Lewin v. Lipper Convertibles, L.P.
2010 WL 4669040
S.D.N.Y.2010Background
- Lewins and CILP/Cohen sue PwC for direct fraud claims and derivative claims related to PwC audits of Convertibles (1995–2000).
- Plaintiffs allege PwC issued unqualified audit opinions falsely stating GAAS/GAAP conformity to induce investments.
- Liquidation of Convertibles (2002) led to distributions; Trustees and plaintiffs later received partial recoveries in state court.
- Trustee’s separate action against PwC for negligence, fraud, breach of fiduciary duty, and breach of contract settled for $29,978,000 (Nov. 2010) with releases not affecting these lawsuits.
- Judge Owen previously dismissed similar claims as derivative; New York courts subsequently held damages in such context are derivative if injuries are not distinct to plaintiffs.
- PwC moves for summary judgment arguing lack of standing for direct claims and absence of date-of-investment injuries; plaintiffs oppose accordingly.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Do plaintiffs have standing for direct claims separate from partnership injury | Lewins/CILP contend they suffered direct, date-of-investment injuries. | PwC argues injuries are derivative, not personal to plaintiffs. | No standing; injuries are derivative to Convertibles. |
| What is the proper damages measure for alleged 10(b) fraud | Damages include out-of-pocket losses at date of investment; rescissionary option exists. | Damages must be measured as difference between price paid and true value at investment; rescissionary damages not established. | Damages not proven; no direct injury shown; summary judgment for PwC. |
| Do state-law claims share the same standing and damages issues | State-law claims allege independent misrepresentations. | State-law claims foreclosed by Continental decision on date-of-investment injuries. | State-law claims dismissed. |
Key Cases Cited
- Continental Cas. Co. v. PricewaterhouseCoopers, LLP, 907 N.Y.S.2d 139 (N.Y. Ct. App. 2010) (holds that damages require direct date-of-investment injury when overlapping actions exist)
- Rand v. Anaconda-Ericsson, Inc., 794 F.2d 849 (2d Cir. 1986) (standing; direct vs. derivative claims in securities context)
- Vincel v. White Motor Corp., 521 F.2d 1113 (2d Cir. 1975) (standing; injury to shareholders in corporate fraud context)