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COMMONWEALTH OF MASSACHUSETTS

SUPREME JUDICIAL COURT

DOCKET NO. SJC-12635

CHELSEA HOUSING AUTHORITY,

PLAINTIFF-APPELLANT,

v.

JOHN D. MAROTTO, CPA AND MARTIN J. SCAFIDI, P.C.,

DEFENDANTS-APPELLEES,

AND

MICHAEL E. MCLAUGHLIN,

DEFENDANT.

APPEAL FROM A FINAL JUDGMENT ENTERED

IN THE SUFFOLK COUNTY SUPERIOR COURT

BRIEF OF AMICI CURIAE

AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS AND

MASSACHUSETTS SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS

IN SUPPORT OF DEFENDANTS-APPELLEES

Matthew P. Bosher Nicholas D. Stellakis

(Admitted Pro Hac Vice) BBO # 644981

Matthew S. Brooker HUNTON ANDREWS KURTH LLP

(Admitted Pro Hac Vice) 125 High Street

HUNTON ANDREWS KURTH LLP Suite 533

2200 Pennsylvania Avenue Boston, MA 02110

Washington, DC 20037 Tel: (617) 648-2747

Tel: (202) 955-1864 Fax: (617) 433-5022

Fax: (202) 778-2201 [email protected]

[email protected]

[email protected]

Counsel for Amici Curiae

American Institute of Certified Public Accountants and

Massachusetts Society of Certified Public Accountants

February 19, 2019

BATEMAN & SLADE, INC. BOSTON, MASSACHUSETTS

2

CORPORATE DISCLOSURE STATEMENT

The American Institute of Certified Public Accountants and the

Massachusetts Society of Certified Public Accountants are membership

organizations serving the certified public accounting profession. Neither

organization is publicly held or has any public company affiliates.

3

TABLE OF CONTENTS

Page

CORPORATE DISCLOSURE STATEMENT ......................................................... 2

INTRODUCTION AND SUMMARY OF THE ARGUMENT ............................... 9

INTERESTS OF THE AICPA AND MASSACHUSETTS SOCIETY AS

AMICI CURIAE .............................................................................................. 12

ARGUMENT ........................................................................................................... 13

I. This Court Should Not Recognize an “Auditor Exception” To

The In Pari Delicto Doctrine. ................................................................... 13

A. Allowing a Wrongdoing Client to Recover from Its

Auditor Would Fundamentally Alter the Client-Auditor

Relationship. ................................................................................... 14

B. Creating an Exception to the In Pari Delicto Defense

Undermines Stakeholder Incentives to Monitor an

Organization’s Management and is Not Necessary to

Incentivize Audit Quality. .............................................................. 19

1. The In Pari Delicto Doctrine Gives Managers and

Directors an Appropriate Incentive to Oversee

Management. ........................................................................ 20

2. Independent Auditors Already Have Ample

Incentives to Perform Competently. .................................... 21

C. An “Auditor Exception” to the In Pari Delicto Doctrine

Would Harm the Public by Decreasing the Availability of

Auditing and Increasing the Cost.. ................................................. 25

D. Other Jurisdictions Have Consistently Rejected an

“Auditor Exception” to the In Pari Delicto Doctrine. ................... 27

II. Mass. G. L. c. 112, § 87A ¾ Did Not Supplant the In Pari

Delicto Doctrine And Has No Application Here. .................................... 29

CONCLUSION ........................................................................................................ 35

4

ADDENDUM .......................................................................................................... 37

CERTIFICATE OF COMPLIANCE ....................................................................... 51

CERTIFICATE OF SERVICE ................................................................................ 52

RULE 17(c)(5) DECLARATION............................................................................ 54

5

TABLE OF AUTHORITIES

Page(s)

