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San Fran Lawyer on the Hook to Ousted Partner

(CN) - A lawyer found to have used firm money to finance his luxury lifestyle should be liable to a former partner owed $2 million, a California appeals court ruled.

Michael Danko worked with the law firm of O'Reilly & Collins from 1995 until an acrimonious split in 2009.

After Danko sued name partner Terry O'Reilly and the firm for breach of contract, wrongful discharge and willful failure to pay wages, the jury found that the firm had fired Danko to avoid paying $2.4 million that he had earned for his services.

Though a San Francisco jury awarded Danko that amount, plus interest and attorneys' fees, the court also entered judgment for O'Reilly as an individual, making the firm responsible for the judgment.

Danko then moved to include O'Reilly as an individual in an amended judgment, based on O'Reilly's use of firm funds to avoid paying Danko what he was owed.

He told the court: "Thus, in a concerted effort to wring from the firm every last dollar, he [O'Reilly] wrote firm checks to others to: build and furnish for him and his wife a luxury ranch in Idaho; buy expensive vintage cars here and abroad in furtherance of his racing hobby; buy fine wine, entertainment systems and clothes; pay taxes and insurance on his home in San Francisco; fly around on private jets; take ski vacations; and travel to rugby matches; pay for vacations and shopping sprees for his current spouse; and fund his personal trust and retirement accounts, and pay the living expenses of various family members."

O'Reilly countered that the firm's involuntary bankruptcy, which Danko had initiated, meant that "well over $5.8 million will be made available to the assignee to satisfy creditor claims, including Mr. Danko's," the court noted.

The trial court approved amending the judgment, agreeing "that Mr. O'Reilly has treated the corporation's assets as his own."

A three-person panel with the First Appellate District affirmed

"Although the bankruptcy court might initially have been sympathetic to this view when it denied Danko's motion to hold that the amended judgment was outside the stay, the court ultimately came to the opposite conclusion," Justice James Richman wrote for the panel.

The Nov. 25 opinion was published on Dec. 18.

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