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Keywords

plaintiffdamagesstatutemotionsummary judgmentmalpracticetrustbankruptcycorporationstatute of limitationsmotion for summary judgment

discoveryaffidavitpleasummary judgmenttrustcorporation

Related Cases

USACM Liquidating Trust v. Deloitte & Touche LLP, 764 F.Supp.2d 1210

Facts

USACM, incorporated in Nevada, filed for bankruptcy in April 2006. The USACM Liquidating Trust was created under a Chapter 11 plan to pursue claims against Deloitte, the former outside auditor. The Trust alleged that Deloitte's unqualified audit opinions for fiscal years 2000 and 2001 enabled USACM insiders to engage in fraudulent schemes that resulted in significant financial losses. The Trust contended that these schemes included misappropriation of service fees and a Ponzi-like operation to cover payments to investors.

The Trust generally contends that if Deloitte had not issued unqualified audit opinions for fiscal years 2000 and 2001, USACM insiders could not have engaged in two allegedly fraudulent schemes which ultimately resulted in millions of dollars in losses.

Issue

Whether the Trust's claims against Deloitte were barred by the in pari delicto doctrine and whether the claims were timely under the statute of limitations.

Deloitte now moves for summary judgment, arguing the Court must impute to USACM the actions and knowledge of USACM's agents, Hantges and Milanowski.

Rule

The court applied the in pari delicto doctrine, which bars a plaintiff from recovering damages if they are equally at fault for the wrongdoing. Additionally, the court determined that the three-year statute of limitations for fraud claims applied, rather than the four-year statute for accounting malpractice claims.

Under Nevada law, the knowledge of an officer or agent is imputed to the corporation when the agent obtains the knowledge 'while acting in the course of his employment and within the scope of his authority.'

Analysis

The court found that the actions and knowledge of USACM's agents, Hantges and Milanowski, were imputed to the corporation, as they were acting within the scope of their authority. This imputation meant that USACM was aware of any alleged failures by Deloitte no later than January 2003, when Deloitte completed its last audit. Consequently, the court ruled that the Trust's claims were time-barred under the applicable statute of limitations.

The Court further concludes that if Nevada would adopt the innocent decision maker exception at all, Nevada would require the innocent insider to have actual corporate authority to stop the fraud.

Conclusion

The court granted Deloitte's motion for summary judgment, concluding that the Trust's claims were barred by the in pari delicto doctrine and were untimely under the statute of limitations.

Summary judgment is appropriate 'if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.'

Who won?

Deloitte & Touche LLP prevailed in the case because the court found that the Trust's claims were barred by the in pari delicto doctrine and were untimely.

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