Publication

Offit Kurman Attorneys Lawrence A. Steckman and Adam J. Rader Obtain Dismissal of $65 Million Complaint Against Audit Firm Clients

For Immediate Release

New York, NY | August 9, 2018 Lawrence A. Steckman and Adam J. Rader of Offit Kurman have obtained a with-prejudice dismissal of a Complaint filed in the U.S. District Court for the Central District of California seeking damages of more than $65 million based on theories of fraud and breach of fiduciary duty, as well as breach of contract and negligence.

The Complaint, filed by Robert W. Seiden, Esq., Receiver for China Valves Technology, Inc., against three audit firms, sought to hold the auditors liable for alleged participation in the fraudulent conduct of China Valves’ corporate officers.

Offit Kurman argued all claims should be dismissed on statute of limitations grounds as the relevant events took place beyond the limitation period and had been the subject of several prior litigations in which a complaint and amended complaint were dismissed in 2012 and 2013. Offit Kurman argued that claims that could have been discovered and in fact were discovered and litigated, should not be subject to the equitable tolling the receiver claimed was applicable under the so-called “Adverse Domination Doctrine,” which allows equitable tolling in certain situations where a company is controlled by directors and officers acting adversely to the company’s best interests, but not where an interested party had knowledge of the wrongdoing sufficient to seek redress for the alleged misconduct of the officers.

In a 20-page opinion issued on July 31, 2018, District Judge Cormac J. Carney adopted Offit Kurman’s position, holding that “[China Valves’] shareholders had both the knowledge and ability to protect [China Valves] from Defendants’ alleged harmful acts, and in fact asserted their right to redress the wrongs addressed in the Complaint.” The Judge rejected the Receiver’s argument that China Valves’ shareholders lacked the ability to bring causes of action asserted in the Complaint on behalf of the Company because Defendants “would have had the defense of in pari delicto against any Company claims while the bad actors were in control of the Company.”

Agreeing further with arguments by Mr. Steckman and Mr. Rader, the Judge held that a defense of in pari delicto is a fact-intensive inquiry, and that it was unclear whether the defense would have completely barred a shareholder derivative action against Defendants for the acts alleged in the Complaint. Accordingly, he held, Plaintiff’s “speculation” that a shareholder derivative claim against the auditors would have resulted in dismissal under the in pari delicto doctrine was insufficient to avoid dismissal. Finally, the Judge held that repleading, although normally granted, would be futile given the circumstances and the defense Offit Kurman asserted.

Offit Kurman’s commercial litigators have successfully represented both plaintiffs and defendants at all levels of state and federal courts. The firm’s attorneys tailor legal strategies to each client’s needs with an emphasis on quick, practical results. The firm also has a substantial appellate practice in both the federal and state courts and is regularly retained by clients to handle their interests on appeal. Working in close association with attorneys in all of the firm’s practice areas, the Commercial Litigation Team has the resources and experience to prepare and try all phases of securities fraud and RICO litigation, intellectual property litigation, mass tort litigation, disputes involving or arising from commercial transactions, contract disputes, and virtually any other kinds of complex dispute.

 

 

ABOUT LAWRENCE STECKMAN

lsteckman@offitkurman.com  | 347.589.8515

Lawrence Steckman has more than thirty years experience litigating securities, RICO and business cases. In July 2006 Super Lawyers Magazine, in its first New York edition, identified Mr. Steckman as one of New York’s “Super Lawyers” in securities litigation and business law and he received that honor again most recently in 2013, 2014, 2015, 2016, and 2017. Mr. Steckman has handled billions of dollars in client matters, has overseen the dismissal of billions of dollars in claims against his clients and has been counsel in leading securities, derivatives and RICO litigations as well as securities and commercial arbitration disputes. He is the author or lead co-author of more than fifty published works on the law. The independent attorney rating service, AVVO, has awarded him a rating of “superb” (10.0), its highest level.

 

 

 

ABOUT ADAM RADER

arader@offitkurman.com  | 347.589.8514

Adam Rader has been assisting clients in the civil prosecution and defense of complex commercial business disputes in state and federal court for more than 20 years. His practice focuses on commercial litigation in state and federal court with an emphasis on international law.

Mr. Rader provides clients with creative and practical approaches to the resolution of complex commercial problems.

Mr. Rader has been involved on behalf of his clients in a diverse array of complex commercial litigation matters, arbitration and mediation, international matters, executive employment disputes and appellate matters.

Mr. Rader has represented U.S. and international clients in a variety of state and federal civil and criminal cases including matters involving corporate and international litigation, arbitration, international trade, extradition, art law, trademark issues, entertainment law and Native American Law.

 

 

 

 

 

 

ABOUT OFFIT KURMAN

Offit Kurman is one of the fastest-growing, full-service law firms in the Mid-Atlantic region. With over 170 attorneys offering a comprehensive range of services in virtually every legal category, the firm is well positioned to meet the needs of dynamic businesses and the people who own and operate them. Our eleven offices serve individual and corporate clients in the Virginia, Washington, DC, Maryland, Delaware, Pennsylvania, New Jersey, and New York City regions. At Offit Kurman, we are our clients’ most trusted legal advisors, professionals who help maximize and protect business value and personal wealth. In every interaction, we consistently maintain our clients’ confidence by remaining focused on furthering their objectives and achieving their goals in an efficient manner. Trust, knowledge, confidence—in a partner, that’s perfect.

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