodrich serving as Aletheia's Chapter 7 trustee. Even if O'Melveny or Gibson Dunn had chosen to hire arbitrator Gary Feess' son, that would not "have necessarily required the arbitrator's recusal pursuant to either of the two federal statutes governing recusal of judicial officers," Snyder wrote.
Snyder pointed to prior court decisions in which judges and arbitrators were not forced to recuse themselves simply because their children were employed by a law firm that was involved in the case.
"Because the standard for determining partiality for arbitrators is more stringent than that for judges, Golden therefore fails to establish the 'evident partiality' required for vacatur," Snyder wrote.
Kevin Rosen, a Gibson Dunn partner who led O'Melveny's defense team, praised Snyder's ruling in a statement: "We are gratified by the federal court's order confirming the conclusion of the arbitrator that all of the trustee's allegations against O'Melveny and its lawyers were meritless," he said.
Snyder rejected all of Golden's attempts to vacate Feess' arbitration award, which found that O'Melveny and its two attorneys—Steven Olson and Jorge deNeve—conducted "themselves properly and in compliance with their ethical obligations throughout their representation of Aletheia and [Peter Eichler, the firm's principal founder and majority shareholder]."
Golden sued O'Melveny, Olson and deNeve, accusing them of mishandling a legal battle Aletheia had with Proctor Investment Managers, another investment firm, that began in late 2009. He alleged both legal malpractice and bankruptcy-related claims against O'Melveny, but Feess' arbitrator award and Snyder's ruling dealt only with the legal malpractice claims.
O'Melveny previously expressed confidence that the other three bankruptcy-related claims might be dismissed if Snyder upholds Feess' award.
In 2006, Aletheia and Proctor made a deal in which the latter would market and sell the former's investment products in return for an equity stake in the investment firm. But relations between the two firms collapsed a year later.
O'Melveny, which was already representing Aletheia in other litigation matters, including an investigation by the U.S. Securities and Exchange Commission, first got involved in the Proctor dispute in late 2009. At one point, Olson and deNeve left O'Melveny to join Aletheia.
By early 2012, O'Melveny withdrew from representing Aletheia after multiple attempts to settle with Proctor and another firm took over. Aletheia filed for bankruptcy in 2012. Shortly thereafter, Aletheia settled the lawsuit with Proctor by giving up its position and agreeing to give Proctor almost $21.8 million.
As the Chapter 7 trustee, Golden sued O'Melveny in November 2014, alleging that the firm should not have jointly represented Aletheia and Eichler in the Proctor litigation. In its motion seeking to vacate Feess' arbitration award, Golden's attorneys frequently refer to Eichler as a "looter."
Golden is represented by Steven Gubner, Jerrold Bregman and Jason Komorsky of Brutzkus Gubner. They did not return requests for comment.
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O'Melveny Duels With Bankrupt Ex-Client in $54M Malpractice Fight
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