Law Firm Will Fight Court Order : Faces Loss of $2 Million in Fees in Heritage Bank Case

A major law firm faced with losing $2 million or more in future fees in ongoing litigation over the 1984 closure of Heritage Bank plans to fight a court order barring it from the case because of a potential conflict of interest.

The firm--Finley, Kumble, Wagner, Heine, Underberg, Manley & Casey--was ordered by Orange County Superior Court Judge Robert C. Todd to stop representing the Federal Deposit Insurance Corp. in its 14-month-old litigation against officers and directors of the failed, Anaheim-based bank.

The order came after the firm already had billed the FDIC for about $1.5 million, said sources who estimated that the complex case could last three years or more in the lower courts.

In his ruling Monday, Todd found that the law firm’s conflict began last July when its Los Angeles office hired a lawyer, Jeffrey A. Tisdale, who had been working on regulatory matters for one of the defendants the FDIC is suing in the Heritage Bank case.

Tisdale’s client, Orange Coast Savings & Loan Assn., is named in the suit because several of its directors at the time were major owners and directors of Heritage. Tisdale allegedly continued to handle some matters for Orange Coast, now called Charter Savings Bank, for a week or so after joining Finley Kumble.

Attorneys for Orange Coast filed the challenge, alleging that Tisdale possesses inside knowledge and that, by working for the FDIC’s legal firm, he could violate his attorney-client relationship with the S&L.;

Finley, Kumble, the second largest law firm in the nation with more than 460 lawyers in five cities, will decide within a week if it will ask an appellate court to reverse Todd’s order or take some other action, said Richard G. Osborn, a litigation partner at the Los Angeles office of the New York-based firm.

Osborn confirmed that his firm has billed the FDIC for 12,000 hours of work since the case began but would not reveal the amount the firm has been paid. FDIC officials did not respond Thursday to a request for the information.

The case is significant because several of the defendants have said publicly that they want to turn the litigation into a test case against the power and procedures of the FDIC.

The FDIC is suing 17 individuals, 15 companies and three family trusts that owned, operated or otherwise were affiliated with the Heritage Bank. It has accused the defendants of fraud, negligence and breach of fiduciary duties that led to the bank’s demise.