A federal appeals court has upheld a $183 million judgment against PricewaterhouseCoopers stemming from a 20-year auditing malpractice suit brought against Coopers & Lybrand, a predecessor company.
In July 2005, a federal jury found that Coopers & Lybrand was negligent in its audit of Ambassador Insurance Co. 20 years ago, according to The Legal Intelligencer. The jury had awarded $120 million to policyholders of the defunct insurance company and other creditors, including the state of Vermont, the insurer’s headquarters. U.S. District Judge Harold A. Ackerman reportedly added $63 million in interest.
Filed in 1985, the lawsuit accused Coopers of negligence in its accounting practices, according to the trade publication. The negligence allegedly caused Ambassador’s debts to continue to increase well after it should have been declared insolvent.
The Third U.S. Circuit Court of Appeals rejected PwC’s argument that the New Jersey courts wouldn’t recognize a cause of action for “deepening insolvency,” the publication noted. Evan Chesler, an attorney with Cravath Swaine & Moore who reportedly represented PwC in its appeal, could not be reached for comment at presstime.
“Although neither the New Jersey legislature nor the New Jersey Supreme Court has authorized a ‘deepening insolvency’ cause of action, contrary to PwC’s assertion, there has been a trend among the state’s courts toward recognizing ‘deepening insolvency’ damages,” U.S. Circuit Judge Julio M. Fuentes reportedly wrote in the opinion on the appeal.