Pennsylvania Supreme Court Limits the Applicability of the In Pari Delicto Defense

July 14, 2010
The Supreme Court of Pennsylvania recently clarified Pennsylvania law on the in pari delicto defense in Official Comm. Of Unsecured Creditors of Allegheny Health, Educ. & Research Found. v. PriceWaterhouseCoopers LLP, when it answered certified questions of law from the Court of Appeals for the Third Circuit concerning the extent to which actions of a debtor corporation’s managers can be imputed to the corporation for purposes of this defense. This update examines the decision, which limits the availability of the in pari delicto defense in cases where bankruptcy estates seek to recover from a third party who colluded with the debtor’s officers in the commission of fraud.