Cases

Am. Int’l Group v. Greenberg,

976 A.2d 872 (Del. Ch. 2009) ....................................................................... 20

Astoria Fed. Sav. & Loan Ass’n v. Solimino,

501 U.S. 104 (1991)....................................................................................... 31

Baena v. KPMG LLP,

453 F.3d 1 (1st Cir. 2006) .................................................................. 24, 26, 35

Bateman Eichler, Hill Richards, Inc. v. Berner,

472 U.S. 299 (1985)....................................................................................... 19

Bily v. Arthur Young & Co.,

834 P.2d 745 (Cal. 1992) ......................................................................... 16, 17

Cenco Inc. v. Seidman & Seidman,

686 F.2d 449 (7th Cir. 1982) ............................................................. 18, 20, 28

Cent. Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A.,

511 U.S. 164 (1994)....................................................................................... 26

Choquette v. Isacoff,

65 Mass. App. Ct. 1 (2005) ........................................................................... 23

Commercial Wharf E. Condo. Ass’n v. Waterfront Parking Corp.,

407 Mass. 123 (1990) .................................................................................... 31

DiLeo v. Ernst & Young,

901 F.2d 624 (7th Cir. 1990) ......................................................................... 24

Fehribach v. Ernst & Young LLP,

493 F.3d 905 (7th Cir. 2007) ......................................................................... 15

Finch v. Commonwealth Health Ins. Connector Auth.,

461 Mass. 232 (2012) .................................................................................... 33

6

Gray v. Evercore Restructuring L.L.C.,

544 F.3d 320 (1st Cir. 2008).......................................................................... 21

Imprimis Inv’rs, LLC v. KPMG Peat Marwick LLP,

69 Mass. App. Ct. 218 (2007) ................................................................. 15, 16

Kerins v. Lima,

425 Mass. 108 (1997) .................................................................................... 31

Kirschner v. KPMG LLP,

15 N.Y.3d 446 (2010) ........................................................................ 21, 27, 28

Kirtsaeng v. John Wiley & Sons, Inc.,

568 U.S. 519 (2013)....................................................................................... 31

Merrimack Coll. v. KPMG LLP,

480 Mass. 614 (2018) .............................................................................passim

Monroe v. Hughes,

860 F. Supp. 733 (D. Or. 1991), aff’d, 31 F.3d 772 (9th Cir. 1994) ............. 18

NCP Litig. Trust v. KPMG LLP,

187 N.J. 353 (2006) ................................................................................. 28, 29

Nisselson v. Lernout,

469 F.3d 143 (1st Cir. 2006).............................................................. 13-14, 35

Nycal Corp. v. KPMG Peat Marwick LLP,

426 Mass. 491 (1998) .................................................................................... 23

Official Committee of Unsecured Creditors, etc. v. PricewaterhouseCoopers,

LLP, 605 Pa. 269 (2010) ................................................................................ 28

People’s United Bank v. B&B Fire Prot., Inc.,

94 Mass. App. Ct. 626 (2019) ................................................................. 31-32

Peterson v. McGladrey LLP,

792 F.3d 785 (7th Cir. 2015) ......................................................................... 28

7

Public Employees Retirement Ass’n of Colorado v. Deloitte & Touche LLP,

551 F.3d 305 (4th Cir. 2009) ......................................................................... 18

In re PHC, Inc. S’holder Litig.,

894 F.3d 419 (1st Cir. 2018).......................................................................... 31

Queler v. Skowron,

438 Mass. 304 (2002) .................................................................................... 31

Reisman v. KPMG Peat Marwick LLP,

57 Mass. App. Ct. 100, 124 (2003) ............................................................... 23

SEC v. Arthur Young & Co.,

590 F.2d 785 (9th Cir. 1979) ......................................................................... 18

SEC v. Tambone,

597 F.3d 436 (1st Cir. 2010).......................................................................... 26

Stewart v. Wilmington Trust SP Services,

112 A.3d 271 (Del. Ch. 2015) ................................................................. 23, 28

In re Worlds of Wonder Sec. Litig.,

35 F.3d 1407 (9th Cir. 1994) ......................................................................... 24

Statutes

15 U.S.C. § 78j(b) .................................................................................................... 22

15 U.S.C.S. § 7242 ................................................................................................... 21

17 C.F.R. § 201.102(e)(ii) ........................................................................................ 22

17 C.F.R. § 240.10b-5 .............................................................................................. 22

G. L. c. 112, § 61 ...................................................................................................... 22

G. L. c. 112, § 87A ¾ ........................................................................................passim

G. L. c. 112, § 87C ½ ............................................................................................... 22

G.L. c. 156D, § 8.31 ................................................................................................. 32

G.L. c. 231, § 85G .................................................................................................... 31

8

Codes

252 Code Mass. Regs. § 3.02 ................................................................................... 22

Other Authorities

2B SUTHERLAND STATUTORY CONSTRUCTION § 50.1 (7th ed.) ............................... 31

1999-2000 Senate Doc. No. 2096 ............................................................................ 33

“Accountants Seek Law to Protect Them from Business Failure Lawsuits,”

STATE HOUSE NEWS SERVICE, Mar. 22, 2001 ...................................... 34

Auditing Standards Board “AU-C § __” ..........................................................passim

9

The American Institute of Certified Public Accountants (“AICPA”) and the

Massachusetts Society of Certified Public Accountants (“Massachusetts Society”)

respectfully submit this brief as amici curiae (i) in response to the Court’s

questions announced on November 16, 2018, and (ii) in support of appellees.

