By Amanda Bronstad

Brian Kabateck first met Vartkes Yeghiayan when he asked him to assist in a class action Yeghiayan had filed against New York Life Insurance Co.

The suit asserted a novel theory: Descendants of the 1.5 million Armenians who were killed between 1915 and 1923 in what is now Turkey were owed payments on life insurance policies held by the victims. Kabateck took the case and brought in high-profile lawyer Mark Geragos, who had known Yeghiayan for decades and was a family friend of the lead plaintiff.

The trio reached a $20 million settlement in 2004. In 2005, they snagged another worth $17.5 million in a similar case against French insurer Axa S.A. They designated millions of dollars from these recoveries to dozens of charitable organizations devoted to Armenian communities. The three lawyers -- all of whom are of Armenian descent -- went on to file similar suits against Deutsche Bank A.G. and Munchener Ruckversicherungs-Gesellschaft A.G. (Munich Re).

The formidable legal team has since been ripped apart, accusing one another of financial mismanagement and theft. Yeghiayan has accused Geragos and Kabateck of mismanaging the Axa settlement trust account; Geragos and Kabateck have sued Yeghiayan, claiming that he concocted charitable organizations to siphon $1 million out of the Armenian genocide settlements for himself.

The future of the litigation is uncertain. Yeghiayan has teamed with new lawyers on the pending cases, some of which are now before the 9th U.S. Circuit Court of Appeals. Michael Bazyler, a professor at Chapman University School of Law and an expert on the Holocaust and human rights who has been advising Yeghiayan, expressed confidence in the litigator. "He's the father of this litigation," Bazyler said of Yeghiayan. "And I think he has a really superb team of lawyers."

For their part, Kabateck and Geragos said they have been saddened by the course of events. "I'd never seen anything overt from this guy to make me question his character," Kabateck said of Yeghiayan. "I'm now shocked and extremely disappointed."

"His strength was research"

From the beginning, Yeghiayan, of Yeghiayan Law Corp. in Glendale, Calif., served as the researcher for the legal team behind the Armenian genocide cases, Kabateck said. "His strength was research," said Kabateck, a partner at Kabateck Brown Kellner in Los Angeles. "He had a network of people around the world and all the different locations where there might be historical documents concerning the Armenian genocide."

The trio had some help from the California Legislature, which extended the statute of limitations until 2010 for heirs of Armenian genocide victims to bring claims for unpaid benefits against insurance companies. (Turkey denies that the turmoil attending the fall of the Ottoman Empire constituted genocide.)

After settling the New York Life and Axa cases, the trio expanded their repertoire to include banks, suing Deutsche Bank and Dresdner Bank A.G., now part of Commerzbank A.G., seeking deposits, interest and profits allegedly seized by the Turkish government and transferred to the German banks. They also sued Munich Re, another insurer.

But the cases stumbled. On July 30, 2010, U.S. District Judge Margaret Morrow in Los Angeles granted summary judgment for the banks, concluding that the plaintiffs lacked sufficient documentation. In the Munich Re case, the 9th Circuit found in 2009 that the California law on which the claims were based conflicted with, and were pre-empted by, the foreign affairs doctrine, which holds that the federal government holds supreme power in global affairs. The court noted that both Presidents Bill Clinton and George W. Bush had opposed legislative efforts to recognize the Armenian genocide. The plaintiffs had argued that Munich Re's argument was based on semantics and presidential statements, not official foreign policy. That, they argued, was at best ambiguous -- particularly under the Obama administration.

Meanwhile, the three lawyers had begun to wind down distribution of the Axa recovery to claimants. Under the settlement terms, whatever remained unclaimed would go to charitable institutions, which already had been allocated $3 million from the settlement.

By early 2010, more than $8.5 million had been distributed with nearly $2.9 million more unclaimed, Kabateck said. Each of the three lawyers was in charge of designating separate charitable organizations that would receive the money.

In March of that year, U.S. District Judge Christina Snyder ordered that more than $952,000 of the remaining money be given to Yeghiayan for his selected charities and more than $1.9 million to Kabateck and Geragos for theirs. The money was placed in separate accounts.

In June, Yeghiayan sought an audit of the settlement fund, accusing Kabateck and Geragos in a court filing of using the money for "petty cash" and lavish trips to Europe. He maintained that the fund had been poorly managed, leading to a "flood of complaints" at his office.

In court papers, Kabateck and Geragos called Yeghiayan's accusations "baseless, malicious and defamatory." "Mr. Yeghiayan has crossed far beyond the line of conduct that is permissible in this District," they wrote. "He has made vicious and scurrilous attacks against Mr. Kabateck and Mr. Geragos, two attorneys with impeccable national reputations."

