Thabault v. Chait: Completing The Third Circuit´s Deepening Insolvency Trilogy

When the United States Court of Appeals for the Third Circuit decided Thabault v. Chait, 541 F.3d 512 (3d Cir. 2008), in September 2008, it was the most significant accounting malpractice decision of last year and perhaps the most significant damages case in the last 20 years. Why? Accounting malpractice cases are filled with pitfalls for unsuspecting plaintiffs. Moreover, accounting firms tend to settle cases in which the plaintiffs survive motions predicated on tried-and-true legal defenses and factual hurdles. The result is that few auditing malpractice cases are tried. Thabault, then, is an exception for that reason alone. But it was different for other reasons, as well. Thabault involved a negligently performed audit of an insolvent insurance company. The accounting firm—PricewaterhouseCoopers—not only pursued a trial rather than settlement, it vigorously advanced many of the industry's favorite legal and factual defenses throughout pre- and post-trial motions and