INTRODUCTION AND SUMMARY OF THE ARGUMENT

This case concerns the narrow issue of whether the common law doctrine of

in pari delicto applies when an organization that has engaged in and benefitted

from fraudulent and criminal financial misconduct sues its auditor for negligently

failing to detect the organization’s own wrongdoing. As set forth below, the in

pari delicto doctrine should continue to bar such claims because the doctrine (i)

accords with the responsibilities of clients and auditors and appropriately aligns

client management incentives, and (ii) has not been abrogated or modified by the

Massachusetts Legislature.

The key facts are not in dispute. The Executive Director of the Chelsea

Housing Authority (“CHA”) and at least two other senior officials engaged in

criminal misconduct related to the organization’s finances and financial reporting.

CHA sued its fee accountant and independent auditor for failing to detect or report

the organization’s criminal misconduct.

The Court has solicited amicus briefs to resolve two questions. First, should

the in pari delicto defense apply when an organization that has engaged in criminal

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wrongdoing sues its auditor for negligently failing to detect the organization’s

wrongdoing, or should the Court recognize an “auditor exception” to the doctrine?

Second, did G. L. c. 112, § 87A ¾ replace the in pari delicto defense for

accounting firms where a firm is sued by its client for an alleged failure to detect or

report fraud?1

With respect to the first question, recognizing an “auditor exception” to the

in pari delicto doctrine would be a departure from longstanding Massachusetts law

and would place Massachusetts auditors in a different position than auditors in

virtually every other U.S. jurisdiction. There are at least three reasons why this

Court should not break new ground to recognize such an exception. First,

eliminating the in pari delicto defense for auditors would distort professional

standards and invert a fundamental tenet of the client-auditor relationship by

making the auditor, not the client, primarily responsible for errors in the client’s

financial statements, even in circumstances where those errors are caused by the

client’s own criminal conduct. See pages 14-19, infra. Second, the in pari delicto

doctrine aligns incentives appropriately by encouraging client stakeholders to hire

1 The Court did not rule on either question in Merrimack Coll. v. KPMG

LLP, because it held that the individual responsible for the fraud at Merrimack

“cannot be deemed a member of senior management whose conduct may be

imputed to Merrimack.” 480 Mass. 614, 629 (2018). In this case, the criminal and

fraudulent conduct is imputed to CHA because it was orchestrated by the

organization’s Executive Director, with assistance from the Finance Director and at

least one other senior official.

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honest, competent managers and to supervise management. As for auditor

incentives, auditors are already subject to a bevy of legal, regulatory, and

professional requirements. The in pari delicto doctrine––given the narrow

circumstances in which it applies––in no way immunizes auditors from scrutiny or

liability. See pages 19-25, infra. Third, expanding auditor liability would make

audit services more expensive to Massachusetts businesses and less available to

small and startup organizations. See pages 25-27, infra.

As for the Court’s second question—whether G. L. c. 112, § 87A ¾

supplanted the in pari delicto doctrine—the answer is “no” for at least three

reasons. First, this Court has consistently held that a statute may not be interpreted

as changing or repealing the common law unless the Legislature’s intent to do so is

clearly expressed. Here, there is nothing in the text or legislative history of § 87A

¾ to indicate that the Massachusetts Legislature intended to replace the in pari

delicto doctrine. See pages 30-33, infra. Second, the available history relating to

the enactment of § 87A ¾ demonstrates that the statute was not intended to expand

auditor liability; rather, the Legislature enacted the statute to curtail the inequitable

results of joint and several liability. This is why the accounting profession actively

supported adoption of the statute. See pages 33-34, infra. Finally, in the eighteen

years since § 87A ¾’s enactment, courts in Massachusetts have continued to apply

the in pari delicto doctrine to bar wrongdoing-client claims against accountants.

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See pages 34-35, infra. Section 87A ¾ and in pari delicto coexist to serve separate

purposes, and there is no reason to upset that coexistence here.

INTERESTS OF THE AICPA AND MASSACHUSETTS SOCIETY

AS AMICI CURIAE

The AICPA is the national organization of the certified public accounting

profession with more than 418,000 members, including more than 10,000 in

Massachusetts. AICPA members work in all sectors of the business and financial

services profession, including public accounting, financial planning, tax, business

and industry, law, consulting, education, and government. The AICPA’s purposes

include (i) the promotion and maintenance of high professional standards of

practice, including the audit standards that governed the accounting services at

issue in this case, and (ii) fostering the availability of professional accountancy

services to companies and individuals across the country. Because of its historical

role in formulating standards relating to audits, examinations, reviews,

compilations, and other accounting engagements, the AICPA routinely appears as

amicus curiae in appeals relating to accounting issues.

