The question seems pretty simple: If executives at a public company commit fraud that later comes back to cost the company, can its shareholders go after the company’s auditors for missing the fraud in the first place?
Stuart Grant, a plaintiffs lawyer and name partner of Grant & Eisenhofer, says the answer has too often been no, with courts denying shareholders the right to pursue malpractice claims against auditors in public fraud cases. Grant will have a chance to make a dent in that precedent today in New York’s Court of Appeals, where he will ask for permission to sue the accounting firm PricewaterhouseCoopers on behalf of various institutional shareholders of AIG, according to Grant and court records. Courts in Delaware have so far denied shareholders’ request to sue PwC, but the accounting firm, which has used Cravath, Swaine & Moore throughout the case, isn’t taking any chances. It has retained King & Spalding’s Paul Clement, a former U.S. solicitor general, to argue the case today at New York’s highest state court.
