Anwar et al v. Fairfield Greenwich Limited et al

Filing 1471

PwC DEFENDANTS' MEMORANDUM OF LAW IN OPPOSITION TO PLAINTIFFS' MOTION IN LIMINE NO. 6 TO EXCLUDE ISSUE OF PLAINTIFFS' COMPARATIVE FAULT. This Document was previously filed under seal in envelope doc. number 1458 and unsealed pursuant to Order doc. number 1463. (rjm)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
:
:
ANWAR, et al.
:
Plaintiffs,
:
v.
:
:
FAIRFIELD GREENWICH LTD., et al.,
:
:
Defendants.
:
:
:

MASTER FILE NO.
09-CV-00118 (VM)

PwC DEFENDANTS’ MEMORANDUM OF LAW
IN OPPOSITION TO PLAINTIFFS’ MOTION IN LIMINE NO. 6
TO EXCLUDE ISSUE OF PLAINTIFFS’ COMPARATIVE FAULT

FILED UNDER SEAL PURSUANT TO CONFIDENTIALITY ORDER

William R. Maguire
Sarah L. Cave
HUGHES HUBBARD & REED LLP
One Battery Park Plaza
New York, New York 10004
Tel: [phone]

Emily Nicklin, P.C.
Timothy A. Duffy, P.C.
KIRKLAND & ELLIS LLP
300 North LaSalle
Chicago, Illinois 60654
Tel: [phone]

Attorneys for Defendant
PricewaterhouseCoopers Accountants N.V.

Attorneys for Defendant
PricewaterhouseCoopers LLP

Defendants PricewaterhouseCoopers Accountants N.V. and PricewaterhouseCoopers
LLP (collectively, the “PwC Defendants”) respectfully submit this memorandum of law in
opposition to Plaintiffs’ Motion in Limine No. 6 to exclude evidence about Plaintiffs’
comparative fault.
PRELIMINARY STATEMENT
Plaintiffs’ attempt to prevent the jury from considering evidence of the Plaintiffs’
negligence, and from apportioning fault accordingly, is premised on a misunderstanding of the
so-called “audit interference rule.” Even assuming the continued viability of that rule in a
comparative fault regime, the rule only applies where the claim is asserted against an auditor by
the actual audit client itself. The rule does not apply where, as here, the action is brought by
plaintiffs other than the audit client. Accordingly, the PwC Defendants are entitled to present
evidence of Plaintiffs’ comparative negligence.
ARGUMENT
Plaintiffs base their motion entirely on a misreading of the “audit interference rule”
articulated in National Surety Corp. v. Lybrand, 256 A.D. 226 (1st Dep’t 1939). Id. at 236. As
an initial matter, the continued relevance of this doctrine is in doubt. National Surety was
decided at a time when New York followed a contributory negligence regime, and its reasoning
was inextricably linked to the unfairness of a total bar against recovery by the accountant’s
client. Id. at 235 (“We are, therefore, not prepared to admit that accountants are immune from
the consequences of their negligence . . . .”) (emphasis added). Subsequent to New York’s
enactment of a comparative negligence regime, however, the New York Court of Appeals has
not addressed whether the audit interference rule remains good law, and at least one court in this
District has questioned its “continued vitality,” stating that, under “a comparative fault regime,

there does not appear to be any sound policy reason to apply National Surety.” Bank Brussels
Lambert v. Chase Manhattan Bank, N.A., No. 93 CIV. 5298 (LMM), 1996 WL 728356, at *1
(S.D.N.Y. Dec. 18, 1996).
Even if the audit interference rule is still viable, the rule has no application here because
Plaintiffs were not the PwC Defendants’ clients. As the National Surety Court explained, the
purpose of the audit interference rule was to avoid a total bar to a client’s recovery against an
auditor, where the client was negligent, and where the auditor was engaged to detect the client’s
error. See Nat’l Sur., 256 A.D. at 236. This logic necessarily limits the application of the audit
interference rule to suits brought by the client whose errors the accountant was engaged to detect
– not non-privy third parties such as Plaintiffs, as to whom there is no potential unfairness in
considering their negligence.
Indeed, in quoting a passage from National Surety, Plaintiffs left out the key sentence in
which the court stated “Accordingly, we see no reason to hold that the accountant is not liable to
his employer in such cases.” Id. (emphasis added). Consistent with this reasoning, the PwC
Defendants are not aware of any case applying the audit interference rule to a non-privy party
(and Plaintiffs have cited no such case). The only decision that addressed this issue has ruled
that “National Surety must be read to be limited to the assertion of the contributory negligence
defense against the accountants’ own employer.” Bank Brussels, 1996 WL 728356, at *1
(emphasis added).
By contrast, each decision cited by Plaintiffs discussed the application of the rule where
the suit is brought by the defendant professional’s employer. See Whitney Grp., LLC v. HuntScanlon Corp., 106 A.D3d 671, 673 (1st Dep’t 2013) (suit by plaintiff client against plaintiff’s
former lawyer); Collins v. Esserman & Pelter, 256 A.D.2d 754, 757 (3rd Dep’t 1998) (suit by

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