## Facts

- American Diversified Savings Bank (ADSB), a California savings institution, sponsored real-estate limited partnerships to raise investor funds.
- ADSB’s principals allegedly inflated asset values and profits and maintained fraudulent internal records used to market the partnerships.
- O’Melveny & Myers served as outside counsel to ADSB and prepared offering and transactional documents used to solicit investors.
- The receiver alleged the law firm incorporated or repeated ADSB’s false financial data in those documents without adequate investigation or correction.
- ADSB became insolvent; the FDIC, as receiver, sought to recover losses by suing the law firm under California tort theories.
- The district court granted the firm summary judgment; the FDIC appealed, and an early Ninth Circuit decision left the district court’s disposition essentially intact at that stage.

## Issues

1. Whether the FDIC, as receiver stepping into the failed bank’s position, could pursue California tort claims against the bank’s former outside counsel for negligence, negligent misrepresentation, and breach of fiduciary duty arising from the bank’s fraudulent syndications.
2. Whether the fraudulent knowledge and conduct of ADSB’s controlling officers were imputable to ADSB and therefore to the FDIC as receiver, barring recovery through estoppel or in pari delicto-type defenses.
3. Whether, given imputation and related defenses, any genuine dispute of material fact remained or the law firm was entitled to judgment as a matter of law.

## Decision

- The district court entered summary judgment for O’Melveny & Myers and dismissed the receiver’s claims.
- The court treated the FDIC as acquiring only the bank’s rights and being subject to the same defenses that would have applied against ADSB.
- Applying California agency principles, the court imputed the officers’ fraud and knowledge to ADSB and concluded the bank could not recover from a third party for consequences of fraud committed by its own controlling agents.
- Because imputation and estoppel defeated the asserted tort claims, the court found no triable issue warranting trial.
- In the early appeal reported at 797 F.2d 817, the Ninth Circuit addressed procedural/jurisdictional matters in the litigation’s early posture and did not displace the district court’s imputation-and-estoppel framework at that stage.

## Legal Principles

- A federal receiver generally “steps into the shoes” of the failed institution for purposes of pursuing state-law causes of action and takes the claims subject to defenses available against the institution.
- Under California agency and corporate law, the knowledge and misconduct of corporate officers acting within the scope of their authority are ordinarily imputed to the corporation.
- When a corporation’s own controlling agents perpetrate a fraud, defenses such as estoppel and in pari delicto may bar the corporation (and a receiver standing in its place) from shifting resulting losses to third parties through tort claims.
- Summary judgment is appropriate where imputation and related defenses establish a complete bar to liability as a matter of law and eliminate any genuine dispute of material fact.

## Conclusion

The district court held that the FDIC, suing as receiver under California tort theories, was barred from recovering against the bank’s outside counsel because the bank’s insiders’ fraud was imputed to the bank and thus to the receiver, supporting estoppel-based defenses and warranting summary judgment; the early Ninth Circuit appeal did not alter that posture.


Fed. Deposit Ins. Corp. v. O’Melveny & Myers, 577 F. Supp. 1449 (C.D. Cal. 1984), aff’d, 797 F.2d 817 (9th Cir. 1986)