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1
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COMPLAINT
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EXTRACTED KEY WORDS
ACCOUNTING DEFENDANT BOOKS PROPER FINANCIAL STATEMENTS AUDITS AESAR PUBLIC ACCOUNTANTS YORK CERTIFIED PUBLIC ACCOUNTANTS CONTROLS AUDITING REVIEW CONTRACTS PLAINTIFF STANDARDS SUBSIDIARIES BUSINESS SUPERVISE INTERNAL CONTROLS PREPARATION DILIGENT SKILLFUL ACCORDANCE DENNIS HAROTUNIAN BOOKKEEPING METHODS PUBLIC LIMITED COMPANY REPORT UNDERTAKE |
SUPREME COURT OF THE STATE OF NEW YORK
~ COUNTY OF NEW YORK
,, ----_---------------__l_________f_______*------------------------
,"
h JOHNSON MATTHEY INC., )
:, >
Plaintiff, >
)
- against - )
1
KPMG PEAT MARWICK, 1
>
Defendant.
)>
_----_----_I-----_--________I___________-------------~----------- X
Plaintiff, Johnson Matthey Inc. as and for its complaint against
KPMG Peat Marwick, alleges upon information and belief as follows:
1. This is an action for professional malpractice and breach of
( which is based upon KPMG Peat Marwick's negligent and reckless failure to uncover and /
disclose a massive fraud perpetrated on Johnson Matthey Inc. ("Johnson Matthey") by an
:, Administrative Manager and Controller of one of Johnson Matthey's audited subsidiaries,
Johnson Matthey Aeser Group (" Aeser ") .
, 2. At all times hereinafter mentioned, plaintiff, Johnson Matthey
and still is a corporation authorized to do business in the State of Pennsylvania.
3 . On information and belief, defendant, KPMG Peat Marwick, at all
times relevant herein was, and still is, a public accounting partnership engaged in the
,.
,-
L _.:
EAA08FC8. WPS
`3 I,`! ,,
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2
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BERNSTEIN AFF OP MTDS
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EXTRACTED KEY WORDS
KPMG MATTER MOTION SDMA COUNSEL PLAINTIFFS COURT JOHNSON MATTHEY AMFM CLAIR DISQUALIFY SDMA TAFT YORK LAW CONFIDENT DISCOVERY REPRESENTATION SETTLEMENT ATTORNEY-CLIENT RELATIONSHIP CLAUDIA TAFT DEPOSITION PROFESSIONAL LIABILITY POLICY LEGAL FEES TRANSCRIPTS GOLDSMITH DEFENSE COSTS CONFERENCE AESAR AUDITS SUMMARY JUDGMENT |
9 a a `a
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
______----rl________________I___________--------------------------- X
JOHNSON MATTHEY, INC.
Index No.:
Plaintiff,
-against- MICHAEL H.
IN
KPMG PEAT MARWICK, TO THE
MOTION
Defendant.
___r__-_________l"l"_----------------------------"----------------"- X
MICHAEL H. BERNSTEIN, an attorney duly admitted to practice law before
the courts of the State of New York, hereby affirms and says under the
follows:
1. I am a member of Sedgwick, Detert, Moran & Arnold ("SDMA"), a orneys
the Plaintiff, Johnson Matthey, Inc. ("Johnson Matthey"), in the above captioned mB%YrY~&!Q
fully familiar with all of the facts and circumstances attendant to this case. I submit this
Affirmation in opposition to the Motion of the Defendant, KPMG Peat Marwick ("KPMG")
to Disqualify SDMA as counsel for Johnson Matthey in the instant matter.
2. As set forth more fully in the accompanying Memorandum of Law, in order
disqualify SDMA as Johnson Matthey's counsel, KPMG must prove, first and foremost, that
SDMA represented KPMG pursuant to a prior attorney-client relationship. In addition to that
threshold requirement, KPMG must also demonstrate that the issues which are the subject of
the two allegedly adverse representations are substantially related, or that the prior
representation resulted in SDMA's receipt of confidential or privileged KPMG information.
