Teachers’ Retirement System of Louisiana v. PricewaterhouseCoopers LLP, No. 454, 2009 (Del. Supr. March 4, 2010)
In a case involving allegations that the defendant/appellee failed to perform its auditing responsibilities in accordance with professional standards of conduct and thus failed to detect or report the fraud perpetrated by AIG’s senior officers in connection with the events that caused the much-publicized near-collapse of that company, the appellant (derivative plaintiff below) appealed the Court of Chancery’s holding that, based on New York law, once the wrongdoing was imputed to AIG, AIG’s derivative claims against PricewaterhouseCoopers LLP were barred by New York’s in pari delicto doctrine. Based on Section 500.27 of the New York Rules of Court, which permits a court of last resort of any other state to certify questions to the New York Court of Appeals when confronted with questions of New York law for which no controlling precedent of the New York Court of Appeals exists, the Delaware Supreme Court has certified the following question of law 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?