Accountants' Liability

The complexity of the financial world has changed in the past couple of years. Organizations of all sizes are ever more exposed to new trends in financial and accounting regulation, not just locally but globally. Orrick lawyers have decades of experience representing and assisting public accounting firms, including all of the "Big Four," in a wide variety of matters.

The broad range of services our lawyers provide to accounting firms provides us with a comprehensive understanding of auditing standards and accounting rules, the firms' structure, the business and regulatory environments in which they operate, and their strategic goals. Moreover, our lawyers are able to address issues that involve multiple practice areas or geographies in a comprehensive manner.

We have more than 30 partners and 50 associates and counsel who devote a significant portion of their practices to representing accounting firms. They work together out of 12 cities around the world and provide services in practice areas that include not only accounting firm litigation, but also securities litigation, white collar, insurance, restructuring, corporate, employment, project finance, real estate and intellectual property.

We work with accounting firms across all practice areas and we have experience in:

Complex Litigation

Our litigators have defended accounting firms against actions brought in state and federal courts across the United States, as well as in foreign jurisdictions, and have won complete defense verdicts in trials for PricewaterhouseCoopers LLP (PwC), Deloitte LLP and Grant Thornton LLP.

We work with clients from the beginning, allowing us to develop effective defense strategies before the first pleading is filed. 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.

Our litigators are also well-versed in securities law 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.

We have achieved dozens of significant, favorable outcomes for our clients. Representative subject matters include:

  • Securities class action lawsuits
  • Professional malpractice claims
  • State and federal wage and hour class action litigation
  • Business disputes arising out of mergers and acquisitions, software licensing agreements and employment contracts

Our litigators have also advised accounting firms with respect to issues that transcend particular cases, for example, by conducting extensive internal investigations designed to identify potential issues and recommend best practices, by counseling firms on state laws and regulations affecting their practices, by assisting in the formulation of efficient and defensible e-Discovery practices and by providing counseling with respect to a variety of issues potentially impacting firm network liability.


Orrick lawyers have been representing clients in their corporate financial market and capital market transactions for more than 70 years. We have assisted companies of all sizes in raising hundreds of billions of dollars through public equity and debt transactions of almost every imaginable variety and have been at forefront of securitization and structured finance. We also assist several of the Big Four firms in the U.S. and overseas with mergers, acquisitions, outsourcing and other transactional work.


Our employment group represents many of the most prestigious employers in the world—including the Big Four—in labor matters, wage and hour class actions, trade secrets defense and counseling on corporate transactions, both in the U.S. and in our offices abroad.


Orrick's Insurance Group represents policyholders in coverage claims in the most complex coverage disputes. We frequently provide risk management counseling and insurance advice regarding some of the world's most challenging and important matters. We have handled such insurance matters for several accounting firms and have worked with forensic experts from the Big Four on many occasions.

Intellectual Property

Orrick's IP group advises and represents clients in patents, trademarks, copyright, trade secrets, litigation, antitrust, strategic IP counseling, U.S. International Trade Commission actions, contentious licensing, patent and trademark infringement, branding issues, unfair competition, commercial disputes, Internet liability and United States Patent and Trademark Office (USPTO) interferences. In those matters, our lawyers often work closely with forensic experts and consultants from the Big Four firms.

International Perspective

We often represent foreign member firms in both U.S. and foreign litigation. With offices throughout Europe and Asia, Orrick is uniquely situated to bring our accounting knowledge 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.

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 the former U.S. Attorney from the Eastern District of California, more than a dozen former federal and state prosecutors as well as former SEC enforcement lawyers—in representing accountants in parallel criminal proceedings. These include investigations conducted by the U.S. Department of Justice, various federal agencies, 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.

Regulatory Investigations and Enforcement Actions

When audit firms and individual accountants face potential enforcement investigations, administrative proceedings or related court actions, they need counsel who understand the complex legal and factual situations those matters 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 such issues.

Our lawyers have extensive experience in successfully representing accountants in SEC and PCAOB investigations and enforcement proceedings and investigations by state boards of accountancy. For example, Orrick represented a Big Four accounting firm partner in the first-ever PCAOB enforcement proceeding to proceed to administrative litigation. We also regularly advise firms on compliance issues under state laws and regulations governing the accounting profession.


The firm's restructuring and insolvency group consists of lawyers throughout the U.S., Europe and Asia who appear in formal bankruptcy and insolvency proceedings and out of court restructurings, and represent buyers and sellers of distressed debt and lender and financial institutions. We have extensive experience in defending claims against accounting firms by bankruptcy trustees. Our lawyers often represent or assist foreign member firms and their partners in their capacity as liquidators or receivers.

Semi-Tech Litigation. We 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.).

HCL Partners Ltd. P'ship v. Leap Wireless Int'l, Inc. Orrick obtained dismissal of purported class action claims alleged against PwC in connection with its audits of cellular provider Leap Wireless.

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. 2005).

In re Agway, Inc. Orrick obained the dismissal of securities class action claims and common law fraud 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, and this result was summarily affirmed by the Second Circuit Court of Appeals.

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 $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. 2005).

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. 1998).

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.).

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 lawyer's fees.

Cromer Finance/Manhattan Investment Fund. Orrick 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. 2001).

