Manhattan Supreme Court Justice Eileen Bransten (See Profile) has dismissed a lawsuit for more than $1 billion filed by a trust for the creditors of bankrupt insurer Reliance Group Holdings Inc. against accounting firm Deloitte & Touche, ruling that the creditors had not offered enough evidence that Deloitte contributed to Reliance’s 2001 bankruptcy through improper accounting.
The June 7 order granted summary judgment to Deloitte on all the creditors’ claims, ending a seven-year lawsuit. The creditors allege that Deloitte prepared an inaccurate financial report for Reliance in 1999 that overstated the company’s financial health. They claim that, but for the inaccurate information, Reliance would have taken action to stave off bankruptcy, including exercising an option to call in payment on certain loans and selling stock in one of its subsidiaries.
However, Bransten said in RGH Liquidating Trust v. Deloitte & Touche, 600057/06, that the evidence did not back up the creditors’ claims. She noted that Reliance’s financial condition was already deteriorating before the allegedly inaccurate report and there was no reason to believe that if it had taken the actions the plaintiffs suggest it would have averted bankruptcy, or even that it could have taken them.
Michael Dell, a partner at Kramer Levin, represents Deloitte. William Fleming, a partner at Gage Spencer & Fleming, and Deborah Skakel, a partner at Dickstein Shapiro, represent Reliance.