{"id":138,"date":"2018-10-11T13:36:51","date_gmt":"2018-10-11T13:36:51","guid":{"rendered":"https:\/\/www.sherin.com\/professional-liability\/?p=138"},"modified":"2018-10-11T19:41:17","modified_gmt":"2018-10-11T19:41:17","slug":"supreme-judicial-court-limits-use-of-in-pari-delicto-defense","status":"publish","type":"post","link":"https:\/\/www.sherin.com\/law-firm-defense\/2018\/10\/11\/supreme-judicial-court-limits-use-of-in-pari-delicto-defense\/","title":{"rendered":"Supreme Judicial Court limits use of in pari delicto defense"},"content":{"rendered":"

In the recent case of Merrimack College v. KPMG, LLP <\/em>(SJC-12434)<\/a>, the Massachusetts Supreme Judicial Court cut back on the application of in pari delicto<\/em>, the equitable defense applicable when the plaintiff itself has intentionally acted improperly.\u00a0 The Court ruled that for plaintiff entities, only the conduct of \u201csenior management\u201d can be imputed to the plaintiff in applying in pari delicto<\/em>.<\/p>\n

In this case, Merrimack College claimed that KPMG, as its auditor, was negligent for failing to unearth fraud by its financial aid director.\u00a0 In the Superior Court, KPMG successfully raised the defense of in pari delicto<\/em> based on the argument that the financial aid director was an employee of Merrimack College acting in that capacity, for the college\u2019s benefit, so her conduct could be imputed upon the school.\u00a0 This is the usual analysis for determining liability to third parties. \u00a0\u00a0The SJC reversed, ruling that only the conduct of \u201csenior management\u201d could be imputed to a plaintiff entity in this context, acknowledging that this was a different standard from imputing liability to third parties.\u00a0 The Court reasoned that under common law, the standard for imputing liability to third parties arose from the context of the allocation of risk.\u00a0\u00a0 In pari delicto<\/em>, however, arose from an equitable law and seeks to determine blame rather than risk.\u00a0 Accordingly, the conduct that can be imputed to an organization is limited to that done by management who make decisions for the entity, \u201csenior management.\u201d<\/p>\n

Although this case arose in an accounting malpractice action, it would not be a surprise if Massachusetts courts applied it equally to the legal malpractice context.\u00a0 We have successfully used the in pari delicto<\/em>\u00a0 defense in legal malpractice cases against plaintiffs who were individuals who engaged in misconduct themselves. \u00a0\u00a0This SJC decision should not affect the application of the doctrine where the plaintiff is an individual, which is most often the case in legal malpractice action. \u00a0Where the plaintiff is an entity, however, the use of the in pari delicto<\/em> defense must include argument that the plaintiff\u2019s misconduct was committed by \u201csenior management\u201d, including an analysis of the actor\u2019s role and responsibilities in the plaintiff entity\u2019s usual business.<\/p>\n

Attorneys with corporate clients should be aware of this ruling, particularly where they are engaged to conduct reviews in the nature of audits.\u00a0 Just as accountants can no longer automatically raise the in pari delicto <\/em>defense if it does not unearth deliberate misconduct by their client\u2019s employees, lawyers may find themselves on the hook under similar circumstances.<\/p>\n","protected":false},"excerpt":{"rendered":"

In the recent case of Merrimack College v. KPMG, LLP (SJC-12434), the Massachusetts Supreme Judicial Court cut back on the application of in pari delicto, the equitable defense applicable when the plaintiff itself has intentionally acted improperly.\u00a0 The Court ruled that for plaintiff entities, only the conduct of \u201csenior management\u201d can be imputed to the […]<\/p>\n","protected":false},"author":9,"featured_media":139,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[],"tags":[],"class_list":["post-138","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"acf":[],"yoast_head":"\nSupreme Judicial Court limits use of in pari delicto defense - Law Firm Defense<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.sherin.com\/law-firm-defense\/2018\/10\/11\/supreme-judicial-court-limits-use-of-in-pari-delicto-defense\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Supreme Judicial Court limits use of in pari delicto defense - Law Firm Defense\" \/>\n<meta property=\"og:description\" content=\"In the recent case of Merrimack College v. KPMG, LLP (SJC-12434), the Massachusetts Supreme Judicial Court cut back on the application of in pari delicto, the equitable defense applicable when the plaintiff itself has intentionally acted improperly.\u00a0 The Court ruled that for plaintiff entities, only the conduct of \u201csenior management\u201d can be imputed to the […]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.sherin.com\/law-firm-defense\/2018\/10\/11\/supreme-judicial-court-limits-use-of-in-pari-delicto-defense\/\" \/>\n<meta property=\"og:site_name\" content=\"Law Firm Defense\" \/>\n<meta property=\"article:published_time\" content=\"2018-10-11T13:36:51+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2018-10-11T19:41:17+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.sherin.com\/professional-liability\/wp-content\/uploads\/sites\/3\/2018\/10\/60086953_l-1024x683.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1024\" \/>\n\t<meta property=\"og:image:height\" content=\"683\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Sherin and Lodgen\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Sherin and Lodgen\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.sherin.com\\\/law-firm-defense\\\/2018\\\/10\\\/11\\\/supreme-judicial-court-limits-use-of-in-pari-delicto-defense\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.sherin.com\\\/law-firm-defense\\\/2018\\\/10\\\/11\\\/supreme-judicial-court-limits-use-of-in-pari-delicto-defense\\\/\"},\"author\":{\"name\":\"Sherin and Lodgen\",\"@id\":\"https:\\\/\\\/www.sherin.com\\\/law-firm-defense\\\/#\\\/schema\\\/person\\\/96bd34e7823afde2e3e7e561023c5a44\"},\"headline\":\"Supreme Judicial Court limits use of in pari delicto defense\",\"datePublished\":\"2018-10-11T13:36:51+00:00\",\"dateModified\":\"2018-10-11T19:41:17+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.sherin.com\\\/law-firm-defense\\\/2018\\\/10\\\/11\\\/supreme-judicial-court-limits-use-of-in-pari-delicto-defense\\\/\"},\"wordCount\":430,\"commentCount\":0,\"image\":{\"@id\":\"https:\\\/\\\/www.sherin.com\\\/law-firm-defense\\\/2018\\\/10\\\/11\\\/supreme-judicial-court-limits-use-of-in-pari-delicto-defense\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.sherin.com\\\/law-firm-defense\\\/wp-content\\\/uploads\\\/sites\\\/3\\\/2018\\\/10\\\/60086953_l.jpg\",\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.sherin.com\\\/law-firm-defense\\\/2018\\\/10\\\/11\\\/supreme-judicial-court-limits-use-of-in-pari-delicto-defense\\\/\",\"url\":\"https:\\\/\\\/www.sherin.com\\\/law-firm-defense\\\/2018\\\/10\\\/11\\\/supreme-judicial-court-limits-use-of-in-pari-delicto-defense\\\/\",\"name\":\"Supreme Judicial Court limits use of in pari delicto defense - 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