Posts tagged "Merrimack"

Merrimack College v. KPMG LLP (Lawyers Weekly No. 12-054-17)

COMMONWEALTH OF MASSACHUSETTS SUFFOLK, ss. SUPERIOR COURT. 1484CV02098-BLS2 ____________________ MERRIMACK COLLEGE v. KPMG LLP ____________________ MEMORANDUM AND ORDER ALLOWING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT Merrimack College incurred substantial financial losses because its former financial aid director, Christine Mordach, deliberately approved fake Perkins loans for many students without their knowledge.1 For years Mordach awarded far more financial aid than she was authorized to spend. She made the college’s financial aid budget appear balanced by replacing grants and scholarships with fake Perkins loans, the proceeds of which were used to pay tuition owed to Merrimack. Ms. Mordach pleaded guilty to federal criminal charges of mail and wire fraud. Merrimack seeks to recover its losses from its former auditor, KPMG LLP. Merrimack claims that KPMG noticed but did not follow up on discrepancies in some student loan accounting and deficiencies in internal controls for such loans, and as a result failed to discover Mordach’s fraud. Merrimack asserts that KPMG was negligent, breached its contract, and violated G.L. c. 93A. KPMG has moved for summary judgment on several grounds, including that Merrimack’s claims are barred under the equitable doctrine known as in pari delicto because Mordach committed fraud to benefit her employer and her deliberate wrongdoing on behalf of Merrimack was far worse than KPMG’s alleged negligence. The Court agrees that, in light of the undisputed material facts, Merrimack’s claims are barred by the in pari delicto doctrine. Under these circumstances, Merrimack is legally responsible for Mordach’s misconduct. Merrimack is also 1 The Perkins Loan program provides “low-interest loans to financially needy students” at institutions of higher education that are funded with federal monies, matching contributions by each participating school, and repayment of prior loans. De La Mota v. United States Dept. of Educ., 412 F.3d 71, 74 (2d Cir. 2005). “The schools independently determine eligibility, advance funds, collect payments[,] and make decisions concerning loan forgiveness.” Id.; see also 20 U.S.C. §§ 1070 et seq. – 2 – bound by the allegations in its complaint that Mordach engaged in intentional fraud. That deliberate misconduct by Merrimack’s employee was far more serious than KPMG’s purported negligence. Finally, the Court is not persuaded that Massachusetts should recognize, on public policy grounds, an exception to this doctrine for claims against an allegedly negligent outside auditor. The Court will therefore allow KPMG’s motion and dismiss this action. 1. Legal Background. “The doctrine of in pari delicto bars a plaintiff who has participated in wrongdoing from recovering damages for any loss resulting from the wrongdoing.” Choquette v. Isacoff, 65 Mass. App. Ct. 1, 3 (2005). It reflects an equitable and policy judgment that courts should “not lend aid to parties who base their cause of action on their own […]

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Posted by Massachusetts Legal Resources - May 17, 2017 at 11:07 pm

