The in pari delicto defense has been recognized, as has the adverse interest exception.

FORBES: A Tale of Two Lawsuits -- PricewaterhouseCoopers and Colonial Bank

The in pari delicto doctrine is based on common law agency principles.

FORBES: FDIC Makes A Case Against Auditors For Bank Failures

The recent New York State Court of Appeals in pari delicto decision will make those claims more difficult to pursue.

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The FDIC seems clearly to be anticipating an in pari delicto defense.

FORBES: A Tale of Two Lawsuits -- PricewaterhouseCoopers and Colonial Bank

But, instead of those facts making it a slam-dunk against the auditors, the guilt of the executives may give auditors the in pari delicto defense.

FORBES: A Tale of Two Lawsuits -- PricewaterhouseCoopers and Colonial Bank

The in pari delicto defense still works in this case.

FORBES: FDIC Makes A Case Against Auditors For Bank Failures

In an unusual move, Delaware asked the New York Court of Appeals to give their opinion on the in pari delicto issue, which was controlled by New York law.

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Typically, since the actions of employees are imputed to the corporation, that would make Colonial a wrongdoer right alongside Taylor Bean exactly the scenario in which in pari delicto would protect its auditors.

FORBES: A Tale of Two Lawsuits -- PricewaterhouseCoopers and Colonial Bank

The FDIC may have to select their first cases in a state where the record of successful use of the in pari delicto defense by third parties is less than in New York or Pennsylvania, for example.

FORBES: FDIC Makes A Case Against Auditors For Bank Failures