In re Parmalat Securities Litigation, No. 04 MD 1653(LAK).

CourtUnited States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
Writing for the CourtKaplan
Citation377 F.Supp.2d 390
PartiesIn re PARMALAT SECURITIES LITIGATION. Dr. Enrico Bondi, Plaintiff, v. Grant Thornton International, et al., Defendants.
Docket NumberNo. 04 Civ. 9771(LAK).,No. 04 MD 1653(LAK).
Decision Date18 July 2005
377 F.Supp.2d 390
In re PARMALAT SECURITIES LITIGATION.
Dr. Enrico Bondi, Plaintiff,
v.
Grant Thornton International, et al., Defendants.
No. 04 MD 1653(LAK).
No. 04 Civ. 9771(LAK).
United States District Court, S.D. New York.
July 18, 2005.

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John B. Quinn, Loren Kieve, Michael B. Carlinsky, R. Brian Timmons, Terry L. Wit, Quinn Emanuel Urquhart Oliver & Hedges, LLP, for Plaintiff.

Brian M. Cogan, James L. Bernard, Quinlan D. Murphy, Stroock & Stroock & Lavan LLP, for Defendant Grant Thornton International.

Bruce R. Braun, Linda T. Coberly, Theodore Z. Polley III, Winston & Strawn LLP, for Defendant Grant Thornton LLP.

Miles N. Ruthberg, Peter W. Devereaux, Janet Malloy Link, Latham & Watkins, LLP, for Defendant Deloitte Touche Tohmatsu.

Alan N. Salpeter, Stephen M. Shapiro, Michele Odorizzi, Daniel L. Ring, Robert J. Ward, Mayer, Brown, Rowe & Mawe LLP, for Defendants Deloitte & Touche USA LLP and Deloitte & Touche LLP.

Richard A. Martin, Kevin J. Toner, Mark Picard, Patryk J. Chudy, Heller Ehrman White & McAuliffe LLP, for Defendant Deloitte & Touche S.p.A.

OPINION

KAPLAN, District Judge.


 Table of Contents
                

Page 395

 I. Facts ................................................................396
                 A. The Parties .......................................................396
                 1. Plaintiff ......................................................396
                 2. Defendants .....................................................396
                 a. Deloitte Defendants .........................................396
                 b. Grant Thornton Defendants ...................................397
                 B. Grant Thornton and the Origins of the Parmalat Fraud ..............397
                 C. Deloitte Takes Over as Parmalat's Primary Auditor .................399
                 II. Pleading Standards ...................................................400
                III. Vicarious Liability ..................................................401
                 A. Legal Standards ...................................................402
                 1. Agency .........................................................402
                 2. Joint Venture ..................................................402
                 3. Alter Ego ......................................................403
                 B. Deloitte Defendants ...............................................404
                 1. DTT ............................................................404
                 2. Deloitte USA ...................................................405
                 a. Agency ......................................................405
                 b. Joint Venture ...............................................406
                 c. Alter Ego ...................................................407
                 C. Grant Thornton Defendants .........................................408
                 1. GTI ............................................................408
                 2. GT-USA .........................................................408
                 D. Conclusion ........................................................409
                 IV. Group Pleading .......................................................409
                 V. Specific Claims ......................................................409
                 A. Professional Malpractice ..........................................409
                 1. Deloitte USA ...................................................410
                 B. Fraud & Negligent Misrepresentation ...........................411
                 C. Aiding and Abetting Fraud and Constructive Fraud, and Aiding and
                 Abetting Breach of Fiduciary Duty ...............................412
                 D. Theft and Diversion of Assets .....................................414
                 E. Conversion ........................................................415
                 F. Aiding and Abetting Fraudulent Transfer ...........................416
                 G. Unjust Enrichment & Civil Conspiracy ..........................417
                 H. Deepening Insolvency ..............................................417
                 I. Claims on Behalf of Creditors .....................................419
                 VI. Conclusion ...........................................................421
                

In December 2003, the Parmalat dairy conglomerate collapsed in scandal.1 Dr. Enrico Bondi, the Extraordinary Commissioner of Parmalat Finanziaria, S.p.A., Parmalat S.p.A. and its affiliates in Extraordinary Administration in Italy (collectively "Parmalat"), brings this action against Parmalat's former auditors and their affiliates on the grounds of professional malpractice, fraud, aiding and abetting fraud and constructive fraud, negligent misrepresentation, aiding and abetting breach of fiduciary duty, theft and diversion of corporate assets, conversion, aiding and abetting fraudulent transfer, deepening insolvency, and unlawful civil conspiracy. Defendants move to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b). These motions raise issues similar to those resolved in a prior opinion in the related securities action.2

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I. Facts

The complaint alleges the following facts, which the Court assumes to be true for purposes of this motion.

