MF Global's $1B-Plus PwC Malpractice Trial Delayed For Talks
Law360, New York (February 7, 2017, 4:41 PM EST) -- MF Global and PricewaterhouseCoopers yielded Monday to prodding by a New York federal judge to take one last stab at settling the $1 billion-plus professional malpractice case against the accounting giant before an expected five-week trial, which had been due to start next week, according to court documents.
At what was supposed to be the final pretrial conference, U.S District Court Judge Victor Marrero asked the parties to consider private mediation to settle the case. Both sides were hesitant until the judge said he would get them back on the calendar in a couple of weeks if mediation failed. Judge Marrero told the attorneys to let him know by noon on Monday and hours later issued a brief order pushing back the trial at the request of the parties.
The trial, which was slated to commence Feb. 13, will now start March 6.
The 2014 suit says PwC’s professional malpractice and negligence were a direct cause of massive damages MF Global suffered in an amount to be determined at trial. From September 2010, when the company began investing heavily in European sovereign debt through euro “repurchase to maturity” financing transactions, or RTMs, through October 2011, when MF Global filed for bankruptcy, the enterprise value of the company declined by “significantly more than $1 billion,” according to the complaint.
The suit alleges that the financial services firm had relied on PwC’s “flatly erroneous” accounting advice when it made billions of dollars worth of foreign investments by using the euro RTMs. Contrary to PwC’s advice, the euro RTMs didn’t qualify as “sales,” and the company shouldn’t have processed the revenues, the suit says.
MF Global said in its complaint that it was seeking at least $1 billion on the professional malpractice claim. In MF Global’s January pretrial memorandum of law, it estimated its damages at approximately $2 billion, to be topped off with around $1 billion in prejudgment interest.
PwC said it’s ready to re-engage the battle should talks fail.
"PricewaterhouseCoopers stands by the work it did for MF Global as its independent auditor,” Rich Marooney of King & Spalding LLP, PwC’s outside counsel, said in a statement. “We are fully prepared to defeat the plan administrator's meritless claims at trial if efforts to resolve the matter prove unsuccessful."
MF Global attorney Daniel Fetterman of Kasowitz Benson Torres & Friedman LLP told Law360 by email Wednesday that MF Global is also ready for trial.
"If discussions are not successful, we look forward to presenting evidence that PwC’s numerous and egregious acts of negligence concerning two critical accounting issues at MF Global were a substantial cause of its financial crash," Fetterman wrote. "PwC is a public watchdog, and it had a duty to get the accounting right. It failed. And, when public auditors fail to do their jobs, disastrous consequences can follow as occurred here.”
Judge Marrero dismissed MF Global’s claims of unjust enrichment and breach of contract, but let stand the professional malpractice claim.
MF Global is represented by Daniel J. Fetterman, Michael C. Harwood and David J. Mark of Kasowitz Benson Torres & Friedman LLP.
PwC is represented by James P. Cusick, James J. Capra Jr. and David M. Fine of King & Spalding LLP.
The case is MF Global Holdings Ltd. v. PricewaterhouseCoopers LLP, case number 1:14-cv-02197, in the U.S. District Court for the Southern District of New York.
Updated: This story has been updated with a comment from MF Global attorney Daniel Fetterman.
--Editing by Bruce Goldman.
the above is all IMHO (consider this my safe harbor statement)
