By Casey Sullivan
NEW YORK, Jan 16 (Reuters) - A New York federal judge on
Wednesday ruled that a former partner of the defunct law firm
Dewey & LeBoeuf can proceed with counterclaims against Citibank
in a dispute over the repayment of a $209,000 loan the bank made
to finance the lawyer's capital investment in the firm.
In the lawsuit, filed in New York in May 2012, Citibank
claimed that former Dewey partner Steven Otillar defaulted on
the loan when he left the firm to join Akin Gump Strauss Hauer &
Feld two weeks before Dewey filed for Chapter 11.
Otillar and his wife, Laura, filed an opposing motion in
August, after Citibank asked a judge to grant summary judgment
on grounds that Otillar has no legal grounds to claim he doesn't
owe payment on the loan. In a 23-page motion, the couple claimed
that Citibank had a duty to disclose its alleged knowledge of
Dewey's true financial condition to Otillar and other partners
who received loans from the bank.
Citibank has argued that, even if the bank had knowledge of
the firm's true financial condition, it had no fiduciary duty to
disclose to Otillar confidential information it had obtained
On Wednesday, Judge Louis Stanton denied Citibank's motion
for summary judgment. He said in his ruling that it was
"doubtful" that the Otillars so far had shown proof that
"Citibank had sufficient knowledge that Dewey's financial
situation was so grave that its non-disclosure defrauded the
Otillars into signing the loan agreement."
Stanton said, "Nevertheless, the Otillars deserve a fair
opportunity to make that showing, in a full legal pleading
setting forth that and the other elements of their case."
Otillar and his lawyer declined to comment, as did a
Citibank spokeswoman. A lawyer for Citibank did not respond to a
request for comment.
Dewey once employed more than 1,000 lawyers in 26 offices
worldwide. Its demise has largely been attributed to
compensation guarantees the firm made to a significant portion
of its partners.
Otillar is believed to be the only former Dewey partner to
be sued for defaulting on his loan. It could not be determined
why he may have been singled out.
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