The Second Circuit ruled in Stein v. KPMG LLP, 2nd Cir., No. 06-4358-cv (5/23/07) that Judge Kaplan, Southern District of New York, was wrong in asserting ancillary jurisdiction over the KPMG defendants' attorney fee claims against KPMG. The KPMG litigation arose in connection with the claim that the accounting firm's maverick tax practice promoted aggressive tax shelter transactions. See this earlier posting on ataxingmatter, which also contains links to various postings explaining and commenting upon the KPMG case.
In connection with the investigation and KPMG's ultimate settlement to avert criminal prosecutions, the Department of Justice's "Thompson Memorandum" regarding credit for cooperation (involving issues of waiver of attorney-client privilege and refusal to pay attorney fees for employees who may have committed criminal acts) became a focus of attention. Judge Kaplan provided what might be termed scornful comments from the bench about the government's position on these issues: he ultimately asserted his right to retain ancillary jurisdiction over any attorney fee dispute between the KPMG defendants and KPMG, in spite of KPMG's claim that any attorney fee dispute was governed by the partnership agreement and required arbitration.
For further background information about the claim, see Beth Bar, KPMG Challenges Kaplan Jurisdiction in Fee Dispute, New York Law Journal (July 31, 2006). There's a good analysis of the decision on the White Collar Crime ProfBlog by my colleague, Peter Henning.
Updated: May 24, 2007
Recent Comments