Overview
In his latest MF Global ruling, issued today, Judge Marrero denied PriceWaterhouseCooper’s motion to dismiss a $1 billion malpractice and negligence suit brought by the bankrupt brokerage firm’s plan administrator. PwC had acted as an outside auditor and accountant for MF Global before it went bankrupt. The plan administrator alleged that PwC “engaged in ‘extraordinary and egregious professional malpractice and negligence.’” According to the complaint, MF Global relied on PwC’s advice in accounting for proprietary investments it had made in European sovereign debt that ultimately backfired and led to the firm’s bankruptcy in 2011. PwC moved to dismiss the claims on the grounds of in pari delicto, arguing that MF Global was equally guilty of malpractice because of its “business strategy and decision-making” in implementing PwC’s strategies. Judge Marrero held that PwC’s “broad reading of the doctrine,” was “not in line” with New York law and would “insulate an auditor from liability whenever a company pursues a failed investment strategy after receiving wrongful advice from an accountant.” Nonetheless, Judge Marrero cautioned, “this is not to say that MF Global and its officers will play no role in the outcome” of the case, as it must prove that it “innocently accepted PwC’s negligent advice.” Our prior posts on the MF Global litigation can be found here.