OTHER NEWS - June 30, 1992

Court Reinstates Suit Against O’Melveny & Myers: The U.S. 9th Circuit Court of Appeals reinstated a malpractice lawsuit against California’s fifth-largest law firm for its work on two real estate syndications for now-defunct American Diversified Savings Bank in Costa Mesa. The appellate court reversed a lower court’s dismissal of a suit brought by the Federal Deposit Insurance Corp. The higher court found that O’Melveny & Myers had a duty to protect the savings and loan from liability by avoiding possible false or misleading statements in two private-placement memorandums issued at the end of 1985. The securities documents were designed to induce investors to join in American Diversified real estate syndications, which closed only weeks before the thrift failed in February, 1986. The FDIC accused the law firm of failing to perform even routine investigation into the thrift’s financial health before issuing the memorandums.