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(Reuters) - Citibank C.UL is fighting claims the bank "fraudulently induced" former Dewey & LeBouef partners into signing up for a loan program that financed their capital in the failed law firm, despite knowing of Dewey's dire financial situation.
Former Dewey partner Steven Otillar made the claims in New York federal court last month in response to a Citibank lawsuit against him for defaulting on a $209,000 loan that financed his capital in the now defunct firm.
Citibank sued Otillar, who is now a partner at Akin Gump Strauss Hauer & Feld, in May for defaulting on the loan.
Otillar filed an opposing motion, after Citibank asked a judge to grant summary judgment, claiming Citibank had a duty to disclose its alleged knowledge of Dewey's true financial condition to Otillar and other partners who received loans from Citibank.
But Citibank fired back in a motion filed Wednesday, saying Otillar had failed to provide any factual basis for his claims that Citibank hid Dewey's financial condition from the partners.
"Otillar offers only his speculation that because Citibank was Dewey's longtime lender, it must have had information that was unknown and unavailable to Otillar," Citibank said in its motion.
Citibank argued that, even if the bank had knowledge of the firm's true financial condition, it had no fiduciary duty to disclose confidential information it had obtained from Dewey to Otillar.
The bank said it was incumbent upon Otillar to look into the financial stability of Dewey upon joining the firm in 2011.
"Having failed to ensure that the firm's finances were in order, Otillar cannot now be heard to complain that he was defrauded by Citibank for failing to disclose the firm's allegedly deteriorating financial condition," the bank said.
Otillar's lawyer, Helen Davis Chaitman, said in an email Friday she was "confident that Citibank's internal documents will prove our contentions."
Michael Luskin, a lawyer for Citibank, did not immediately respond to a request for comment. Neither did Otillar or a Citibank spokeswoman. A representative for Dewey's estate did not immediately return a request for comment.
Dewey once employed more than 1,000 lawyers in 26 offices worldwide, but in May it became the largest U.S. law firm to file for bankruptcy. Its demise has largely been attributed to compensation guarantees the firm made to a significant portion of its partners.
Otillar is believed to be the only former Dewey partner to be sued for defaulting on his loan, although it could not be determined why he may have been singled out.
It is now up to a judge to decide whether Otillar's case can proceed to trial.
The case is Citibank, N.A. v. Otillar et al, No. 12-cv-05092.
Reporting By Casey Sullivan; Editing by Noeleen Walder and Paul Tait