AHERF Creditors' Committee successfully appeals award of summary judgment in favor of auditor and limits availability of in pari delicto defense in audit-failure cases

Client(s) Official Committee of Unsecured Creditors of Allegheny Health, Education & Research Foundation

Jones Day represents the Official Committee of Unsecured Creditors of Allegheny Health, Education and Research Foundation ("AHERF"), formerly the largest integrated healthcare delivery system in Pennsylvania, in a suit against AHERF's auditor. The Committee seeks to recover for the auditor's role in materially misstating AHERF's financial performance and condition in the years immediately preceding the healthcare system's bankruptcy. At the time of the 1998 filing, AHERF's bankruptcy reportedly was the largest not-for-profit bankruptcy in the country's history. The Committee's appeal of the district court's grant of summary judgment in favor of the auditor on in pari delicto grounds -- which appeal included both a reported Third Circuit and Pennsylvania Supreme Court opinion, the latter answering certified questions from the federal appellate court -- overturned the district court's summary judgment award and established new precedent limiting the availability of the in pari delicto defense in audit-failure cases. The Third Circuit vacated the district court's earlier decision and remanded the case to the district court for further proceedings, including a determination of whether the auditor dealt with AHERF in good faith.

Official Committee of Unsecured Creditors of Allegheny Health, Education & Research Foundation v. PricewaterhouseCoopers, LLP, Case No. 00-684 (W.D. Penn.)