In pari delicto is one of the bedrock principles of common law: You can’t blame someone else for wrongdoing if you’re equally at fault. On the civil side that usually means that fraud participants — like, say, corporations — can’t sue the lawyers, accountants and bankers who abetted corporate malfeasance.
Or can they? That’s the intriguing possibility that remains alive for the Refco Litigation Trust after a Dec. 23 ruling (pdf) by the 2nd U.S. Circuit Court of Appeals. The appellate panel asked the New York Court of Appeals to clarify what it called “considerable uncertainty” about an exception to the New York state law codifying in pari delicto. Depending on what the state high court does with the 2nd Circuit’s referral, the Refco trustee may be able to proceed with a case against Mayer Brown, Grant Thornton, KPMG, PricewaterhouseCoopers and several banks.
