By Casey Sullivan
(Reuters) - A former Dewey & LeBoeuf partner has resolved a dispute with Citibank after he accused the bank of defrauding him and his fellow partners when they signed up for a loan program to finance their capital contribution into the ailing firm.
Citibank sued former Dewey partner Steven Otillar in May 2012 for defaulting on a $209,000 loan that financed his capital in the now-defunct law firm. Otillar now works at the law firm Akin Gump Struss Hauer & Feld.
Otillar filed an opposing motion in August, claiming he did not owe Citibank payment and that the bank had "fraudulently induced" him and other Dewey partners to sign up for the capital loan program when it knew of the firm's precarious financial state. Otillar said Citibank had a duty to disclose whatever knowledge it may have possessed regarding Dewey's true financial condition to Otillar and other partners who received loans from Citibank.
In a single-paragraph order on Thursday, New York federal Judge Louis Stanton dismissed the case after Citibank and Otillar worked out a settlement. In his order, Stanton said that "all claims asserted by (Citibank) ... and all counterclaims asserted by the defendants against Citibank shall be and hereby are dismissed." He did not provide any further details.
The case had put the spotlight on disputes between law firm partners and banks over financing arrangements.
The settlement comes two months after similar fraud claims against Citibank were thrown out by a California judge. Two former partners of another defunct law firm, Howrey, sued Citibank in September 2011, accusing the bank of committing fraud and scamming partners into putting capital into the ailing firm despite knowing of the firm's weakened financial condition.
That lawsuit was tossed out on March 10 by Superior Court Judge Peter Busch, who said the bank owed no duty of disclosure to the partners, Stephen O'Neal and David Buoncristiani, about their firm's financial state.
Helen Davis Chaitman, a lawyer for Otillar, declined to discuss the terms of the Dewey settlement. "It's confidential," she said. Otillar did not respond to a request for comment.
Citibank spokeswoman Natalie Marin said of the dismissal: "We are pleased with the decision." Michael Luskin, a lawyer for the bank, added: "Case settled, action dismissed, Citi delighted. No further comment."
In Dewey's demise, at least one other mirroring lawsuit over a capital loan remains, but it is being waged against Barclays Bank , not Citibank. That lawsuit, which dates back to February, was brought by former Dewey partner and entertainment lawyer L. Londell McMillan, who accused Barclays and Dewey leaders of orchestrating a fraudulent scheme in connection with the capital loan program.
The case is Citibank, N.A. v. Otillar et al, No. 12-cv-05092.
(Reporting by Casey Sullivan in New York; Editing by Edmund Klamann)