Posted Jan 17, 2013 04:42 pm CST
A former partner of Dewey & LeBoeuf has won a round in an unusual legal case against the bank that made him a personal loan to finance his capital contribution to the now-defunct law firm.
A federal judge in New York on Wednesday nixed a summary judgment motion by Citibank on Steven Otillar’s counterclaims. They seek to have the $209,000 loan cancelled, due to the bank’s alleged failure to disclose to Otillar that Dewey was on shaky financial footing at the time he took out the loan, Reuters reports.
Citibank, which sued Otillar last year after he allegedly defaulted on the loan, has argued that the bank had no duty to to disclose to a partner the financial situation of his own law firm, even if it had knowledge that Dewey was in a death spiral, which Citibank has not admitted. A lawyer for the bank did not respond to a request for comment from the news agency.
U.S. District Judge Louis Stanton called it “doubtful” that Otillar could prove, based on what has been presented so far in the case, 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.” However, he said Otillar nonetheless deserves “a fair opportunity to make that showing.”
Otillar moved to Akin Gump Strauss Hauer & Feld last year shortly before Dewey filed for Chapter 11 bankruptcy.
Additional and related coverage:
ABAJournal.com: “Former Dewey Partner Alleges He and Others Were ‘Fraudulently Induced’ to Get Citibank Loans”
ABAJournal.com: “Citibank Says It Had No Duty to Warn Ex-Partner About Dewey Finances”
ABAJournal.com: “Ex-Partners’ Suit Says Citibank Urged Personal Loans as Howrey Overspent Line by ‘Incredible’ $23M”