A heated dispute between Citibank and a former Dewey & LeBoeuf partner over what the bank claimed was his unpaid capital contribution loan was quietly resolved Wednesday when a Manhattan federal district court judge approved a settlement under which the feuding parties agreed to drop their dueling lawsuits.
Citibank initiated the standoff by suing Houston-based energy lawyer Steven Otillar in New York state court on May 31, 2012, just weeks after he left Dewey for Akin Gump Strauss Hauer & Feld and three days after the firm filed for bankruptcy protection. Citi maintained at the time that Otillar owed it $209,670 in connection with a $207,000 loan he took out nine months after joining Dewey in January 2011 from Baker & McKenzie.
Otillar fought back aggressively last August with a countersuit filed in federal district court in New York, where the case had been moved, that accused Citi and Dewey of actively defrauding not just him and his wife—whom the bank also named in its suit—but also other lateral hires by failing to disclose the depths of the firm’s financial problems. Otillar further alleged that the bank had helped Dewey operate as a Ponzi scheme that continually brought in new partners and new capital to cover outsize compensation promises made to previous recruits and legacy partners.
Citi forcefully denied those allegations the following month, arguing in court filings that incoming partners were responsible for assessing Dewey’s fiscal condition themselves and that it was not the bank’s job to warn them of potential problems.
Fierce rhetoric aside, neither party can claim victory. The one-paragraph stipulation filed Wednesday ending the dispute, signed by lawyers on both sides of the litigation and U.S. District Judge Louis Stanton, says that the suits are being dismissed with prejudice and "without costs or expenses to any party."
Citi’s attorney, Michael Luskin of Luskin, Stern & Eisler, said Thursday that he could not discuss details of the settlement. Luskin confirmed that Otillar is the only former Dewey partner who has been sued by Citi for an unpaid loan, though, as The Am Law Daily has previously reported, several partners received letters from the bank demanding that their loans be repaid in the wake of the firm’s collapse.
A Citi spokeswoman said the bank is "pleased with the decision."
Helen Davis Chaitman, who represented the Otillars, declined to comment. Otillar, reached by email, said he was in Brazil and also had no comment.
Citi is one of two financial institutions—Barclays Bank is the other—that operated formal loan programs for Dewey partners in the years prior to the firm’s failure. Another former Dewey partner, entertainment lawyer L. Londell McMillan, is waging his own battle over an allegedly unpaid loan after Barclays sued him in London to recover $540,000 the bank claims he borrowed in 2010. In February, McMillan sued Barclays in New York federal district court "to challenge a fraudulent scheme orchestrated and arranged" by Barclays and Dewey management that he says led to a loan being signed in his name without his approval, after he had already tendered his resignation. Last month, McMillan added a handful of former Dewey leaders as defendants.
A third lawsuit involving defunct law firms and capital loans came to a conclusion in March, when a California state court judge dismissed a suit brought by former Howrey partners Stephen O’Neal and David Buoncristiani against Citi over unpaid loans totaling $315,000 and $420,000, respectively. In throwing out the suit, which claimed the bank defrauded O’Neal and Buoncristiani by hiding the now-defunct firm’s true financial state,  Superior Court Judge Peter Busch in San Francisco ruled "the bank owed the plaintiffs no duty of disclosure."