Two lawsuits by Parmalat SpA and its Parmalat Capital Finance Ltd. unit claiming damages from the accounting firm Grant Thornton LLP were revived by a federal appeals court in New York.
The appeals court ruled today that U.S. District Judge Lewis Kaplan in Manhattan, who was assigned to oversee federal Parmalat-related lawsuits from throughout the country, applied the wrong standard in deciding to exercise jurisdiction over the Grant Thornton suits, which were originally filed in Illinois state court in 2004 and 2005.
The appeals court sent the cases back to Kaplan to determine whether he should have permitted the cases to stay in Illinois. Kaplan, after taking jurisdiction over the cases, dismissed them in 2009. An affirmative ruling by Kaplan, or by the appeals court reviewing Kaplan’s answer to the question, would undo the dismissals and permit the Illinois court to consider the claims.
Parmalat, a dairy company based in Collecchio, Italy, collapsed in December 2003 in the country’s largest bankruptcy, later disclosing more than 14 billion euros ($18.7 billion) of debt, about eight times the amount reported by its former management. Parmalat SpA emerged from bankruptcy and returned to the stock market in 2005.
Enrico Bondi, who was appointed to oversee the Parmalat bankruptcy, sued Grant Thornton, claiming it aided in the fraud that led to Parmalat’s collapse. Parmalat Capital also sued the firm.
“We are currently reviewing the order,” Kristi Grgeta, a spokeswoman for Grant Thornton LLP, the U.S. member firm of Grant Thornton International, said today in an e-mailed statement. “Grant Thornton LLP was not involved in any wrongdoing with regard to the fraud at Parmalat -- as we did not issue any statements or audits with regard to Parmalat -- and will continue to vigorously defend against any claims or actions.”
If Parmalat is permitted to pursue its claims against Grant Thornton in Illinois, it will have to overcome a similar defense under that state’s law to win on the claims.
In a related ruling today, the appeals court upheld Kaplan’s dismissal of a claim by Parmalat Capital against Charlotte, North Carolina-based Bank of America Corp. Parmalat Capital didn’t raise any jurisdictional issues on the appeal of that case, the appeals court said.
North Carolina Law
Kaplan, applying North Carolina law, ruled in 2009 that Parmalat Capital couldn’t recover damages from Bank of America over an alleged fraud in which Parmalat insiders participated. The appeals court agreed.
“It has been our view all along that Parmalat Capital Finance, a participant in the fraud, was not entitled to seek damages from Bank of America, which had no knowledge of the fraud and was damaged by it,” Timothy Gilles, a Bank of America spokesman, said in a statement.
The case is In re Parmalat Securities Litigation, 04-cv-01653, U.S. District Court, Southern District of New York (Manhattan).