Delaware Supreme Court Asks New York Court of Appeals to Address Issue of New York Law; Re: Liability of PricewaterhouseCoopers
Teachers’ Retirement System of Louisiana v. PricewaterhouseCoopers LLP, No. 454, 2009 (Del. March 4, 2010), read opinion here.
In this short ruling, the Delaware Supreme Court used an procedure provided for under the New York Rules of Court to certify a question of law to New York’s highest court, the New York Court of Appeals. This approach was based on the following finding of Delaware’s highest court: "We have concluded that a resolution of this appeal depends on significant and unsettled questions of New York law that are properly answered, in the first instance, by the New York Court of Appeals."
This matter involves an appeal from the Delaware Court of Chancery regarding the oft-cited AIG case which denied a motion to dismiss claims against the top officials of AIG for breach of fiduciary duty based on Delaware law. However, the claims against the auditor, PwC, were dismissed based on New York law. Highlights of that AIG decision (of more than 100 pages), were provided on this blog here. See American Int’l Group, Inc. v. Greenberg, 965 A.2d 763, 817-22, 826-27 (Del. Ch. 2009).
The Delaware Supreme Court certified the following question to the New York Court of Appeals:
Would the doctrine of in pari delicto bar a derivative claim under New York law where a corporation sues its outside auditor for professional malpractice or negligence based on the auditor’s failure to detect fraud committed by the corporation; and, the outside auditor did not knowingly participate in the corporation’s fraud, but instead, failed to satisfy professional standards in its audits of the corporation’s financial statements?
UPDATE: Francine McKenna of the blog In Re: The Auditors, writes about this on The Huffington Post here. Also courtesy of Francine McKenna, here is a brief filed in the case before the New York Court of Appeals which is expected to hear oral argument in this matter in September 2010.