The Massachusetts Society is the CPA membership organization in

Massachusetts, with more than 11,000 members in public accounting, industry and

business, government, and education. The Society provides services enabling its

members to learn, connect, and prosper in the accounting profession. The

Massachusetts Society also advocated in favor of the adoption of Mass. G. L.

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c. 112, § 87A ¾, and is, accordingly, well-positioned to address the Court’s

question regarding the intended scope of that statute.

The Court’s questions in this matter implicate multiple issues in which amici

have a strong interest, including (i) the application of professional accounting

standards to litigation claims against auditors; (ii) the contours of the appropriate

relationship between clients and their auditors; (iii) the consistent application of

Massachusetts law and the equitable defenses historically available to the

accounting profession, including the in pari delicto defense; (iv) the impact of

expanded liability on the profession, the users of financial statements, and the

economy; and (v) the history and application of a statute that the profession

supported at the time of its enactment.

ARGUMENT

I. This Court Should Not Recognize an “Auditor Exception” to the In Pari

Delicto Doctrine.

The answer to the Court’s first question to amici curiae—whether the Court

should apply the in pari delicto doctrine where an organization that engaged in and

benefitted from fraudulent or criminal activity seeks to recover damages from its

auditor for negligently failing to detect that activity—is “yes.” The in pari delicto

doctrine bars claims by a client against its auditor when the client itself has

engaged in wrongdoing and “bears at least substantially equal responsibility for the

wrong [it] seeks to address.” Nisselson v. Lernout, 469 F.3d 143, 152 (1st Cir.

14

2006) (citing “[r]ecent Massachusetts case law”). As the Court held in Merrimack,

this “long-standing doctrine” is “an equitable one, focused squarely on the moral

blame of the parties.” 480 Mass. at 621. For the reasons set forth below, this

doctrine is necessary to preserve a proper balance of managerial and reporting

responsibilities between a client and its auditor, which holds management

responsible for the day-to-day management of the business and its financial

reporting, and which properly incentivizes client management to detect and prevent

misconduct by the organization. The doctrine also serves important public policy

goals, which would be undermined if the Court allows business managers to shift

their responsibility to an outside professional whose services have been subverted

by management’s own fraud.

A. Allowing a Wrongdoing Client to Recover from Its Auditor

Would Fundamentally Alter the Client-Auditor Relationship.

Eliminating the in pari delicto defense and allowing wrongdoing clients to

recover from their auditors would invert the respective responsibilities of auditors

and their clients. Without the defense, client management could shift

responsibility (and liability) for certain financial reporting and compliance

functions from themselves to their auditors. That turns the client-auditor

relationship on its head, and is precisely what Generally Accepted Auditing

15

Standards (“GAAS”), which were applicable to the audit services provided to

CHA, were designed to prevent.2

It is fundamental to the client-auditor relationship that client management is

responsible for the client’s financial statements and the effectiveness of its internal

controls. GAAS make clear that client management is responsible for, among

other things:

“the preparation and fair presentation of the financial statements” and

“the design, implementation, and maintenance of internal control,” AU-

C § 200.14;3

fraud prevention and detection, AU-C § 240.04 (“The primary

responsibility for the prevention and detection of fraud rests with both

those charged with governance of the entity and management.”); and

legal compliance, AU-C § 250.03 (“It is the responsibility of

management . . . to ensure that the entity’s operations are conducted in

accordance with [law].”).

Retaining an auditor “does not relieve management or those charged with

governance of their responsibilities.” AU-C § 260.10. Instead, “an audit in

2 The Court’s first question relates to auditors and therefore this section

discusses the professional standards relating to audit work. An audit is governed

by GAAS, which are promulgated by the Auditing Standards Board (an AICPA

committee) and are identified herein by the abbreviation “AU-C § __.” This brief

cites GAAS currently in effect (available at http://www.aicpa.org/Research/

Standards/AuditAttest/Pages/default.aspx), but such standards are not materially

different from those in effect at the time of the audits at issue.

3 Courts recognized this principle as well: “Financial statements are

generated by a corporation’s management.” Imprimis Inv’rs, LLC v. KPMG Peat

Marwick LLP, 69 Mass. App. Ct. 218, 224 n.8 (2007); see also Fehribach v. Ernst

& Young LLP, 493 F.3d 905, 910 (7th Cir. 2007) (“the audited company’s financial

statements . . . are prepared by the company, not by the auditor”).

