The Court of Appeals last month handed down a much-anticipated decision concerning the liability of third-party professionals that either fail to detect or are actively complicit in wrongdoing by officers of their corporate clients. In Kirschner v. KPMG LLP, the Court concluded that New York’s traditional strict application of the in pari delicto doctrine, and the long-established principle under which acts of agents are imputed to their principals, remain fully intact in the corporate context. As a result, if its officer engaged in wrongdoing, a corporation will have a very difficult time recovering from its auditor or other professional advisor unless the officer acted purely in his personal interests and without any short-term benefit to the corporation.
In Flemming v. Barnwell Nursing Home and Health Facilities Inc., the Court agreed with the Appellate Division that there is no basis, under CPLR 909 or otherwise, to award counsel fees to a class member who raises an objection to a proposed class action settlement.
Third-Party Professionals
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