Semi-Tech Litigation, L.L.C. v. Ting

Decision Date16 December 2004
Docket Number4939.
Citation2004 NY Slip Op 09381,787 N.Y.S.2d 234,13 A.D.3d 185
CourtNew York Supreme Court — Appellate Division
PartiesSEMI-TECH LITIGATION, L.L.C., Respondent-Appellant, v. JAMES H. TING et al., Appellants, and ERNST & YOUNG LLP (an Ontario Limited Liability Partnership), Appellant-Respondent, et al., Defendants.

This is an action brought by an entity created by the Bankruptcy Court to pursue claims for the benefit of the corporate debtor's estate, where the chapter 11 confirmed plan assigned the debtor's claims to plaintiff. Many of the creditors are noteholders subject to a 1993 trust indenture. Plaintiff alleges that former officers and directors of the debtor and its subsidiaries caused the debtor to engage in prohibited transactions that constituted defaults under the indenture, with the complicity of and subsequent cover-up by the accountants who were required to certify to the trustee whether there had been defaults.

The motion court properly found that there was jurisdiction over the officer defendants and over the accounting firm that issued the auditors' certificates pursuant to CPLR 302 (a) (1), based upon their allegedly false ongoing certifications to the trustee, and over the director defendants based on their complicity (see McGowan v Smith, 52 NY2d 268, 271-272 [1981]). The prospect of these defendants having to defend a suit in New York comports with due process (see LaMarca v Pak-Mor Mfg. Co., 95 NY2d 210, 217 [2000]). In view of the foregoing, it is unnecessary to address the other grounds advanced to support jurisdiction over these defendants. There was jurisdiction pursuant to both CPLR 302 (a) (1) and (2) over Ernst & Young (Hong Kong) based on the admission, which is uncontested, that its members attended meetings in New York where the allegedly false certificates and their consequences were discussed, and where the purported cover-up was allegedly advanced.

Contrary to defendants' contention, plaintiff has standing to bring this action (see Semi-Tech Litig., LLC v Bankers Trust Co., 272 F Supp 2d 319 [2003]; In re Ben Franklin Retail Stores, Inc. [Steinberg v Kendig], 225 BR 646, 649-650 [Bankr Ct, ND Ill 1998]). Our decision in Barnes v Hirsch (215 App Div 10 [1925], affd 242 NY 555 [1926], cert denied 273 US 709 [1926]), which was decided before revisions to the bankruptcy laws and which, in distinction to the present case involving an assignment by the Bankruptcy Court to a specially created entity, involved assignments by the individual creditors to the trustee, does not compel a different result.

Fraud was pleaded against the accountants with sufficient particularity (see Houbigant, Inc. v Deloitte & Touche, LLP., 303 AD2d 92, 97-98 [2003]; see also e.g. Franklin High Income Trust v APP Global, Ltd., 7 AD3d 400 [2004]) and was sufficiently stated (see e.g. Knight Sec., L.P. v Fiduciary Trust Co., 5 AD3d 172 [2004]). The representations by the issuer of the auditors' certificates were chargeable, on theories of conspiracy and aiding and abetting fraud, to accounting firms...

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3 cases
  • In re Cbi Holding Co., Inc.
    • United States
    • U.S. Court of Appeals — Second Circuit
    • June 16, 2008
    ...to the bankruptcy laws have undermined the rationale of Barnes for the reasons set forth in Semi-Tech Litigation, L.L.C. v. Ting, 13 A.D.3d 185, 787 N.Y.S.2d 234 (1st Dep't 2004). Because we reverse, we must reach the two arguments that E & Y raises in its cross-appeal: (1) BSI's claims are......
  • C3 Media & Marketing Group v. Firstgate Internet
    • United States
    • U.S. District Court — Southern District of New York
    • September 26, 2005
    ...An officer or director "does not owe a fiduciary duty to the creditors of a solvent corporation." Semi-Tech Litig., L.L.C. v. Ting, 13 A.D.3d 185, 188, 787 N.Y.S.2d 234, 236 (1st Dep't 2004) (citing Clarkson Co. v. Shaheen, 660 F.2d 506, 512 (2d Cir.1981)); see Credit Agricole Indosuez v. R......
  • In the Matter of Williams v. Doherty, 4937.
    • United States
    • New York Supreme Court — Appellate Division
    • December 16, 2004
8 books & journal articles
  • Table of Cases
    • United States
    • James Publishing Practical Law Books Archive Qualifying & Attacking Expert Witnesses - 2015 Contents
    • August 4, 2015
    ...194, 213 (1947), §305 Self v. General Motors Corp ., 42 Cal App 3d.1, 116. Cal. Rptr. 575 (1974), §561.1 Semi-Tech Liti. L.L.C. v. Ting, 787 N.Y.S.2d 234,236 S.Ct. N.Y. App Div. (2004), §554 Sewell v. Md. Dept. of Transportation , 206 F.R.D 547 (D. Md. 2002), §407 Seymour v. Consolidated Fr......
  • Commonly Used Experts
    • United States
    • James Publishing Practical Law Books Archive Qualifying & Attacking Expert Witnesses - 2019 Contents
    • August 4, 2019
    ...was at least equally at fault. Bankruptcy courts and trustees can create entities to sue accountants. In Semi-Tech Liti. L.L.C. v. Ting, 787 N.Y.S.2d 234, 236 S.Ct. N.Y. App Div. (2004) the United States Bankruptcy Court created an entity to pursue claims for the benefit of the corporation’......
  • Table of Cases
    • United States
    • James Publishing Practical Law Books Archive Qualifying & Attacking Expert Witnesses - 2016 Contents
    • August 4, 2016
    ...194, 213 (1947), §305 Self v. General Motors Corp ., 42 Cal App 3d.1, 116. Cal. Rptr. 575 (1974), §561.1 Semi-Tech Liti. L.L.C. v. Ting, 787 N.Y.S.2d 234,236 S.Ct. N.Y. App Div. (2004), §554 Sewell v. Md. Dept. of Transportation , 206 F.R.D 547 (D. Md. 2002), §407 Seymour v. Consolidated Fr......
  • Commonly Used Experts
    • United States
    • James Publishing Practical Law Books Archive Qualifying & Attacking Expert Witnesses - 2017 Contents
    • August 4, 2017
    ...was at least equally at fault. Bankruptcy courts and trustees can create entities to sue accountants. In Semi-Tech Liti. L.L.C. v. Ting, 787 N.Y.S.2d 234, 236 S.Ct. N.Y. App Div. (2004) the United States Bankruptcy Court created an entity to pursue claims for the benefit of the corporation’......
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