We represent the “Big Four” and other national and regional accounting firms in a wide variety of litigations and enforcement matters, successfully defending them in federal securities class actions, in state common law actions, and in SEC, PCAOB, and state accounting board investigations. We obtain favorable results for our clients and are proud of the case law we have developed - from securing dismissal of clients under heightened standards by the Private Securities Litigation Reform Act, to limiting the common law liability of accountants to third parties.
Securities Claims Defense
A substantial part of our practice involves representing national accounting firms in federal securities actions and SEC investigations. We have successfully defended numerous shareholder class actions. In advance of the Private Securities Litigation Reform Act, we led the way nationally in obtaining comparative fault bar orders to protect non-settling auditor defendants in shareholder class actions. In re Kendall Square Securities Litigation, 869 F. Supp. 53 (D. Mass. 1994). On the basis of the Central Bank decision of the U.S. Supreme Court, we successfully limited potential Section 10(b) liability and substantially shortened plaintiff class periods. Kendall Square, 868 F. Supp. 26 (D. Mass. 1994). We have also been innovative at the appellate level. In VERSYSS Incorporated v. Coopers & Lybrand, 982 F.2d 653 (1st Cir. 1992), we successfully argued against a Section 11 claim under the 1933 Securities Act where the acquired company, whose audited financial statements were challenged, merged into the acquiring company at the time that the stock of the acquired company was purchased.
Since the 1995 passage of the Private Securities Litigation Reform Act, we have been instrumental in giving shape to the heightened pleading standards and other provisions contained in the Reform Act. For example, in the Raytheon Securities Litigation, 157 F. Supp. 2d 131 (D. Mass. 2001), we secured dismissal of plaintiff's class action complaint on the grounds that it did not sufficiently plead any wrongdoing or scienter under the Reform Act. Similarly, in Stone & Webster, 253 F. Supp. 2d 102 (D. Mass. 2003), we achieved the same favorable result and then defeated plaintiffs' attempt to amend its deficient complaint. We are also actively helping develop other aspects of the practice under the Reform Act including broad application of its discovery stay provisions and entry of final judgment once our clients are dismissed from multi-party actions.
SEC, PCAOB and State Accounting Board Matters
We have defended the Big Four and other national accounting firms in numerous SEC, IRS and other regulatory investigations brought by various offices involving such financial reporting issues as purchase accounting, restructuring expenses, revenue recognition, going concern disclosures, the appropriate accounting treatment of mortgage derivative instruments, complete tax planning vehicles and asset impairment. At the Massachusetts Board of Accountancy, our activities have included CPA licensing disputes and client disputes. We have also litigated issues regarding the status and authority of the PCAOB and have advised several national accounting firms about the PCAOB’s regulations, by-laws and releases.
Common Law Claims Defense
We have successfully defended national and regional accounting firms in a variety of actions brought in Massachusetts, New Hampshire, Maine, Connecticut, Vermont, Rhode Island, Georgia and Florida state and federal courts. The accounting and auditing issues have included reserving for loan losses and insurance losses, inventory valuations, internal controls, revenue recognition, purchase accounting, percentage of completion accounting, barter transactions, accounting for tax liabilities, asset impairment determinations, going concern disclosures, detection of employee defalcations and balance sheet presentation. We have handled a number of the leading cases in Massachusetts limiting the common law of liability of auditors to third parties, including most recently representing the defendant in Imprimis vs. KPMG, wherein the Superior Court granted summary judgment and the Appeals Court affirmed, holding that a third party cannot bring a claim against an auditor unless it can establish that it received, read and relied on the auditor's challenged opinion before making the investment at issue.
Claims Prevention Consulting
Our practice also involves consulting with accountants on client risk management matters.
Recent Engagements
- Stone & Webster Securities Litigation. Defending national accounting firm in defense of federal securities class action; recent decision granting motion to dismiss accounting firm reported at In re Stone & Webster, Inc. Securities Litigation, 253 F. Supp. 2d 102 (D. Mass. 2003).
- In re Tyco Int’l, Ltd. Representing Big Four firm in a variety of civil actions and related regulatory investigations.
- In re Imprimis v. KPMG LLP. Successfully defended Big Four firm against hedge fund's fraud, negligent misrepresentation and c. 93A claims, securing summary judgment which was then affirmed on appeal, 69 Mass App. Ct. 218 (2007).
- In re Raytheon Company Securities Litigation. Representing Big Four accounting firm in federal securities class action; decision granting motion to dismiss accounting firm reported at In re Raytheon Co. Securities Litigation, 157 F. Supp. 2d 131 (D. Mass. 2001).
- Bank of America v. Deloitte & Touche. Representing Big Four firm in connection with defense of common law claims brought by non-client bank.
- NAED v. Grant Thornton. Represent national firm in defending claims by municipal electric department and municipality that auditor should have detected electric department's misuse of municipal bond funds.
- In re Mariner Health Systems. Defended a Big Four firm and its partners against allegations of fraud, breach of fiduciary duty and civil RICO in a case arising from bankruptcy of a multi-billion dollar public health company. After a four week jury trial in which plaintiffs had sought in excess of $400M, the jury returned a verdict exonerating the firm and its partners of fraud, breach of fiduciary duty and civil RICO, awarding only a small fraction (less than 10%) of the amount demanded by plaintiffs in settlement on the remaining negligence-based claim.
- In re SmarTalk Teleservices, Inc. Securities Litigation. Represented Big Four firm in connection with federal securities class actions.
- SystemSoft Corp. Securities Litigation. Represented national accounting firm in defense of federal securities class action.
- Van de Velde v. Ferrofluidics Corp. Represented national accounting firm in defense of federal securities class action.
- Kendall Square Securities Litigation. Represented national accounting firm in defense of federal securities class action.
- Kurzweil Applied Intelligence Securities Litigation. Represented national accounting firm in defense of federal securities class action.
- In re Healthco International, Debtor: Brandt v. Hicks, Muse & Co. Represented national accounting firm in defense of bankruptcy trustee's claim of capital inadequacy/insolvency at time of LBO.
