Accounting Firm Representation

Orrick litigators have decades of experience representing public accounting firms, including the "Big Four" firms, in a wide variety of matters. We understand the legal issues confronting the profession and also have extensive experience in the application of the relevant professional standards, including GAAP, GAAS, PCAOB Auditing Standards and Rules, and SEC regulations and interpretations. As a result, we have achieved favorable outcomes for our clients in litigation and regulatory proceedings. Our litigators are also well-versed in the securities laws and have advised accounting firms with respect to the many issues posed, for example, by the Securities Litigation Uniform Standards Act, the Sarbanes-Oxley Act and the Private Securities Litigation Reform Act.

Complex Litigation

Orrick lawyers have defended accounting firms against actions brought in state and federal courts across the United States and have won complete defense verdicts in trials for PricewaterhouseCoopers LLP (PwC), Deloitte & Touche LLP and Grant Thornton LLP. Representative matters include securities class action lawsuits, professional malpractice claims, and business disputes arising out of mergers and acquisitions, software licensing agreements and employment contracts. Our lawyers often become involved well before litigation commences and are able to work with clients to develop effective defense strategies before the first pleading is filed. We also have conducted extensive internal investigations for accounting firms designed to identify potential issues and recommend best practices.

Regulatory Investigations & Enforcement Actions

When accountants face potential regulatory enforcement actions, they need counsel who understand the complex legal and factual context those proceedings present, such as the specific role auditors play in auditing and opining on an issuer’s financial statements and the professional judgments that they are often called upon to make with respect to complex issues. Our lawyers have extensive experience representing accountants in SEC investigations and enforcement proceedings, PCAOB investigative proceedings and investigations by state boards of accountancy.

Parallel Criminal Proceedings

We are able to draw on the vast experience of litigators in Orrick’s White Collar Criminal Defense and Corporate Investigations Group, which includes several former federal and state prosecutors as well as former SEC enforcement attorneys, in representing accountants in parallel criminal proceedings. These include investigations conducted by the U.S. Department of Justice, state attorneys general and grand juries. Our comprehensive knowledge and experience allow us to provide outstanding representation to accountants, no matter what turn these investigations may take.

International Perspective

In addition to representing U.S. accounting firms, we also represent foreign firms in U.S. litigation. With offices throughout Europe and Asia, Orrick is uniquely situated to bring our accounting expertise to matters with cross-border significance. With the expected convergence of U.S. GAAP and International Financial Reporting Standards, as well as the further globalization of the economy, the international perspective is likely to become increasingly important to the defense of litigation and regulatory enforcement matters.

Other Matters

Our experience in defending complicated accounting matters also prepares us to represent other types of defendants, such as issuers, directors, officers and underwriters, in cases that present complicated accounting and financial disclosure issues. These include claims involving restatements, misclassification, revenue recognition, valuation of assets (including mortgage-backed securities), loss reserves, "round tripping," "channel stuffing" and restructuring charges, as well as claims brought under the Foreign Corrupt Practices Act.

Selected accounting firm representation:

• In re Acterna Corp. Orrick obtained the dismissal of all claims against PwC in consolidated securities fraud class actions brought in U.S. District Court in Maryland. The Acterna case was one of the first to apply the Supreme Court's 2005 decision in Dura Pharmaceuticals, Inc. v. Broudo, holding that securities fraud plaintiffs cannot adequately allege loss causation simply by alleging that they purchased securities at an inflated price. See In re Acterna Corp. Sec. Litig., 378 F. Supp. 2d 561 (D. Md.).
• Agripac. We represented KPMG LLP in the defense of a professional liability action brought by the bankruptcy trustee of a major Oregon agricultural cooperative.
• In re Agway, Inc. Our litigators obtained the dismissal of securities class action claims brought against PwC in federal court in New York arising out of the failure and bankruptcy of Agway, Inc., a large agricultural cooperative. The court found that PwC was not liable for failing to issue a "going concern" qualification in its audit opinion, and this result was summarily affirmed by the Second Circuit Court of Appeals.
• Ahtna. We represented Deloitte & Touche in a professional malpractice action brought by an Alaska native corporation. At trial, we secured a complete jury verdict in favor of our client. Plaintiff also paid Deloitte its attorney fees.
• Beacon Hill Hedge Fund Litigation. Orrick successfully defended Ernst & Young Cayman Islands (EYCI) in the Beacon Hill hedge fund litigation involving losses of approximately US$300 million. Plaintiffs initially brought suit against EYCI and others in the Southern District of New York, where, on EYCI's motion, the federal claims were dismissed for failure to plead scienter, and the court declined to exercise jurisdiction over the state law claims. Plaintiffs then filed a similar action in the New York Supreme Court's Commercial Division, claiming EYCI had negligently failed to detect the fraudulent valuation practices of the fund's investment managers. EYCI successfully moved for summary judgment on the basis of, among other arguments, in pari delicto and agency/imputation principles. See Bullmore v. Ernst & Young Cayman Islands, 861 N.Y.S.2d 578 (N.Y. Sup. 2008).
• Bear Stearns Hedge Fund Litigation. Orrick is defending Deloitte & Touche Cayman Islands against claims for securities fraud, malpractice and a host of other state law claims arising out of the collapse of the Bear Stearns Cayman Islands hedge funds, which invested heavily in mortgage-backed securities. Plaintiffs, representing the interests of the Cayman Islands liquidators of the hedge funds, as well as domestic and foreign investors, seek recovery of US$1.5 billion in losses.
• In re BISYS. Orrick obtained the dismissal of a securities fraud claim brought against PwC in New York federal court arising out of the restatement of three years of financial statements by The BISYS Group, Inc. The court found the allegations of scienter to be deficient as to PwC, specifically rejecting plaintiffs' arguments based on the magnitude of the restatement (more than US$100 million in overstated revenue) and so-called "red flags," which plaintiffs alleged should have alerted PwC to the fraud. See In re BISYS Sec. Litig., 397 F. Supp. 2d 430 (S.D.N.Y.).
• Coeur d'Alene Mines. Our lawyers represented Ernst & Young LLP in a federal securities fraud class action arising out of alleged accounting irregularities relating to ore reserves. We obtained a with-prejudice dismissal of our client in the first round of motions to dismiss. See Queen Uno Ltd. P'shp v. Coeur d'Alene Mines Corp., 2 F. Supp. 2d 1345 (D. Colo.).
• Computer Associates. Orrick represents Ernst & Young LLP in connection with the Computer Associates securities and derivative litigation arising out of the alleged revenue recognition fraud at the company and alleged obstruction by company insiders. Our lawyers successfully defended Ernst & Young LLP in a shareholder class action, establishing in a case of first impression that Sarbanes-Oxley's statute of limitations is not retroactive, (see McBride v. Ernst & Young LLP, No. 02-CV-126, Mem. & Order (E.D.N.Y., Dec. 3, 2003)); aff'd, In re Enterprise Mortgage Acceptance Co., LLC, Sec. Litig., 391 F.3d 401 (2d Cir. 2005), and continue to represent E&Y in connection with the pending derivative litigation. See In re Computer Assoc. Int'l Deriv. Litig., Case No. 04 Civ. 2697 (E.D.N.Y.).
• Cray. We represented Deloitte & Touche in a derivative action alleging negligence in the performance of an audit. The case was voluntarily dismissed while motions to dismiss were pending.
• Credit Union Financial Services. We represented Grant Thornton in a professional malpractice action in which we obtained a complete jury verdict in favor of our client following a seven-week trial. Plaintiff also paid Grant Thornton’s attorney fees.
• Cromer Finance/Manhattan Investment Fund. Our lawyers successfully represented Ernst & Young International in obtaining dismissal of all claims asserted by hedge fund investors. See Cromer Finance, Ltd. v. Berger, 137 F. Supp. 2d 452 (S.D.N.Y.).
• In re Doral Financial Corp. Orrick lawyers obtained dismissal of securities fraud claims brought against PwC in the Southern District of New York in connection with PwC's audits of Doral Financial Corp. following the company's announcement that it had overstated its pre-tax income by approximately US$920 million and understated its debt by approximately US$3.3 billion with respect to a four year period. The district court dismissed on the basis that plaintiffs failed to adequately plead scienter. See In re Doral Fin. Corp. Sec. Litig., 563 F. Supp. 2d 461 (S.D.N.Y. 2008).
• KL Properties, L.P. We obtained a verdict for PwC following a bench trial in the New York Supreme Court's Commercial Division on claims arising out of the acquisition and subsequent sale of a human resources consulting business as part of a $280 million transaction.
• In re Metropolitan Securities Litigation. We represent PwC in securities litigation pending in the Eastern District of Washington relating to Metropolitan Mortgage & Securities Co., a bankrupt subprime lender.
• In re Parmalat. We represented Deloitte & Touche S.p.A. in connection with consolidated multidistrict securities litigation in the Southern District of New York arising out of the collapse of the Italian dairy giant. In one of the key cases, we successfully defended against a remand motion filed by the Italian receiver of Parmalat, establishing in a case of first impression the existence of federal bankruptcy jurisdiction "related to" the receiver's Section 304 bankruptcy case. See Bondi v. Grant Thornton Int'l, Inc., 322 B.R. 44 (S.D.N.Y. 2005). After extensive international discovery, we resolved the primary exposure for Deloitte & Touche S.p.A. on favorable terms and obtained the dismissal of other related actions, two of which are currently on appeal before the Second Circuit. See In re Parmalat Sec. Litig., 04 MD 1653.
• In re Reciprocal of America. We represent PwC in federal MDL litigation alleging malpractice in PwC's audits of Reciprocal of America, a Virginia reciprocal insurer placed in receivership in 2003. We obtained dismissal of the ROA Receiver's RICO claim and an order limiting the claims that policyholders can assert based on standing. See In re Reciprocal of America Sales Practices Litig., 04-MD-1551 (W.D. Tn.).
• In re Refco. We represent PwC in cases arising from the collapse of Refco Inc, a commodities and futures brokerage. See In re Refco, Inc. Sec. Litig., 07-MD-1902 (S.D.N.Y.).
• Semi-Tech Litigation. Orrick lawyers represented Ernst & Young International in action by note holders claiming $800 million in losses. See Semi-Tech Litig. LLC v. Ting, No. 604664/02 (N.Y. Sup. Ct.).
• SmarTalk Teleservices. We represented PwC in multidistrict litigation involving federal and state securities claims and professional liability claims arising out of alleged accounting errors relating to revenue recognition for prepaid telephone services. We obtained dismissal of the class claims on a motion to dismiss. See In re SmarTalk Teleservices, Inc. Sec. Litig., 124 F. Supp. 2d 505 (S.D. Ohio).
• Williamson v. PwC. Orrick represented PwC in the defense of accounting malpractice claims brought in New York state court arising out of the 2002 collapse of the Lipper Convertibles, L.P. hedge fund. Notably, this case provided the New York Court of Appeals with its first opportunity to construe the continuous representation doctrine in the accounting context. The court held that because the engagement letters for each audit contemplated discrete and separate services for the year in question, plaintiffs could not invoke the continuous representation doctrine to toll the applicable three-year statute of limitations. See Williamson ex rel. Lipper Convertibles, L.P. v. PricewaterhouseCoopers LLP, 872 N.E.2d 842 (N.Y. 2007).