In re Doral Financial Corp. We 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 $920 million and understated its debt by approximately $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).

In re Metropolitan Securities Litigation. Our lawyers represented PwC in securities litigation in the Eastern District of Washington relating to Metropolitan Mortgage & Securities Co., a bankrupt commercial lender. Lawyers who represented Ernst & Young LLP in that matter are also now with Orrick.

In re Parmalat. We represented Deloitte 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 rulings in the various actions, 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 on favorable terms and obtained the dismissal of other related actions, on loss causation grounds. That discussion was affirmed by the Second Circuit. See Papus v. Bank of America, 309 Fed. Appx. 536 (2d Cir. 2009).

SmarTalk Teleservices. 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 2000). Our lawyers also represented PwC in connection with related SEC enforcement matters.

Madoff Litigation. We are representing Ernst & Young Luxembourg ("EY Luxembourg") in litigation in the Southern District of New York arising out of EY Luxembourg's involvement in the audits of certain feeder funds that invested in Bernard Madoff securities. This litigation is in the preliminary stages.

Stewardship Funds Litigation. Orrick successfully defended Ernst & Young Bermuda ("EY Bermuda") in litigation arising out of the Stewardship Fund's investment with a group of companies run by Thomas E. Petters, who was recently found guilty of running a $3 billion Ponzi scheme. In response to investors' initial filing in Connecticut state court, EY Bermuda successfully compelled arbitration in Connecticut federal court under the Federal Arbitration Act, by convincing a Connecticut Federal court, arguing that the investors' claims were derivative, rather than direct, because the investors sought to recover for the fund's losses, rather than the investors' individual losses, and, therefore, the investors were bound by the arbitration clause in the fund's engagement letter. See Ernst & Young Ltd. Bermuda v. Quinn, 3:09-CV-1164 (JCH) (D. Conn.).

Agripac. Orrick lawyers represented KPMG LLP in the defense of a professional liability action brought by the bankruptcy trustee of a major Oregon agricultural cooperative.

In re Refco. We represent PwC and one of its partners in MDL proceedings arising from the collapse of Refco Inc., one of the largest brokerage and clearing services providers in the derivatives, currency and futures markets. See In re Refco, Inc. Sec. Litig., 07-MD-1902 (S.D.N.Y.).

SmarTalk Teleservices. Orrick defended malpractice claims brought against PwC by the Creditors' Committee and the Liquidation Trustee on behalf of the SmarTalk bankruptcy estate. The complaint asserted GAAS and GAAP violations and focused on a major restatement involving restructuring reserves, revenue recognition and acquisition accounting issues. This case was settled for less than 10% of claimed damages.

Metropolitan Mortgage. Orrick lawyers defended claims by Metropolitan Mortgage and related entities against its former auditors, including claims asserted by an insurance commissioner acting as a receiver for an insurance subsidiary.

Beacon Hill Hedge Fund Litigation. Orrick successfully defended Ernst & Young Cayman Islands (EYCI) in the Beacon Hill hedge fund litigation involving losses of approximately $300 million. Plaintiff investors 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. See Fraternity Fund Ltd. v. Beacon Hill Asset Management LLC, 376 F. Sup. 2d 385 (S.D. N.Y. 2005). The Cayman liquidator 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 currently defending Deloitte & Touche Cayman Islands against claims asserted by the liquidators of several Bear Stearns Cayman Islands hedge funds that collapsed when the sub-prime crisis began in late 2007. Those claims, brought in federal court in New York, seek $1.5 billion, and initially included assertions of securities fraud, malpractice and a host of state law violations. In preliminary motion practice, Orrick was successful in having all claims other than for negligence dismissed and will challenge that claim as well as the case proceeds.

Continental Casualty Co. v. PricewaterhouseCoopers. Orrick represented PwC in claims arising out of the failure of a hedge fund. The New York Court of Appeals affirmed the grant of summary judgment for PwC, which dismissed plaintiffs' claims for investment losses due to their failure to demonstrate direct, as opposed to derivative, losses.

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.

Ahtna. Our lawyers 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.

Cray. We represented Deloitte in a derivative action alleging negligence in the performance of an audit. The case was voluntarily dismissed while motions to dismiss were pending.

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. Tenn.).

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).

KPMG Italy. We successfully defended the Italian member firm of KPMG in connection with the efforts of U.S. plaintiffs to obtain documents and testimony from the Italian firm in a malpractice action against KPMG LLP. We were successful in defeating claims of U.S. jurisdiction over the Italian firm, and limited discovery to that which Italy recognizes under its law—which was very narrow. Bontex, Inc. v. KPMG LLP, Case No. CL 04000017-0 (Buena Vista, Va.)

Vigilant v. Deloitte LLP. Orrick represented Deloitte & Touche in a claim asserted by an insurance carrier for indemnification of amount it paid Deloitte's audit client on a D&O policy. The case settled on very favorable terms while summary judgment motions were pending.

Partner in Big Four accounting firm. Orrick successfully represented a partner in a Big Four firm in a PCAOB enforcement investigation relating to audits of a pharmaceutical company. Following submission of a PCAOB Rule 5109(d) statement, the Division of Enforcement and Investigations determined not to recommend any enforcement action as to this partner.

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