Opinion Gives Excellent Guidelines Regarding Corporate Vicarious Liability
In these days when Ponzi might be Googled almost as much as Britney, and pretty much everyone is pleading (or actually experiencing) great losses, plaintiffs are going to be very creative looking for pockets that aren’t empty. To be fair, defendants will probably be claiming that they had nothing to do with any arguably related entities.
Therefore, any business that operates or has any relationship with US or multinational entities, or any plaintiff suing one, should carefully read and consider Judge Kaplan’s recent In re Parmalat Securities Litigation opinion. The opinion may also be found at 594 F.Supp.2d 444 (2009).
Parmalat was an Italian dairy conglomerate that collapsed after its giant fraud was discovered. This particular opinion discusses whether entities related to Parmalat's Italian accountants can be held vicariously, or jointly and severally, liable for the Italian accountants' acts. The court found a question of fact regarding whether the Italian accountants’ Swiss umbrella entity, or a United States entity could be liable for the Italian accountants' alleged securities fraud violations.
The opinion exhaustively details and applies factors that might be considered in deciding whether an agency relationship exists; whether an umbrella organization has control over the allegedly offending entity; whether a member entity controls the umbrella organization; and the affirmative defense of good faith.
Whether or not you agree with the application of the law – law students all over the country are probably thinking this decision is a good note topic -- the factual analysis in the opinion should be considered in light of your, or your opponent’s, organization.
