Superior Court of Massachusetts, Suffolk, Business Litigation Session
May 16, 2017
MEMORANDUM AND ORDER ALLOWING DEFENDANT'S MOTION
FOR SUMMARY JUDGMENT
Kenneth W. Salinger, Justice
College incurred substantial financial losses because its
former financial aid director, Christine Mordach,
deliberately approved fake Perkins loans for many students
without their knowledge. For years Mordach awarded far more
financial aid than she was authorized to spend. She made the
college's financial aid budget appear balanced by
replacing grants and scholarships with fake Perkins loans,
the proceeds of which were used to pay tuition owed to
Merrimack. Ms. Mordach pleaded guilty to federal criminal
charges of mail and wire fraud.
seeks to recover its losses from its former auditor, KPMG,
LLP. Merrimack claims that KPMG noticed but did not follow up
on discrepancies in some student loan accounting and
deficiencies in internal controls for such loans, and as a
result failed to discover Mordach's fraud. Merrimack
asserts that KPMG was negligent, breached its contract, and
violated G.L.c. 93A.
has moved for summary judgment on several grounds, including
that Merrimack's claims are barred under the equitable
doctrine known as in pari delicto because
Mordach committed fraud to benefit her employer and her
deliberate wrongdoing on behalf of Merrimack was far worse
than KPMG's alleged negligence.
Court agrees that, in light of the undisputed material facts,
Merrimack's claims are barred by the in pari
delicto doctrine. Under these circumstances, Merrimack
is legally responsible for Mordach's misconduct.
Merrimack is also bound by the allegations in its complaint
that Mordach engaged in intentional fraud. That deliberate
misconduct by Merrimack's employee was far more serious
than KPMG's purported negligence. Finally, the Court is
not persuaded that Massachusetts should recognize, on public
policy grounds, an exception to this doctrine for claims
against an allegedly negligent outside auditor. The Court
will therefore allow KPMG's motion and dismiss this
The doctrine of in pari delicto bars a plaintiff who
has participated in wrongdoing from recovering damages for
any loss resulting from the wrongdoing." Choquette
v. Isacoff, 65 Mass.App.Ct. 1, 3, 836 N.E.2d 329 (2005).
It reflects an equitable and policy judgment that courts
should " not lend aid to parties who base their cause of
action on their own immoral or illegal acts."
Id. at 4. This doctrine does not create an absolute
bar to recovery. If both sides may have engaged in
misconduct, the " less guilty" party may be able to
recover damages or obtain equitable relief, notwithstanding
its own misconduct. Id., quoting Council v.
Cohen, 303 Mass. 348, 354, 21 N.E.2d 967 (1939), and
Berman v. Coakley, 243 Mass. 348, 350, 137 N.E. 667
In pari delicto " is a phrase of legal Latin
that " means 'in equal fault.'" Baena
v. KPMG, LLP, 453 F.3d 1, 6 (1st Cir. 2006), quoting
Black's Law Dictionary 791 (6th ed. 1990). It
comes from a long-standing equitable maxim, in pari
delicto potior est conditio defendentis, " that can
be translated as " [i]n a case of equal or mutual fault,
the position of the [defending party] is the better
one." Id., n.5, quoting Black's Law
practical import of this principle, where it applies, "
is simply that the law leaves the parties exactly where they
stand; not that it prefers the defendant to the plaintiff,
but that it will not recognize a right of action" based
on inequitable conduct. Atwood v. Fisk, 101 Mass.
363, 364 (1869).
principle was developed and originally applied to bar a
plaintiff who engaged in wrongdoing from obtaining purely
equitable relief (such as an order that someone specifically
perform a contract or some other injunctive relief) to remedy
its own misconduct (such as entering into an illegal contract
or engaging in fraud). Choquette, 65 Mass.App.Ct. at
recently, this doctrine has also been applied to bar a
plaintiff from asserting legal claims seeking monetary
compensation for an injury that was in part self-inflicted.
In Choquette, for example, the plaintiff filed a
bankruptcy petition and was then sued by the bankruptcy
trustee for fraudulently conveying property and filing a
false statement of his assets. The plaintiff turned around
and sued his attorney for legal malpractice on the theory
that the lawyer had prepared the false schedule of assets.
The Appeals Court affirmed summary judgment in favor of the
defendant lawyer on the ground that the in pari
delicto doctrine barred all claims because the plaintiff
had knowingly signed the false asset schedule and then lied
about it under oath during his bankruptcy hearing.
Id. at 3-8.
in pari delicto doctrine applies with full force
against a corporation or other legal entity, such as
Merrimack College, that has been injured as a result of
misconduct by an employee or other agent acting on its behalf
and then seeks compensation from some third party for that
injury. Arcidi v. National Association of Government
Employees, Inc., 447 Mass. 616, 621-622, 856 N.E.2d 167
Application to the Undisputed Facts
Whether particular claims are barred because the plaintiff is
at least as culpable as, and thus in pari delicto
with, the defendant can be resolved on a motion for summary
judgment where the material facts are not in dispute. See
Choquette, 65 Mass.App.Ct. at 2-8.