Federal Deposit Insurance v. O'Melveny & Myers

We are surprised to see this ease back from the Supreme Court, having previously disposed of it largely on state law grounds— or so we thought. The Court didn’t see it that way, suspecting us of having overlooked Erie R.R. v. Tompkins, 304 U.S. 64 , 58 S.Ct. 817 , 82 L.Ed. 1188 (1938), by “adopting a special federal common-law rule divesting States of authority over the entire law of imputation.” O’Melveny & Myers v. FDIC, — U.S. —, —, 114 S.Ct. 2048, 2053 , 129 L.Ed.2d 67 (1994). Had we done such a thing, we would deserve to be harshly judged, but we did not. Nothing in Section III of our earlier opinion, dealing with O’Melveny’s duty of care, 969 F.2d 744 , suggests we were applying federal law. To the contrary, we rejected one of O’Melveny’s arguments because “[n]o California cases advise us of an exception to the general rule that a lawyer has to act competently to avoid public harm when he learns that his is a dishonest client.” Id. at 748 (emphasis added).

Nor did we apply federal law in Part IV.A., where we held that the perfidy of ADSB’s principals does not estop the FDIC from bringing a claim against O’Melveny. The chief cases we relied on for this conclusion also come…