$107 Million Award Overturned

Civil Procedure

Posted Jul 27, 2007, 08:45 am CST
By Debra Cassens Weiss

Ernst & Young has dodged a $102.7 million bullet.

The appellate-level Pennsylvania Superior Court has overturned an award of that amount, imposed because of procedural legal gaffes by the accounting firm, the Legal Intelligencer reports.

“The sanction was extremely disproportionate to the noncompliance at issue,” the court ruled in a July 18 en banc opinion.

The ruling comes in a suit by the owners of a failing property company claiming negligence and fraudulent misrepresentation for work by the accounting firm's predecessor in bankruptcy proceedings. The bankrupt company had oversold property in a Ponzi scheme.

The company owners issued a request for admissions, and Ernst & Young failed to respond by the deadline. When given more time to submit verified answers, the accounting firm did so. The new filings were verified by an Ernst & Young partner, but not by its associate general counsel, even though he had verified previous filings.

Common Pleas Senior Judge John Brydon considered the omission to be an admission to the plaintiffs’ questions. His $102.7 million award may have been the largest in Pennsylvania, at least for the years 2003 to 2006 of verdict data kept by the Intelligencer.

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