Even when the evidence is viewed in the light most favorable to KPMG, it does not establish
1
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3
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PLF MEM OPP MTDS
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EXTRACTED KEY WORDS
DISQUALIFY COUNSEL ADVERSE SDMA PEAT MARWICK MEMORANDUM LAW OPPOSITION MOTION SEDGWICK DETERT MORAN ARNOLD MICHAEL BEMSTEIN SHARON DUTCH AUTHORITIES FACTS KPMG CLIENT ALLEGEDLY ADVERSE REPRESENTATIONS RECEIVED CONFIDENTIAL INFORMATION IMPROPER |
JOHNSON MATTHEY mC.,
Index No. 107775/96
Plaintiff,
-against-
KPMG PEAT MARWICK,
F I L E D
I
,JOHNSON MATTHEY INC.'S MEMORANDUM OF LAW
IN OPPOSITION TO KPMG'S MOTION TO DISQUALIFY
SEDGWICK. DETERT. MORAN & ARNOLD AS PLAINTIFF'S COUNSEL
SEDGWICK, DETERT, MORAN & ARNOLD
Attorneys for the Plaintiff, Johnson Matthey
125 Broad Street, 39th Floor
New York, New York 10004-2400
(212) 422-0202
On the brief:
Michael H. Bemstein
Sharon M. Dutch
b
SDNY1/244591
TABLE OF CONTENTS
TABLE
OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PRELIMINARY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
STATEMENT OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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4
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KPMG REP MEM SUP MDS
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EXTRACTED KEY WORDS
DETERT AFFIRMATION SETTLEMENT STRATEGY YORK JOHNSON MATTHEY PEAT MARWICK MEMORANDUM SUPPORT MOTION COUNSEL DISQUALIFY OPPOSITION PAPERS KPMG EXHIBITS LITIGATION MICHAEL BERNSTEIN PERSONAL KNOWLEDGE FACTS PRODUCT ASSESSMENTS LITIGATION WEAKNESSES PRIVATE EVALUATIONS EVIDENCE CONSPICUOUSLY ABSENT AMFM MATTER HEARSAY SPECULATION REBUT SWORN FIRSTHAND STATEMENT |
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
JOHNSON MATTHEY INC.
Index No. 107775/96
Plaintiff,
-- against--
KPMG PEAT MARWICK,
KPMG'S REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF ITS
MOTION TODISQUALIFY SEDWICK, DETERT AS PLAINTIFF'S COUNSEL
Louis A. Craco, Jr.
DAVIS WEBER & EDWARDS P.C.
100 Park Avenue
New York, New York 10017
(212) 685-8000
James Markowski
KPMG Peat Marwick LLP
55 East 52"d Street
New York, New York 10055
(212) 909-5400
Attorneys for KPMG Peat Marwick LLP
JOHNSON MATTHEY INC.
Index No. 107775/96
Plaintiff,
-- against--
KPMG PEAT MARWICK,
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5
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KPMG MEM SUP MTDS SEDWICK
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EXTRACTED KEY WORDS
KPMG LAW DETERT JOHNSON MATTHEY PEAT MARWICK MEMORANDUM SUPPORT MOTION DISQUALIFY SEDWICK DEFENDANT KPMG SEDGWICK ANDERSON INSURANCE POLICY REPRESENTING PLAINTIFF JOHNSON ACCOMPANYING AFFIDAVIT WOODROW AFFIRMATION GENERAL COUNSEL JAMES GOLDSMITH ESQ PROFESSIONAL LIABILITY UNDERWRITERS LONDON PAY COVERED CLAIMS JUDGEMENT ANDERSON AFF COOPERATE |
SUPREME COURT OF THE STATE OF NEW YORK
a COUNTY OF NEW YOFX
JOHNSON MATTHEY INC.
Index No. 107775/96
Plaintiff,
-- against--
KPMG PEAT MARWICK,
F I L E D
r;OUNfy CLERKS OFFIS
NEW YORK
KPMG'S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION TO
DISQUALIFY SEDWICK, DETERT AS PLAINTIFF'S COUNSEL
I ) .
Louis A. Craco, Jr .
DAVIS WEBER & EDWARDS P.C.