In an interview, Geragos expressed surprise at Yeghiayan's accusations, which he called "utter nonsense." "He was making allegations which were summarily rejected," said Geragos, noting that Snyder denied Yeghiayan's request for an audit. "There is no truth to them and the allegations are demonstratively false."

Then, in October, Kabateck and Geragos, while conducting due diligence, began to question one of the charities that Yeghiayan had designated in the New York Life case called the Center for Armenian Remembrance. Snyder had approved Yeghiayan's request that the organization receive $200,000 from the settlement. "When we started looking into it, one of the first things we found was the Center for Armenian Remembrance operated out of his law firm," Kabateck said. "Our initial thought was, 'Maybe he's loaned them space.' Then we got the checks he wrote to this charity and one of them is endorsed by his associate."

In their suit, filed on March 11, Geragos and Kabateck claim that Yeghiayan made up the Center for Armenian Remembrance and another charity in the Axa case, Conservatoire de la Memoire Armenienne, to pay personal and law firm expenses and to hide money from creditors, including the Internal Revenue Service. Both charities received additional funds in March 2010. Kabateck and Geragos alleged that several other charities could be fictitious.

Their suit lists a series of disciplinary measures that the State Bar of California has brought against Yeghiayan and his attorney wife, Rita Mahdessian, also named as a defendant. In 1996, Yeghiayan was placed on one year's probation for failing to reimburse a client's insurer for more than five years following a settlement, reported on the Bar's website. He misappropriated money from his client trust account in the same case, according to the Bar. Mahdessian's license was suspended for two years after she pleaded guilty in 1994 to possessing fraudulent immigration amnesty documents.

When asked during an interview why they worked with Yeghiayan despite his disciplinary problems, Geragos and Kabateck said they chose to overlook them. "The case and the cause and what we were pursuing was and remains bigger than the lawyers involved in this case," Kabateck said.

Yeghiayan, in an interview shortly after the suit was filed, told The National Law Journal that the allegations regarding the charities aren't true. "There's absolutely no merit in what they're saying," he said. "I want to say this is in retaliation for a number of things that I've done to them. And this is how they get back to me."

He continued to assert that there needed to be an accounting of the Axa settlement money. He filed court papers in March opposing a move by Geragos and Kabateck to close the settlement fund.

Calls placed to Yeghiayan's office this month were referred to his lawyer, Roman Silberfeld, managing partner of the Los Angeles office of Robins, Kaplan, Miller & Ciresi. Silberfeld said he was retained to represent Yeghiayan in the suit filed by Kabateck and Geragos and in the Axa dispute. "I hope it just ends up being a misunderstanding," he said of the attorney rift. "My own view of this is that lawyers should try to get along with one another and especially lawyers that were on the same side previously. My hope is that this is a failure of communication and nothing more."

In the Deutsche Bank case, Yeghiayan paired with lawyers from Schwarcz, Rimberg, Boyd & Rader in Los Angeles to file his Feb. 7 brief before the 9th Circuit. Lead counsel K. Lee Boyd, a partner at the firm, did not return a call for comment. Boyd, a former professor at Pepperdine University School of Law, specializes in human rights and Holocaust restitution litigation.

High Court Bound?

Yeghiayan and his team have filed three other cases without Geragos and Kabateck, including a lawsuit against the Republic of Turkey and two banks. Kabateck and Geragos have filed their own suit against Turkey.

Despite the rift, the trio remained together long enough in the Munich Re case to win reversal of the 9th Circuit's 2009 decision. On Dec. 10, 2010, the same appellate panel overruled its own opinion, finding that there is no clear foreign policy forbidding California from enacting a law that recognizes the Armenian genocide.

Munich Re has filed a petition for rehearing en banc before the 9th Circuit. Munich Re cites the U.S. Supreme Court's 2003 ruling in American Insurance Association v. Garamendi. The justices ruled that a California law requiring insurers to provide records of policies that could be used in California lawsuits by descendants of Holocaust victims was pre-empted by executive agreements between the United States, Germany and other countries mandating that such disputes be resolved through an administrative process.

Amicus briefs have been filed by the Republic of Turkey, the Armenian Bar Association and the Center for the Study of Law and Genocide at Loyola Law School, Los Angeles. Kabateck and Geragos filed their response on Feb. 1. A few weeks later, the lead plaintiffs fired them, keeping Yeghiayan as sole counsel.

The case could have wide implications. "There's a high likelihood one way or the other that one side would take it to the Supreme Court," said Neil Soltman, a partner in the Los Angeles office of Mayer Brown, who represents Munich Re.

If that happens, Kabateck said, he and Geragos might be back in the case. "That's not something that should be left to amateurs, and we've been litigating these cases for 11 years," he said.

National Law Journal; April 19, 2011