16

accordance with GAAS is conducted on the premise that management . . . have

acknowledged certain responsibilities that are fundamental to the conduct of the

audit.” Id.

In contrast, “[t]he auditor’s duty is to express an opinion on whether the

financial statements conform to generally accepted accounting principles based

upon audits conducted in conformance with generally accepted accounting

standards.” Imprimis Inv’rs, LLC v. KPMG Peat Marwick LLP, 69 Mass. App. Ct.

218, 224 n.8 (2007) (citation omitted). See also AU-C § 200.A4 (“auditor’s

responsibility for the audited financial statements is confined to the expression of

the auditor’s opinion on them”). And in forming that opinion, auditors must rely

on management to provide them with access to financial information that is

relevant to the preparation and fair presentation of the financial statements under

audit. “[A]udits are performed in a client-controlled environment,” and “the client

necessarily furnishes the information base for the audit.” Bily v. Arthur Young &

Co., 834 P.2d 745, 762 (Cal. 1992). To that end, management is required to

provide specific representations to an auditor relating to, among other things,

management’s belief “that they have fulfilled their responsibility for the

preparation and fair presentation of the financial statements and for the

completeness of the information provided to the auditor.” AU-C § 580.06.

17

That is not to say that an auditor blindly accepts management’s information

or representations. To the contrary, the auditor’s role is to test management’s

assertions. Along with the careful exercise of professional judgment, the auditor

relies on risk assessment procedures, analytical procedures, sampling, and “testing

and other means of examining populations” to reach its opinion. AU-C § 200.A53.

As part of that process, the auditor does not (because it cannot) reconstruct

or inspect every transaction that the client entered into during the audit period.

See, e.g., Bily, 834 P.2d at 749, 751 (“For practical reasons of time and cost, an

audit rarely, if ever, examines every accounting transaction in the records of a

business.”). Nor can the auditor independently value every one of the client’s

assets and liabilities, or test each of the client’s internal controls. See AU-C

§ 200.A52 (“there is an expectation . . . that the auditor will form an opinion on the

financial statements within a reasonable period of time and, so as to achieve a

balance between benefit and cost, recognizing that it is impracticable to address all

information that may exist or to pursue every matter exhaustively”).

The auditor’s primary objective, then, is to “obtain reasonable assurance

about whether the financial statements as a whole are free from material

misstatement, whether due to fraud or error.” AU-C § 200.06. Reasonable

assurance, however, is not absolute assurance. Because of the inherent limitations

of an audit, “[t]he auditor is not expected to, and cannot, reduce audit risk to zero

18

and cannot, therefore, obtain absolute assurance that the financial statements are

free from material misstatement due to fraud.” AU-C § 200.A49. Put differently,

the auditor “is not a guarantor of the reports he prepares.” SEC v. Arthur Young &

Co., 590 F.2d 785, 788 (9th Cir. 1979); see also Monroe v. Hughes, 860 F. Supp.

733, 738-39 (D. Or. 1991) (“under professional standards, [auditors] were not

required to ensure that [the client] corrected internal control problems prior to its

re-issuance of the audit report”), aff’d, 31 F.3d 772 (9th Cir. 1994).

GAAS expressly acknowledge that even properly planned and executed

engagements may not detect irregularities or fraud committed by a client. AU-C

§ 200.A56 provides that “there is an unavoidable risk that some material

misstatement of the financial statements may not be detected, even though the

audit is properly planned and performed in accordance with GAAS.” AU-C

§ 200.A51 further states that “audit procedures used to gather audit evidence may

be ineffective for detecting an intentional misstatement that involves, for example,

collusion to falsify documentation that may cause the auditor to believe that audit

evidence is valid when it is not. The auditor is neither trained nor expected to be

an expert on the authentication of documents.” See also Cenco Inc. v. Seidman &

Seidman, 686 F.2d 449, 454 (7th Cir. 1982) (“Auditors are not detectives hired to

ferret out fraud”); Public Employees Retirement Ass’n of Colorado v. Deloitte &

Touche LLP, 551 F.3d 305, 316 (4th Cir. 2009) (“It is not an accountant’s fault if

19

its client actively conspires with others in order to deprive the accountant of

accurate information about the client’s finances.”).

Each of these professional standards reinforces the key point: client

management, not the auditor, has primary responsibility for the client’s financial

statements and internal controls. CHA’s proposed elimination of the in pari

delicto defense would allow organizations to shift responsibility for these

management functions to the auditor, inverting the client-auditor relationship.