A. The Parties

1. Plaintiff

Plaintiff Dr. Bondi has been appointed by the Italian government as the Extraordinary Commissioner of Parmalat, a position he contends is similar to that of a bankruptcy trustee in the United States.3 He brings this action on behalf of Parmalat against its former auditors Grant Thornton S.p.A. ("GT-Italy"), now known as Italaudit, S.p.A., and Deloitte & Touche S.p.A. ("Deloitte Italy") and their respective affiliates Grant Thornton International ("GTI") and Grant Thornton LLP ("GT-USA"), and Deloitte Touche Tohmatsu ("DTT") and Deloitte & Touche USA LLP and Deloitte & Touche LLP (collectively "Deloitte USA").4

2. Defendants

a. Deloitte Defendants

DTT is a Swiss verein,5 headquartered in New York and the umbrella firm for the international accounting enterprise commonly known as "Deloitte."6 DTT claims that a Swiss verein is similar to an incorporated membership association and is legally distinct from its members.7 Deloitte USA is Deloitte & Touche LLP and Deloitte & Touche USA LLP, both of which are Delaware limited liability partnerships and together comprise the United States member firm of the Deloitte organization. Deloitte Italy is a societá per azione, an Italian limited liability entity, and the Italian member firm of DTT. Plaintiff alleges that Deloitte Italy partners Adolfo Mamoli and Guiseppe Rovelli, who served as lead partners on the Parmalat audit, "were Deloitte's contact persons in Italy"8 and that they held positions with specialized groups of DTT.9

According to plaintiff, Deloitte firms hold themselves out as an integrated worldwide accounting organization with DTT at the helm of "a global strategy executed locally in nearly 150 countries."10 The Deloitte firms report revenue on a combined basis11 and have a centralized decision making process.12 DTT creates professional standards to which member firms must adhere and oversees that adherence to ensure that "clients receive `uniform, quality service wherever they do business, anywhere in the world.'"13 It enforces compliance also with a global ethics program, the violation of which subjects a member firm or partner to expulsion.14

Page 397

Plaintiff asserts that Deloitte operated as a unified accounting firm in respect of the Parmalat audit with 32 member firms or offices joining together to audit Parmalat and its subsidiaries. DTT, Deloitte Italy and the member firms shared in the compensation received for the Parmalat audit and each contributed funds and/or resources to that project.15

b. Grant Thornton Defendants

GTI is an Illinois nonprofit corporation headquartered in London that serves as the umbrella organization for the Grant Thornton firms providing accounting services to mid-size companies.16 GT-USA is an Illinois limited liability partnership and the United States member firm of GTI.17 Prior to January 2004, GT-Italy, a societá per azione, was the Italian member firm of Grant Thornton.18

Plaintiff alleges that GTI and its member firms hold themselves out as a unified accounting organization with offices in 100 countries.19 Member firms are required to adhere to certain standards and to comply with Grant Thornton procedures.20 GTI performs a regular review of its member firms and requires that they use the Grant Thornton logo and name when bidding for and providing services.21 Members firms cooperate on certain engagements, plaintiff alleges, and individual partners of these firms attend meetings together and participate in global practice groups.22

B. Grant Thornton and the Origins of the Parmalat Fraud

Beginning in the mid-1990s, Parmalat faced mounting losses from its operations in South America and elsewhere.23 To hide these losses, as well as the personal diversion of funds by Parmalat's founder and chief executive Calisto Tanzi,24 insiders at Parmalat, including Tanzi, chief financial officer Fausto Tonna, and its auditors, Lorenzo Penca and Maurizio Bianchi from GT-Italy, devised a scheme to use offshore companies to offload debt and manufacture the appearance of revenue.25

Initially, the scheme involved three shell companies incorporated in the Cayman Islands and Netherlands Antilles that were used to remove debt from Parmalat's balance sheet.26 In 1998, Parmalat insiders and its auditors at Grant Thornton incorporated Bonlat Financing, Ltd. ("Bonlat"), a Cayman Islands company that became the principal vehicle for the fraud.27 Bonlat then served as a dumping ground for Parmalat liabilities, all the while booking fictitious sales and revenue.28

One of the more notable fictitious transactions involved the "sale" of 300,000 tons of powdered milk to a Cuban state importer for $620 million.29 Bonlat purportedly sold the milk through Camfield Pte. Ltd. ("Camfield"), a Singapore based company with the same address as the offices of Foo Kon Tan Grant Thornton, the Singapore

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member firm of Grant Thornton.30 In fact,...

