Document Type

Article

Publication Date

2-20-2003

Abstract

The action giving rise to this appeal was commenced in the United States District Court for the Southern District of New York (Cedarbaum, J.) by plaintiff-appellant Official Committee of the Unsecured Creditors of Color Tile, Inc. ("Color Tile Committee"), as assignee of the bankruptcy estate of Color Tile, Inc., against defendant-appellee Coopers & Lybrand, LLP ("Coopers"), an accounting firm that provided auditing and consulting services for Color Tile and its controlling shareholders. The services were provided in connection with a merger and acquisition transaction (the "Transaction") and a public debt offering that was used to finance the Transaction. The gravamen of the claims asserted against Coopers is that it breached the fiduciary duties it owed to Color Tile, as well as the terms and conditions of its consulting agreement with Color Tile, by failing to disclose to Color Tile's Board of Directors all material information pertaining to the Transaction. Color Tile Committee alleges that the Transaction would not have taken place had these disclosures been made. The District Court dismissed the claims for breach of fiduciary duty and breach of contract set forth in the Second Amended Complaint upon a finding that, under Texas law, the complaint failed to state claims upon which relief could be granted because the facts pled therein demonstrated as a matter of law the affirmative defense of in pari delicto. The District Court subsequently denied a motion filed by Color Tile Committee to reconsider the dismissal of the Second Amended Complaint in light of the District Court's decision to grant partial summary judgment in favor of certain other defendants and for leave to file a Third Amended Complaint.

On appeal, Color Tile Committee principally argues that the District Court erred in dismissing its Second Amended Complaint on the pleadings because the defense of in pari delicto had not been established as a matter of law. For the reasons that follow, we affirm the judgment of the District Court, although we decline to embrace the entirety of the District Court's analysis of Texas law with respect to the in pari delicto defense.

Comments

322 F.3d 147 (2003)

OFFICIAL COMMITTEE OF THE UNSECURED CREDITORS OF COLOR TILE, INC., as assignee of the claims of the Chapter 11 estates of Color Tile, Inc. and Color Tile Holdings, Inc. Plaintiff-Appellant,

v.

COOPERS & LYBRAND, LLP, Defendant-Appellee, Investcorp, S.A., ABF Acquisition Corp., Investcorp Bank, E.C., Investcorp Holdings Limited, Jon W. Hedley, Charles J. Philippin, E. Garrett Bewkes, III, Walter F. Loeb, Window Investments Limited, Shades International Limited, Shades Investments Limited, Blind Equity Limited, Blinds Holdings Limited, AIBC Investcorp Finance B.V., Investcorp Investment Holdings Limited, Acquisition Capital Limited, Corporate Capital Limited, Funding Capital Limited and Planning Capital Limited, Defendants, Investcorp International, Inc., CIP Limited, Corporate Equity Limited, Acquisition Equity Limited, Funding Equity Limited, Planning Equity Limited, Elias N. Hallack, Nemir A. Kirdar, Michael L. Merritt, Paul W. Soldatos, Defendants-Third-Party-Plaintiffs-Counter-Defendants, Eddie M. Lesok, Third-Party-Defendant-Counter-Claimant, N. Laurence Nagle, Third-Party-Defendant.

Docket No. 01-9432.

United States Court of Appeals, Second Circuit.

Argued: September 30, 2002.

Decided: February 20, 2003.

New York Law School location: File #3087, Box #145


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