That proposed inversion is contrary to the allocation of responsibilities and

requirements established by the professional standards. For that reason, the

judgment below should be affirmed.

B. Creating an Exception to the In Pari Delicto Defense Undermines

Stakeholder Incentives to Monitor an Organization’s

Management and Is Not Necessary to Incentivize Audit Quality.

An “auditor exception” to the in pari delicto doctrine would also diminish

client incentives to oversee and supervise managers. While “denying judicial relief

to an admitted wrongdoer is an effective means of deterring illegality,” Bateman

Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299, 306 (1985), it is equally true

that providing wrongdoers with a means to obtain such relief will reward

management’s inattention and lax oversight. The perverse incentive structure that

would result from an “auditor exception” to in pari delicto is also unnecessary

20

because auditors already face ample incentives to provide high quality services

pursuant to the applicable professional and ethical standards.

1. The In Pari Delicto Doctrine Gives Managers and Directors

an Appropriate Incentive to Oversee Management.

It is axiomatic that client management is responsible for ensuring, and in the

best position to ensure, the accuracy of the client’s financial statements and the

effectiveness of its internal controls. Limiting (or eliminating) the responsibility of

those charged with the governance of an organization by establishing an “auditor

exception” to the in pari delicto defense, would undermine the incentive those

organizations now have to police their management and employees. Such an

exception ensures that, even when management acts fraudulently or intentionally

misleads an auditor, the client-organization could always seek to recover for its

own mismanagement or wrongdoing by suing the auditor, enabling the responsible

organization to transform its audit relationship into an insurance policy.

Numerous courts, including the Seventh Circuit, have recognized this

concern in applying the in pari delicto doctrine to malpractice claims brought

against an auditor: “If the owners of the corrupt enterprise are allowed to shift the

costs of its wrongdoing entirely to the auditor, their incentives to hire honest

managers and monitor their behavior will be reduced.” Cenco, 686 F.2d at 455;

see also Am. Int’l Group v. Greenberg, 976 A.2d 872, 889 (Del. Ch. 2009)

(exception to the in pari delicto defense would “diminish[] corporate boards’

21

incentives to supervise their own agents”); Kirschner v. KPMG LLP, 15 N.Y.3d

446, 476 (2010) (not applying the in pari delicto doctrine would allow the

stakeholders “of the company that employs miscreant agents to enjoy the benefit of

their misconduct without suffering the harm”).4 Indeed, just as denying relief to an

admitted wrongdoer is an effective means of deterring illegality, it is also an

effective means of encouraging the responsible selection and oversight of

management. See Gray v. Evercore Restructuring L.L.C., 544 F.3d 320, 327 (1st

Cir. 2008) (“Although [the client] contends that dismissing the case will effectively

pardon professionals, in seeking to proceed with this lawsuit [the client] asks for a

pardon of its own.”). CHA’s proposed “auditor exception” would turn this

incentive structure on its head, and would supply management with a ready failsafe

for its lack of supervision.5

2. Independent Auditors Already Have Ample Incentives to

Perform Competently.

There is no doubt that a balance must be struck in ensuring that professionals

perform their services competently, and that those who do not are held to account

4 While these cases generally relate to corporations, public policy equally

favors incentivizing the stakeholders of organizations like CHA to supervise the

conduct of its management.

5 While not applicable here, Section 303 of the Sarbanes-Oxley Act, 15

U.S.C.S. § 7242, makes it unlawful for officers, directors, and others to mislead an

organization’s auditors. Eliminating the in pari delicto defense would allow

organizations to mislead their auditors in violation of federal law, but then turn

around and recover damages from the auditor.

22

for their shortcomings. But that balance already exists. Auditors have ample

incentive to comply with their professional obligations in light of the laws,

regulations, and professional standards that govern the practice of public

accounting:

The Massachusetts Board of Public Accountancy has broad authority to

take disciplinary action against accountants. For example, the Board can

pursue accountants for “gross negligence” and violations of the

Massachusetts Code of Ethics and Rules of Professional Conduct for

Accountants, including rules relating to competence and compliance with

professional standards. G. L. c. 112, § 87C ½; 252 Code Mass. Regs.

§ 3.02. The Board can also suspend, revoke or cancel a CPA license for,

among other things, “malpractice” and conduct that “places into question

the [license] holder’s competence to practice the profession.” G. L.

c. 112, § 61.

