Whether in legal malpractice, accounting malpractice or legal malpractice about an accounting malpractice claim, In Pari Delicto is a powerful defense widely wielded by defendants.  They say, in essence, we sued a wrongdoer, but failed.  Now you (the wrongdoer’s employer) sue us.  Courts should not intervene between two wrongdoers, and that’s what you are asking them to do!

Stokoe v Marcum & Kliegman LLP  2016 NY Slip Op 00587  Decided on January 28, 2016
Appellate Division, First Department is opaque, and requires multiple readings, but its lesson is that “complete diversity” is required.  This does not refer to “diversity of citizenship” but rather to complete diversity that the wrongdoer’s acts were not performed in aid of the employer; they were performed solely in aid of the wrongdoer.

“The allegations by these plaintiffs in another action and in a Securities and Exchange Commission complaint, did not constitute documentary evidence conclusively demonstrating that the investment manager, as agent of the funds in liquidation, engaged in wrongful conduct that was not completely adverse to the interests of the funds; Concord Capital Mgt., LLC v Bank of America, N.A. (102 AD3d 406 [1st Dept 2013], lv denied 21 NY3d 851 [2013]). The pleading addressed in the dismissal motion alleged that the malefactors acted in the interest of the wronged entity as well as in their own personal interest, and is distinguishable from defendants’ attempt on the instant pre-answer dismissal motion to refute the allegations here with those in other pleadings. Moreover, the other pleading by the same plaintiffs is not clearly a conclusive admission. We note that New York requires complete adversity in order to fall within the exception to the imputation rule of the in pari delicto doctrine, and that New York law governs here based on the choice of law provision in the parties’ engagement letters.”