RECENT DEVELOPMENTS AFFECTING PROFESSIONALS', OFFICERS', AND DIRECTORS' LIABILITY

[...] the court upheld the trial court's grant of summary judgment in favor of the accountants on these claims.11 The court used the same principles to reach a different conclusion in Armstrong v. American Pallet Leasing, Inc.,11 a case where investors filed claims against an auditor for violations of the Racketeer Influenced and Corrupt Organizations Act, federal securities laws, and various state claims arising from an extensive Ponzi scheme. In 2006, a trustee representing the liquidating trust asserted claims for gross negligence and breach of fiduciary duty against Fried Frank for formulating an unworkable restructuring plan.213 The district court allowed Fried Frank's Rule 12(b)(6) motion to dismiss the claims based upon the in pari delicto defense.214 The First Circuit affirmed the trial court's decision applying the in pari delicto defense because HVE, as compared to Fried Frank, bore at least substantially equal responsibility for the wrong HVE sought to redress (the responsibility component) and concluded that the claims against Fried Frank would not interfere with the purposes of the underlying law or otherwise contravene the public interest (the public policy component).215 Wth respect to the responsibility component, the court rejected HVE's argument that Fried Frank's expertise rendered it more responsible than HVE for the wrong and held that HVE could not shift blame to its hired professionals.216 The court further held that the adverse interest exception to the in pari delicto defense was not available to HVE where the complaint failed to allege that HVE's management sought confirmation of the plan based on a desire to serve themselves and not HVE.217 The mere fact that management received bonuses based upon the plan's confirmation was insufficient to establish the exception.218 Wth respect to the public policy component, the court rejected HVE's argument that dismissal of the claims would pardon attorneys who betrayed their professional obligations, harmed third parties, and misinformed the bankruptcy court.219 The court found that entertaining the dispute between equally culpable wrongdoers would waste valuable resources and would offend the public interest.220 The First Circuit also rejected HVE's argument that dismissing the case would make it impossible for other plaintiffs to hold professionals retained in the bankruptcy context accountable for gross negligence and breach of fiduciary duty because the decision is driven by HVE's own a