Teachers' Ret. Sys. La. v. Pricewaterhouse-Coopers

Full title: Teachers' Retirement System of Louisiana v. Pricewaterhouse-Coopers LLP

Court: Supreme Court of Delaware

Date published: Jan 3, 2011

11 A.3d 228 (Del. 2011)

Opinion

No. 454, 2009.

January 3, 2011.

Court Below: Court of Chancery of the State of Delaware, C.A. No. 769-VCS.

Before STEELE, Chief Justice, HOLLAND, BERGER, JACOBS and RIDGELY, Justices, constituting the Court en Banc.

ORDER

CAROLYN BERGER, Justice.

This 3^rd day of January, 2011, on consideration of the briefs and arguments of the parties, it appears to the Court that:

1) Teachers' Retirement System of Louisiana and City of New Orleans Employees' Retirement System (Derivative Plaintiffs) appeal a Court of Chancery decision dismissing their malpractice and breach of contract claims against PricewaterhouseCoopers LLP. The trial court held that the claims are governed by New York law, and are barred under the doctrine of in pari delicto. ¹

1 A.I.G., Inc. v. Greenberg, 965 A.2d 763 (Del. Ch. 2009).

2) On appeal, this 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?²

2 Teachers' Retirement System of Louisiana v. PricewaterhouseCoopers LLP, 998 A.2d 280, 282-3 (Del. 2010).

3) The New York Court of Appeals accepted the certified question, and issued an opinion holding that the in pari delicto doctrine would bar such a derivative claim.³

3 Kirschner v. KPMG LLP et al., 2010 WL 4116609 at *14 (N.Y.).

4) In their supplemental briefing, Derivative Plaintiffs argued that the Kirschner decision is not binding on the issue of imputation of wrongdoing, which, they claim, is a question of Delaware law.

5) We reject this argument for two reasons. First, Derivative Plaintiffs acknowledged in their Opening Brief that, under the facts of this case, imputation is a question of New York law. Second, in our certification request, this Court sought resolution of a "determinative question[] of New York law. . . ."⁴ The Kirschner decision provided a determinative answer, which this Court must follow.

4 N.Y. Comp. Codes R. Regs. tit.22, § 500.27(a) (2010).

NOW, THEREFORE, IT IS ORDERED that the judgment of the Court of Chancery be, and the same hereby is, AFFIRMED on the basis of its February 10, 2009 decision.