O’Melveny tries to end 5-year malpractice claim saga

O'Melveny & Meyers LLP has taken another step toward a possible conclusion of a five-year legal malpractice claim saga, after attorneys representing the firm filed a motion for summary judgment this week.

The original complaint was brought by Jeffrey I. Golden, a Chapter 7 trustee who claimed the firm improperly represented both disgraced securities trader Peter J. Eichler Jr. and a company he cofounded, Aletheia Research and Management Inc. Golden v. O'Melveny & Meyers LLP, 2:14-cv-08725-CAS-AGR (C.D. Cal., filed Nov. 10, 2014).

Golden claimed O'Melveny and two of its attorneys, Jorge J. deNeve and Steven J. Olson, engaged in "actual conflict of interest that existed as to the attorneys' joint representation of the debtor and the debtor's former co-founder." This alleged negligence and breach of fiduciary duties led to significant costs to Aletheia's shareholders and creditors, according to the complaint filed by attorneys with Brutzkus Gubner LLP in Woodland Hills.

The motion submitted Monday by O'Melveny's attorneys, led by Gibson Dunn & Crutcher LLP partner Kevin S. Rosen, noted most of Golden's causes of action have failed, leaving just three that were stayed pending an arbitration proceeding.

Rosen argued Golden's attorneys have failed to show that allegedly fraudulent transfers to O'Melveney involved the two attorneys named. He also wrote that the plaintiffs have failed to show Aletheia "did not receive reasonably equivalent value in exchange for the alleged attorneys' fees and costs paid to O'Melveny."

"The trustee's complaint, filed over five years ago, recklessly attacks defendants' ethics, integrity, and the quality of their legal work," Rosen wrote.

He added, "The undisputed facts show that O'Melveny was neither a statutory nor a nonstatutory insider. It was simply one of Aletheia's many outside counsel."

The case's origins began in 2006, when Proctor Investment Managers agreed to sell Aletheia's financial products in return for a stake in the company. But the partnership soured. In 2009, Proctor sued Aletheia and its cofounders, Eichler and Roger Peikin, for breach of contract.

The founders and the company then hired O'Melveny, eventually paying it $9.7 million, according to Golden's complaint. The firm withdrew its representation in 2012 after multiple attempts to reach a settlement. Working with different lawyers, Aletheia then settled the case for nearly $22 million.

But by then the company's problems had compounded. In 2012, Aletheia declared Chapter 11 bankruptcy, later converted into Chapter 7, and saw the Securities and Exchange Commission charge Eichler with illegally steering profits to certain clients. The agency barred Eichler from the securities industry in 2016.

The latest filing follows a fall of setbacks for Golden, a partner with Weiland Golden Goodrich LLP in Costa Mesa. In September, following a 12-day evidentiary hearing, arbitrator Gary A. Feess found the O'Melveny attorneys did not breach their duties.

U.S. District Judge Christina A. Snyder confirmed Feess' decision with a ruling on Nov. 1. She rejected Golden's claims that Feess was biased. Those allegations cited the fact that Feess' son, then a law student, had signed up for on-campus interviews with O'Melveny and Gibson Dunn. She wrote that even had Feess' son been hired -- he was not -- Feess would not have been forced to recuse himself barring additional evidence of a conflict.

Golden's lead attorney, Brutzkus Gubner partner Jerrold L. Bregman, did not return a call seeking comment Tuesday.