The doctrine of in pari delicto bars a party that has been damaged as a result of its own intentional wrongdoing from recovering those damages from “another party whose equal or lesser fault contributed to the loss.” Rosenbach v. Diversified Grp., 85 A.D.3d 569, 570 (1st Dep’t 2011). The doctrine finds its roots in two rationales. First, courts are not inclined to interject and resolve “a dispute between two wrongdoers” as in pari delicto seeks to avoid the courts from becoming the “referee between thieves.” Kirschner v. KPMG, 15 N.Y.3d 446, 464 (2010). Second, the doctrine denies judicial relief to the one engaged in illegal conduct. Bateman Eichler, Hill Richards v. Berner, 472 U.S. 299, 306 (1985). The term comes from the Latin maxim “in pari delicto potior est conditio defendentis,” which means “in a case of equal or mutual fault … the position of the defending party … is the better one.” While the doctrine’s original focus was on illegal acts and illegal contracts, as discussed below, it has since been significantly expanded to other types of wrongdoing, including civil wrongs.

Appellate Precedent

The New York Court of Appeals addressed in pari delicto in Kirschner v. KPMG, 15 N.Y.3d 446 (2010). There, the trustee of a litigation trust, created in the Refco bankruptcy, brought suit against Refco’s outside advisors for not preventing fraudulent schemes committed by Refco’s own officers in orchestrating loans that concealed hundreds of millions of dollars of uncollected debt. The court found the trustee’s claims were precluded because they sought to recover for the injuries to Refco caused by Refco’s own wrongdoings. Because the court found the officers’ conduct imputable to the corporation, the Refco trust could not sue Refco’s advisors for fraudulent actions for which Refco itself was responsible. The court likened the situation to “[a] criminal who is injured committing a crime” being unable to “sue the police officer or security guard who failed to stop him” or “the arsonist who is singed” being unable to “sue the fire department.”

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