In Pari Delicto, a delicious Latin phrase, is the principal that a court will not adjudicate rights between two guilty parties.  This concept arises most often in accounting negligence settings, but does rear its head from time to time in legal malpractice.  The accounting setting arises when the corporation sues its accountants, who defend by saying that someone in the corporation (a VP, and executive) participated in a fraud about which the corporation now sues.

Schwartz v Leaf, Salzman, Manganelli, Pfiel & Tendler, LLP  2014 NY Slip Op 08823 [123 AD3d 901]  December 17, 2014  Appellate Division, Second Department  cites one of the few exceptions to the rule that plaintiff, who is partially or strongly involved in the underlying problem cannot sue the accountants.

“As the complaint sufficiently alleged a cognizable claim of accounting malpractice (see Bruno v Trus Joist a Weyerhaeuser Bus., 87 AD3d 670 [2011]; Kristina Denise Enters., Inc. v Arnold, [*2]41 AD3d 788 [2007]; Estate of Burke v Repetti & Co., 255 AD2d 483 [1998]), the Supreme Court properly denied that branch of the defendants’ motion which was pursuant to CPLR 3211 (a) (7) to dismiss the second cause of action. Additionally, the Supreme Court properly granted those branches of the motion which were pursuant to CPLR 3211 (a) (7) to dismiss the first and third through ninth causes of action, which sought to recover damages for negligence, fraud, breach of fiduciary duty, and unjust enrichment, since they were duplicative of the professional malpractice cause of action, as they arose from the same facts and do not allege distinct damages (see Blanco v Polanco, 116 AD3d 892 [2014]; Bruno v Trus Joist a Weyerhaeuser Bus., 87 AD3d 670 [2011]; Leon Petroleum, LLC v Carl S. Levine & Assoc., P.C., 80 AD3d 573 [2011]; Stuart v Kushner, 68 AD3d 974 [2009]; Town of Wallkill v Rosenstein, 40 AD3d 972 [2007]).

The Supreme Court properly denied that branch of the defendants’ motion which was to dismiss the accounting malpractice cause of action pursuant to CPLR 3211 (a) (1). The defendants contend that that cause of action is barred by the doctrine of in pari delicto, which “mandates that the courts will not intercede to resolve a dispute between two wrongdoers” (Kirschner v KPMG LLP, 15 NY3d 446, 464 [2010]). However, the adverse interest exception to the doctrine of in pari delicto provides that “when an agent is engaged in a scheme to defraud his principal, either for his own benefit or that of a third person, the presumption that knowledge held by the agent was disclosed to the principal fails because he cannot be presumed to have disclosed that which would expose and defeat his fraudulent purpose” (Center v Hampton Affiliates, 66 NY2d 782, 784 [1985]). Here, the documentary evidence submitted by the defendants did not conclusively foreclose the application of the adverse interest exception to the in pari delicto defense (see Symbol Tech., Inc. v Deloitte & Touche, LLP, 69 AD3d at 196-199; compare Chaikovska v Ernst & Young, LLP, 78 AD3d 1661, 1662-1664 [2010]).

ss the accounting malpractice cause of action pursuant to CPLR 3211 (a) (1). The defendants contend that that cause of action is barred by the doctrine of in pari delicto, which “mandates that the courts will not intercede to resolve a dispute between two wrongdoers” (Kirschner v KPMG LLP, 15 NY3d 446, 464 [2010]). However, the adverse interest exception to the doctrine of in pari delicto provides that “when an agent is engaged in a scheme to defraud his principal, either for his own benefit or that of a third person, the presumption that knowledge held by the agent was disclosed to the principal fails because he cannot be presumed to have disclosed that which would expose and defeat his fraudulent purpose” (Center v Hampton Affiliates, 66 NY2d 782, 784 [1985]). Here, the documentary evidence submitted by the defendants did not conclusively foreclose the application of the adverse interest exception to the in pari delicto defense (see Symbol Tech., Inc. v Deloitte & Touche, LLP, 69 AD3d at 196-199; compare Chaikovska v Ernst & Young, LLP, 78 AD3d 1661, 1662-1664 [2010]).”