WASHINGTON - The Supreme Court on Monday agreed to hear a case against a failed thrift's law firm that could affect hundreds of pending and future cases against lawyers and accountants.
The Supreme Court agreed to review a decision by the federal appeals court in San Francisco that reinstated a government suit against O'Melveny & Myers, a Los Angeles law firm that represented a failed thrift's subsidiary when it issued $22 million in two limited real estate partnerships in 1985.
Forty-five days later, American Diversified Savings Bank, the state-chartered thrift parent, was declared insolvent by the Federal Home Loan Bank Board.
|A Landmark Case'
The case could affect $1.5 billion in federal claims against accountants and lawyers who represented failed thrifts and banks, a spokesman for the Federal Deposit Insurance Corp. said. The FDIC has 56 such suits pending.
"This is a landmark case for lawyers," said Arthur W. Leibold, a partner in the Washington office of Dechert Price & Rhoads, a Philadelphia law firm. "It could affect virtually every case against a professional, as well as cases against officers and directors."
The FDIC sued O'Melveny, alleging that the firm was negligent in preparing documents that were sent to investors about the partnerships because they didn't disclose the thrift's financial problems, which were related to fraud by American Diversified executives, the FDIC said.
O'Melveny claimed that it had no obligation to ferret out its client's fraud.