Categories: News   Tags: , , , , ,

Merrimack College v. KPMG LLP (Lawyers Weekly No. 11-002-16)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us   15-P-122                                        Appeals Court   MERRIMACK COLLEGE  vs.  KPMG LLP. No. 15-P-122. Suffolk.     November 2, 2015. – January 6, 2016.   Present:  Milkey, Carhart, & Massing, JJ.     Accountant.  Negligence, Accountant.  Arbitration, Arbitrable question, Appropriateness of judicial proceedings.  Contract, Arbitration.       Civil action commenced in the Superior Court Department on June 30, 2014.   A motion to compel arbitration was heard by Janet L. Sanders, J.     Ira M. Feinberg, of New York (Christopher H. Lindstrom with him) for the defendant. T. Christopher Donnelly (Kelly A. Hoffman with him) for the plaintiff.     MILKEY, J.  The defendant, KPMG LLP (KPMG), is an accounting firm that performed annual audits for the plaintiff, Merrimack College (Merrimack).  In the underlying action, Merrimack alleges that KPMG committed malpractice when it failed to detect serious financial irregularities that occurred in Merrimack’s financial aid office during fiscal years 1998 through 2004.  Based on a dispute resolution provision included in a contract the parties executed for fiscal year 2005, KPMG argues that Merrimack waived its right to sue KPMG regarding services it had provided in prior years and was required to arbitrate those claims.  In addition, KPMG maintains that whether Merrimack’s pre-2005 claims are subject to compulsory arbitration must be resolved by arbitration.  In a thoughtful decision, a Superior Court judge rejected such arguments and denied KPMG’s motion to compel arbitration.  We affirm. Background.  The essential facts are undisputed.  For the fiscal years at issue in the malpractice action, Merrimack had hired KPMG through a succession of separate annual service agreements.  Each such agreement took the form of a letter that KPMG sent to Merrimack that was then countersigned by Merrimack.  None of the annual agreements from 1998 through 2004, referred to by the parties as “engagement letters,” makes any mention of arbitration as an available (much less mandatory) means for the parties to resolve disputes that might arise between them. In claiming that Merrimack’s malpractice action nevertheless is subject to binding arbitration, KPMG is relying on the engagement letter that the parties executed for fiscal year 2005.  The 2005 agreement spelled out specific auditing services that KPMG would provide to Merrimack during that year.  Unsurprisingly, in laying out KPMG’s affirmative obligations, the 2005 engagement letter is a forward-looking document, referring, for example, to the audit report that KPMG “will issue” in […]

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Posted by Massachusetts Legal Resources - January 6, 2016 at 10:48 pm

Categories: News   Tags: , , , , ,

Chow v. Merrimack Mutual Fire Insurance Company (Lawyers Weekly No. 11-062-13)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA 02108-1750;  (617) 557-1030; SJCReporter@sjc.state.ma.us       12‑P‑1010                                       Appeals Court   ISAAC CHOW  vs.  MERRIMACK MUTUAL FIRE INSURANCE COMPANY.     No. 12‑P‑1010. Hampshire.     January 8, 2013.  ‑  May 15, 2013. Present:  Cohen, Green, & Vuono, JJ.     Insurance, Homeowner’s insurance.  Contract, Insurance, Performance and breach.  Practice, Civil, Instructions to jury.  Negligence, Standard of care.  Words, “Unoccupied.”       Civil action commenced in the Superior Court Department on November 17, 2008.   After transfer, the case was tried before Bertha D. Josephson, J.     Mark A. Tanner for the plaintiff. John E. Garber for the defendant.     GREEN, J.  Sometime during late December, 2006, or early January, 2007, a house owned by the plaintiff and insured under a homeowner’s policy issued by the defendant incurred substantial damage when pipes froze, and then burst, releasing large amounts of water into the structure.  The defendant denied coverage for the loss, based upon a policy exclusion for damage caused by frozen pipes if (i) the house was unoccupied at the time of the loss, and (ii) the insured failed to use reasonable care to maintain heat in the building.  The plaintiff filed this action against the defendant for breach of contract and declaratory relief.  After a trial, a jury returned a verdict in the defendant’s favor, and this appeal followed.  At issue is whether the trial judge correctly instructed the jury that the negligence of a person entrusted by the plaintiff to maintain heat in the building should be imputed to the plaintiff, so as to establish a failure by the plaintiff, himself, to use reasonable care.  We conclude that the instruction was in error, and reverse the judgment. Background.  Beginning in 1987 and continuing until the summer of 2006, the plaintiff owned and operated a restaurant in Northampton known as the Panda Garden.  When the restaurant opened, the plaintiff acquired a four-bedroom house located at 103 Rocky Hill Road in Hadley (the “property”), to serve as living quarters for restaurant employees.  The plaintiff resides  in New York, but lived at the property during the period when the restaurant was first getting established.  Thereafter, for so long as the restaurant was operating, the restaurant’s general manager, Richard Lau, lived at the property and generally managed it, paying utility bills and addressing any maintenance needs.  During the fall of 2006, Lau moved to a home he […]

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Posted by Massachusetts Legal Resources - May 15, 2013 at 10:48 pm

Categories: News   Tags: , , , , , , , ,

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