100 Park Avenue
New York, New York 10017
(212) 685-8000
.e James Markowski
KPMG Peat Marwick LLP
55 East 52nd Street
New York, New York 10055
c (212) 909-5400
Attorneys for KPMG Peat Marwick LLP
JOHNSON MATTHEY INC.
Index No. 107775/96
Plaintiff,
-- against--
KPMG PEAT MARWICK,
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6
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AFF OF GOLDSMITH
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EXTRACTED KEY WORDS
COUNSEL PROFESSIONALS UNDERSTANDING STANDARDS AMFM AFFIRMATION JAMES GOLDSMITH SEDGWICK DETERT PROFESSIONAL LIABILITY INSURER JOHNSON MATTHEY PEAT MARWICK PLAINTIFF APPOINTS MONITOR ADVICE LLOYDS COOPERATION SUBSTANCE CLAIR AMFM MATTER IMPLICATES POLICY NATURE INTERNAL CONTROLS ASSURING ALLEGATIONS |
JOHNSON MATTHEY INC.,
Plaintiff, Index No. 107775/96
-against-
KPMG PEAT MARWICK,
AFFIRMATION OF JAMES GOLDSMITH, ESQ.
JAMES GOLDSMITH, under penalty of perjury, affirms:
1. I am a member of the bar of this Court and am employed as
Associate General Counsel of KPMG LLP ("KPMG"), defendant herein. I make this
affirmation in support of KPMG's motion to disqualify the law firm of Sedgwick,
Detert, Moran & Arnold ("Sedgwick, Detert") from representing plaintiff Johnson
Matthey, Inc. in this action.
2. Typically, KPMG's professional liability insurer, Lloyd's,
appoints counsel to monitor claims and provide advice to Lloyd's with respect to
covered claims against its insureds. It is my general understanding that such counsel
must, among other things, evaluate the strength of the insured's position in professional
liability claims in order to advise Lloyds's concerning settlement and expense issues. It
is also my understanding that, in order to do so, Lloyds' counsel needs to have the
candid and highly confidential views of the insured on its professional liability matters.
. .
3. As part of its duty of cooperation with Lloyd's, KPMG is
therefore required to work with Lloyd's counsel on the defense of claims. In the course
of such cooperation, KPMG is required to provide Lloyds' counsel highly confidential
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7
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DEC AND ORDER
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EXTRACTED KEY WORDS
REPRESENTING JOHNSON MATTHEY KPMG ATTORNEYS CONFIDENCES FORMER CLIENT PARTY NYCRR DISQUALIFICATION LAWYER KPMG PEAT MARWICK SEDGWICK DETERT PROTECT SECRETS AVOID ADVERSE PRIOR MOVING PARTY RELATED LITIGATION FEAR DETRIMENT FOSTERS OPEN DIALOGUE EFFECTIVE REPRESENTATION ASSESSING SATISFYING COURTS BLANKET RULES |
-against-
KPMG PEAT MARWICK,
Defendant.
- X
_ _ _ _ _ - - - - - _ _ _ I _ - - - _ _ _ _ _ _ l _ _ _ _ _ _ _ l _ _ _ _ _ _
MARTIN SCHOENFELD, J.:
In this action plaintiff Johnson Matthey, Inc. ("Johnson
Matthey") alleges that defendant KPMG Peat Marwick ('IKPMC")
negligently performed audits on Johnson Matthey and a subsidiary
~
of Johnson Matthey named The Aesar Group, KPMG now moves,
pursuant to 22 NYCRR 1200.27(a) (1-2) and 22 NYCRR 1200.24(a), to
disqualify the law firm of Sedgwick, Detert, Mosan & Arnold
("Sedgwick, Detert") from representing Johnson Matthey, Inc - in
this action. For the reasons set forth herein, the motion is
granted.
and loyalty to their clients. The Code of Professional
Responsibility imposes a continuing obligation on attorneys to
protect their clients' confidences and secrets. Even after the
representation has ended, a lawyer may not reveal information
confided by a former client and may not use such information to
the disadvantage of the former client or the advantage of a third
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