Business Litigation - Monday, September 22, 2008 9:26 - 0 Comments

$10 million verdict upheld against PricewaterhouseCoopers

Georgia’s Court of Appeals has upheld a $10 million jury verdict against PricewaterhouseCoopers on behalf of four family trusts associated with two Cobb County, Georgia, businessmen. The appellate panel, in an opinion authored by Judge John J. Ellington, rejected the international accounting firm’s appeal of the 2007 verdict, one of the largest in Cobb County’s history. After a trial that lasted more than a month, the Cobb jury found the Big Four accounting firm liable for negligent misrepresentation in a series of financial audits of a nursing home conglomerate. The Plaintiffs in the case had merged their Marietta, Georgia-based nursing home business with Mariner Health Group in 1995. That company and its successors were not part of the suit, which had been filed in 2002.

In 2002 the two individuals, two of their limited liability partnerships, and four Kellett family trusts sued PwC and three former senior executives of Mariner Health — with which the Kelletts had merged their firm, Convalescent Services Inc. — claiming that the defendants had engaged in fraud that cost the Plaintiffs more than $126 million in stock losses. In the Cobb suit, the plaintiffs, their partnerships and the trusts accused PwC and the Mariner executives of fraud, breach of fiduciary duty, professional negligence, negligent misrepresentation and racketeering. They sought more than $400 million and the banishment of PwC from doing business in Georgia. Mariner executives were cleared of civil liability by the jury. The suit claimed that PricewaterhouseCoopers predecessor, Coopers & Lybrand, had generated inaccurate financial reports — both before and after the merger — that overstated Mariner’s earnings and understated the company’s liabilities. Those alleged misstatements, according to the plaintiffs, convinced them the merger would be profitable and the expanding business would continue to make money.

Coopers & Lybrand and Price Waterhouse later merged to form PricewaterhouseCoopers. While awarding $10 million to the family trusts — and $1 each to the individual Plaintiffs and their two limited liability partnerships — the jury found for PwC on the fraud and racketeering claims. A breach of fiduciary duty claim against the accounting firm had already been dismissed. The jury also rejected claims of racketeering, fraud, breach of fiduciary duty and negligent misrepresentation against the Mariner executives.

PricewaterhouseCoopers appealed the sole claim that the jury had allowed to stand, seeking relief from the $10 million judgment. In that appeal, lawyers for the accounting firm argued that the trustee for the Kellett family trusts, who was the lead plaintiff, didn’t present any evidence to prove claims that the Plaintiffs’ interests relied on alleged misrepresentations by PwC about Mariner’s financial condition. The appeals court disagreed.

Source: Law.com