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LOS ANGELES � O’Melveny & Myers has replaced its own lawyers in a racial discrimination case against the firm after a federal judge ruled that its arbitration agreement had been found to be invalid and “unconscionable.” Last month, U.S. District Judge Florence-Marie Cooper of the Central District of California vacated an earlier summary judgment ruling in which she allowed the firm to move the discrimination claim to arbitration. Dagnea Teshome v. O’Melveny & Myers, No. 2:05-cv-03664 (C.D. Calif.). In her new order, the judge cited a 9th U.S. Circuit Court of Appeals decision finding O’Melveny’s arbitration agreement to be invalid and “unconscionable.” Davis v. O’Melveny & Myers, 485 F.3d 1066 (9th Cir.). That ruling, issued in May, is among the few appellate decisions involving an arbitration agreement at a law firm. “I have not seen that before,” said Steven Katz, a partner in the Los Angeles office of Thelen Reid Brown Raysman & Steiner. The facts of the 9th Circuit case are “something that employers and their lawyers are looking to.” O’Melveny now goes to trial on both cases. On Oct. 10, the firm replaced its lawyer in the more recent case, Matthew Eastus, of counsel to its Los Angeles office, with Nancy L. Abell, chairwoman of the employment law department at Paul, Hastings, Janofsky & Walker, and an associate, Cameron W. Fox, both in the Los Angeles office. Eastus and Abell did not return calls seeking comment. A call to Scott Dunham, the chairman of the labor and employment law department at O’Melveny who represented the firm in both cases, was referred to Martin Checov, general counsel to the firm. “The addition of outside counsel does not reflect any dissatisfaction with the excellent lawyers who have been handling the case to date,” Checov said. He said O’Melveny is considering petitioning the U.S. Supreme Court to overturn the ruling of the 9th Circuit, which he said “showed undue hostility to our program.” The 9th Circuit denied a petition to rehear the case this summer. ‘Grossly discriminatory’ Dagnea Teshome, an African-American and former database administrator at O’Melveny, sued the firm in May 2005 for racial discrimination and wrongful demotion, among other things. In the suit, Teshome said he had been given a negative annual performance review in 2003 after complaining to the firm’s chief information officer and director of human resources about his boss’s technical expertise. In his suit, Teshome called the review “grossly discriminatory.” He sent letters to the director of human resources, the chief operations officer and others complaining about the review. No one investigated the complaint, the suit says. The next year, the firm hired a non-African-American with less experience to replace him, according to the suit. In its motion for summary judgment, O’Melveny sought to remove the case from court on the ground that all employees, including Teshome, had received an interoffice e-mail about the arbitration agreement. Records show that Teshome opened that e-mail. Cooper granted the motion, which she vacated last month in light of the 9th Circuit decision. The 9th Circuit case, which involves a former paralegal at O’Melveny who sued for overtime wages, found several aspects of the arbitration agreement to be “unconscionable.” Procedurally, the “terms took effect three months after they were announced regardless of whether an employee liked them or not,” the ruling states. “An employee’s option was to leave and work somewhere else.” The court recognized that “employees must take it or leave it,” said Samuel G. Jackson Jr., managing partner of Jackson & Associates in Los Angeles, who represents Teshome. “They don’t have any power to negotiate over the arbitration provision.” Also, the agreement’s notice provision was “oppressive” because it forced an employee to make a claim within one year of becoming aware of the problem, the 9th Circuit ruled.

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