O’Melveny prepares to seek summary judgment in almost concluded malpractice case

O'Melveny & Myers LLP said in court papers that an arbitrator rejected a Chapter 7 trustee's allegations it had committed legal malpractice and should be precluded from making related arguments.

The firm made the disclosure in its answer filed this week to a lawsuit stemming from the bankruptcy

Considering many of the claims have already been ruled on, Monday's answer appeared to have been filed as a procedural formality and signals O'Melveny's intention to file a motion for summary judgment on the remaining bankruptcy related claims. O'Melveny is represented in the matter by Gibson, Dunn & Crutcher LLP partner Kevin S. Rosen.

Filed in 2014 by former O'Melveny client Jeffrey Golden, the Chapter 7 trustee of the now defunct research and management firm Aletheia, the suit alleges O'Melveny ignored a conflict of interest in its duel representation of Aletheia and its founder, Peter J. Eichler Jr. The suit also says the law firm breached its fiduciary duties in a contract dispute with another investment firm.

After arbitrator Gary A. Feess ruled in O'Melveny's favor in September, finding attorneys Steven Olsen and Jorge deNeve had properly represented Aletheia, U.S. District Judge Christina Snyder upheld the ruling in November.

"The trustee's portrayal of events would make a compelling tale if it were supported by persuasive evidence, but it is not," Fees said in his award ruling. "The arbitrator finds that ... respondents acted properly in pursuing their clients' aligned interests in that lawsuit."

Unwilling to give up, Golden first claimed the arbitrator was biased. He had argued the arbitrator ruled against him because after he raised concerns about the arbitrator's son applying for a job at Gibson, Dunn that firm decided not to allow the young lawyer to interview for the job.

Snyder later rejected these allegations as well.

Golden is appealing the ruling to the 9th U.S. Circuit Court of Appeals.

The malpractice claims arose from a 2012 litigation between Aletheia and Proctor Investment Managers who had a 2006 business deal in which Proctor would sell Aletheia's investment products in return for an equity stake. However in 2007, the two companies' relationship soured and Aletheia delivered to Proctor a notice of breach based on its alleged failed effort to generate sales for Aletheia.

After multiple attempts to settle with Proctor, O'Melveny withdrew from representing Aletheia in 2012 and another firm took its place. Shortly after Aletheia filed for bankruptcy in 2012 it settled with Proctor for almost $22 million.

Dissatisfied with his representation, Golden, as the Chapter 7 trustee, filed a legal malpractice suit against O'Melveny claiming it "fail[ed] to properly address the conflict issue," that the attorneys were "guided by their own economic self-interest," "breached their fiduciary obligations owed to [Aletheia]," "implemented a litigation strategy that favored Eichler over the interests of [Aletheia]," and that this strategy "eventually led to [Aletheia's] insolvency and other damages."

Snyder briefly lifted a stay previously put in place on three claims relating to bankruptcy issues. In the event O'Melveny's motion for summary judgment is denied, the court will set a status conference to determine whether the stay shall thereafter remain in force.