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Federal Deposit Insurance Corp. v. O'Melveny & Myers
United States Court of Appeals for the Ninth Circuit
577 F. Supp. 1449, 1450-53 (N.D. Cal. 1984), 797 F.2d 817 (9th Cir. 1986)
Sahni and Day formed American Diversified Savings Bank (ADSB) to purchase, develop, and sell real estate through limited partnerships sponsored by ADSB and its subsidiaries. ADSB’s holdings were insured by the Federal Savings and Loan Insurance Corporation (FSLIC), the predecessor to the Federal Deposit Insurance Corporation (FDIC) (plaintiff). ADSB retained the law firm of O’Melveny & Myers (O’Melveny) (defendant) to assist with the preparation of legal documents used to convince individuals and entities to invest in its business ventures. ADSB intentionally and fraudulently overvalued its assets and inflated profits. O’Melveny used the misrepresented data in the legal documents distributed to potential investors. The FDIC examined ADSB’s financial documents and concluded that the company was insolvent. Thereafter, the FDIC stepped in as receiver for ADSB and filed suit in federal district court against O’Melveny for professional negligence, negligent misrepresentation, and breach of fiduciary duty. The district court granted O’Melveny’s motion for summary judgment. FDIC appealed.
Rule of Law
Holding and Reasoning (Poole, J.)
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