HUD conducts quality control reviews of public housing authority audits

and, when deficiencies are identified, (i) takes disciplinary action against

the accountants through its Departmental Enforcement Center, and/or (ii)

refers the matter to other oversight bodies. See https://www.hud.gov/

sites/documents/qassenforcement.pdf. Deficient audits for public

housing authorities regularly result in debarment by HUD and fines by

state boards of accountancy. Id.6 Other regulatory enforcement bodies

have similar powers of oversight over auditors in other contexts,

including powers of inspection and discipline.

Auditors of public companies are subject to, among other laws and

regulations: Section 10(b) of the Securities Exchange Act of 1934 and

SEC Rule 10b-5, 15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5; SEC

rules allowing the Commission to bar an accountant from practicing

before it, see 17 C.F.R. § 201.102(e)(ii); and standards of the Public

Company Accounting Oversight Board (“PCAOB”). The SEC and

PCAOB routinely bring enforcement cases against negligent auditors.

6 CHA ignores HUD and other regulatory enforcement authority in its

contention that, as a public housing entity, it deserves greater protection. See CHA

Br. at 31.

23

The Delaware Court of Chancery recently cited this regulatory framework in

applying the in pari delicto defense to malpractice claims brought against an

auditor. See Stewart v. Wilmington Trust SP Services, 112 A.3d 271, 318 (Del. Ch.

2015). Because “the SEC, the PCAOB, the AICPA, or the State Board of

Accountancy . . . govern the audit industry,” the court held that it is “ill-advised to

insert [itself] into matters within the core mandate of those bodies.” Id.; see also

Choquette v. Isacoff, 65 Mass. App. Ct. 1, 8 (2005) (“[A professional]’s

misconduct . . . should be discouraged by the threat of . . . disciplinary action, as

opposed to client filing suit against the [professional] to recover damages incurred

due to being caught.”) (internal punctuation and citation omitted).

Negligent auditors are also not immune from private lawsuits. For example,

the in pari delicto doctrine does not apply to a client’s claims against its auditor if

the client has not engaged in wrongdoing or does not bear equal or greater

responsibility for the wrong the client seeks to redress. Moreover, this Court has

ruled that, in certain circumstances, third parties can sue accountants for

negligence. Nycal Corp. v. KPMG Peat Marwick LLP, 426 Mass. 491 (1998). See

also Reisman v. KPMG Peat Marwick LLP, 57 Mass. App. Ct. 100, 124 (2003)

(allowing shareholders’ claims of negligence against a company auditor to proceed

even though the shareholders and the auditor were not in privity).

24

Finally, auditors have yet another incentive to act in accordance with the law

and professional standards: the reputational harm that may be suffered as a result

of any alleged malpractice. “An accountant’s greatest asset is its reputation for

honesty, followed closely by its reputation for careful work,” DiLeo v. Ernst &

Young, 901 F.2d 624, 629 (7th Cir. 1990), and therefore accountants have “a great

deal of incentive to ensure accurate reporting.” Baena v. KPMG LLP, 453 F.3d 1,

9 (1st Cir. 2006); see also In re Worlds of Wonder Sec. Litig., 35 F.3d 1407, 1427

n.7 (9th Cir. 1994) (“It is highly improbable that an accountant would risk

surrendering a valuable reputation for honesty and careful work by participating in

a fraud merely to obtain increased fees.”). Moreover, the reputational harm from

an unwarranted finding of liability impacts the audit firm significantly in the

market among existing and prospective clients. Audit committees regularly

monitor litigation and regulatory proceedings involving their auditors, and may

distance themselves from a sanctioned accounting firm in order to avoid scrutiny.

It is thus not the case—as CHA contends—that the in pari delicto doctrine

“allow[s] an accountant to escape liability for negligence,” CHA Br. at 28, that the

doctrine provides “blanket immunity” to accountants, id. at 34, or that the doctrine

gives accountants “free reign to perform substandard work,” id. at 36. Auditors are

subject to a bevy of regulatory oversight and private legal exposure, and the in pari

delicto defense applies only in one narrow circumstance: where a wrongdoing

25

client that is equally or more culpable than its auditor sues the auditor for the

client’s wrongdoing. In light of the ample incentives that auditors already have to

comply with the law and professional standards, an “auditor exception” will not

add a missing incentive for auditors to perform their services competently and in

accordance with professional standards.

C. An “Auditor Exception” to the In Pari Delicto Doctrine Would

Harm the Public By Decreasing the Availability of Auditing and

Increasing the Cost.

