Trustee Comments on Reinstatement of His Malpractice Suit Against K&L Gates

By Gina Passarella
Of the Legal Staff

Mark Kirschner, the trustee of bankrupt bottled-water producer Le-Nature’s, called a Superior Court’s decision to reinstate his $500 million malpractice suit against K&L Gates a “major victory for the Le Natures Liquidating Trust.”

Kirschner sued the law firm and accounting firm Pascarella & Wiker for not detecting fraudulent activities within Le-Nature’s when the two firms were hired to do an internal investigation in 2003. He has argued that the firms’ finding no evidence of fraud allowed certain people within the company to continue their illegal activity until the company went bankrupt in 2006, costing another $500 million in damages.

Allegheny County Court of Common Pleas Judge R. Stanton Wettick Jr. had previously dismissed all of the claims against the two firms, finding they were hired by the special committee of the board created to investigate reports of fraud. The trial judge said K&L Gates had no duty to Le-Nature’s itself.

But the Superior Court disagreed, finding the work done on behalf of the special committee was essentially for the board and therefore the company. The court said there were actual losses suffered by Le-Nature’s due to K&L Gates’ actions as described by Kirschner in his complaint. Kirschner said the Superior Court’s decision also cited with approval a decision by the U.S. Court of Appeals for the Third Circuit in Official Committee of Unsecured Creditors of Allegheny Health Education & Research Foundation v. PriceWaterhouse Coopers regarding the application of the in pari delicto doctrine.

Kirschner said that aspect of the opinion is of “great significance” because it is “the first major appellate decision in Pennsylvania” to adopt the idea that, in Pennsylvania, “a professional firm that acts other than in good faith, as alleged in the complaint against K&L Gates, cannot avoid potential liability under the doctrine of in pari delicto.

Check out the full article about the Superior Court’s decision here.

Gina Passarella is the senior reporter for The Legal. She can be contacted by e-mail at gpassarella@alm.com or phone at 215-557-2494. Follow her on Twitter at @GPassarellaTLI.