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45 practice notes
  • In re Libor-Based Fin. Instruments Antitrust Litig., 11 MDL 2262 (NRB)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • August 4, 2015
    ...See Diduck v. Kaszycki & Sons Contractors, Inc., 974 F.2d 270, 284 (2d Cir. 1992) (applying federal law); In re Parmalat Sec. Litig., 377 F. Supp. 2d 390, 413-14 (S.D.N.Y. 2005) (applying Illinois law); Restatement (Second) of Torts § 876(b). Page 266 Third, for tort and CEA claims arising ......
  • In re Felt Mfg. Co., Inc., Bankruptcy No. 05-13724-JMD.
    • United States
    • United States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of New Hampshire
    • July 27, 2007
    ...bankruptcy estate Page 612 and derivatively the interests of its creditors. Bondi v. Grant Thornton Int'l (In re Parmalat Sec. Litig.), 377 F.Supp.2d 390, 420 (S.D.N.Y.2005); Gheewalla, ___ A.2d at ___, 2007 WL 1453705, at *7. Indeed, where the injury from an alleged breach of an officer's ......
  • John Buckley & Mama Gramm's Bakery, Inc. v. Abuzir, No. 1–13–0469.
    • United States
    • United States Appellate Court of Illinois
    • April 10, 2014
    ...112, 122 (S.D.N.Y.2007) (“actual ownership is not a prerequisite to a finding of liability”); In re Parmalat Securities Litigation, 377 F.Supp.2d 390, 404 n. 95 (S.D.N.Y.2005) (“Although none of the defendants here owns shares in another, the absence of such ownership is not fatal to an alt......
  • In re Total Containment, Inc., Bankruptcy No. 04-13144F.
    • United States
    • United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania
    • December 18, 2005
    ...Recently, a district court judge reached a similar conclusion concerning Illinois state law, In re Parmalat Securities Litigation, 377 F.Supp.2d 390, 416-17 (S.D.N.Y.2005), and did so by following a ruling made in Baker O'Neal Holdings, Inc. v. Ernst & Young LLP, 2004 WL 771230, at *14 (S.D......
  • Request a trial to view additional results
45 cases
  • In re Libor-Based Fin. Instruments Antitrust Litig., 11 MDL 2262 (NRB)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • August 4, 2015
    ...See Diduck v. Kaszycki & Sons Contractors, Inc., 974 F.2d 270, 284 (2d Cir. 1992) (applying federal law); In re Parmalat Sec. Litig., 377 F. Supp. 2d 390, 413-14 (S.D.N.Y. 2005) (applying Illinois law); Restatement (Second) of Torts § 876(b). Page 266 Third, for tort and CEA claims arising ......
  • In re Felt Mfg. Co., Inc., Bankruptcy No. 05-13724-JMD.
    • United States
    • United States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of New Hampshire
    • July 27, 2007
    ...bankruptcy estate Page 612 and derivatively the interests of its creditors. Bondi v. Grant Thornton Int'l (In re Parmalat Sec. Litig.), 377 F.Supp.2d 390, 420 (S.D.N.Y.2005); Gheewalla, ___ A.2d at ___, 2007 WL 1453705, at *7. Indeed, where the injury from an alleged breach of an officer's ......
  • John Buckley & Mama Gramm's Bakery, Inc. v. Abuzir, No. 1–13–0469.
    • United States
    • United States Appellate Court of Illinois
    • April 10, 2014
    ...112, 122 (S.D.N.Y.2007) (“actual ownership is not a prerequisite to a finding of liability”); In re Parmalat Securities Litigation, 377 F.Supp.2d 390, 404 n. 95 (S.D.N.Y.2005) (“Although none of the defendants here owns shares in another, the absence of such ownership is not fatal to an alt......
  • In re Total Containment, Inc., Bankruptcy No. 04-13144F.
    • United States
    • United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania
    • December 18, 2005
    ...Recently, a district court judge reached a similar conclusion concerning Illinois state law, In re Parmalat Securities Litigation, 377 F.Supp.2d 390, 416-17 (S.D.N.Y.2005), and did so by following a ruling made in Baker O'Neal Holdings, Inc. v. Ernst & Young LLP, 2004 WL 771230, at *14 (S.D......
  • Request a trial to view additional results

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