Eliminating the in pari delicto defense for auditors—and thereby expanding

auditor liability—runs counter to public policy for other reasons. Not only would

this “auditor exception” disserve consumers by driving up auditing costs, but it

would also threaten the sustainability of new business in the Commonwealth.

There are at least two reasons why that is so.

First, an “auditor exception” to the in pari delicto doctrine would

undoubtedly increase litigation costs for auditors and expand their risk of liability.

As stated above, auditors are routinely sued in cases in which the in pari delicto

defense does not apply. The in pari delicto defense is designed to dispose of

inequitable claims prior to trial. Allowing those inequitable claims to proceed,

along with all the claims to which in pari delicto does not apply, will change the

auditor’s overall litigation risk profile.

26

This “increased [risk of] civil exposure” would, in turn, “raise the price of

accounting services” paid by large and small businesses in Massachusetts and,

ultimately, the prices paid by customers. Baena, 453 F.3d at 9. Indeed, “[n]o one

sophisticated about markets believes that multiplying liability is free of cost. And

the cost, initially borne by those who raise capital or provide audit or other services

to companies, gets passed along to the public.” SEC v. Tambone, 597 F.3d 436,

452–53 (1st Cir. 2010) (Boudin, J., concurring). It is thus squarely in the public

interest to reject an “auditor exception” to in pari delicto and thereby avoid

burdening consumers with the greater costs that would result from a greater risk of

auditor liability.

Second, expanded liability and rising costs without in pari delicto may

prompt auditors to refuse to provide services for newer or smaller, less

sophisticated organizations with fewer developed internal controls and managerial

resources. See Cent. Bank of Denver, N.A. v. First Interstate Bank of Denver,

N.A., 511 U.S. 164, 189 (1994) (opining that if liability for outside professionals is

expanded, then “newer and smaller companies may find it difficult to obtain advice

from professionals”). That is because “[a] professional may fear that a newer or

smaller company may not survive and that business failure would generate . . .

litigation against the professional.” Id. Thus, an “auditor exception” to the in pari

delicto defense carries with it a substantial risk that new or small companies with

27

the highest risk profiles—and that are most in need of accounting services—will

have difficulty obtaining adequate services. Such a risk need not (and should not)

be taken here.

D. Other Jurisdictions Have Consistently Rejected an “Auditor

Exception” to the In Pari Delicto Doctrine.

CHA is not the first wrongdoing client to propose an “auditor exception” to

the in pari delicto defense. To the contrary, litigants have on numerous occasions

sought to curtail the application of that defense. For the reasons set forth above,

almost every other court to consider such a proposal has rejected it.

For example, in Kirschner v. KPMG LLP, a litigation receiver sought to hold

the auditor of a company in receivership responsible for failing to detect fraud at

the company. 15 N.Y.3d at 457. The receiver argued in favor of a “carve-out from

traditional agency law in cases of corporate fraud so as to deny the in pari delicto

defense to negligent or otherwise culpable outside auditors.” Id. at 471. The New

York Court of Appeals refused to adopt such an exception, holding that the

asymmetry of the client-auditor relationship made the in pari delicto defense

particularly apt: “the [audit client]’s agents would almost invariably play the

dominant role in the fraud and therefore would be more culpable than the outside

professional’s agents who allegedly . . . did not detect the fraud at all or soon

enough.” Id. at 475-476.

28

Kirschner is no outlier. A host of other courts across the country have

reached similar conclusions. See Peterson v. McGladrey LLP, 792 F.3d 785, 788

(7th Cir. 2015) (applying in pari delicto doctrine to claims against auditor under

Illinois law because “a wrongdoer cannot recover compensation from a third party

who may have made things worse or missed a chance to avert the loss”); Official

Committee of Unsecured Creditors v. PricewaterhouseCoopers, LLP, 605 Pa. 269,

302 (2010) (rejecting a “rule which would uniquely disable auditors, as a class,

from asserting an in pari delicto defense”); Cenco, Inc. v. Seidman & Seidman, 686

F.2d 449, 455-456 (7th Cir. 1982) (applying in pari delicto doctrine to company’s

claim against auditor because company’s managers “were slipshod in their

oversight and so share responsibility for the fraud that [auditor] also fail[ed] to

detect”); Stewart v. Wilmington Trust SP Services, 112 A.3d 271, 317-318 (Del.

Ch. 2015) (rejecting an “auditor exception” to in pari delicto doctrine because such

an exception would “open a floodgate of ex post auditor liability”).

There is no compelling authority that would support the creation of such an

exception, including NCP Litig. Trust v. KPMG LLP, 187 N.J. 353 (2006). As this

Court explained in Merrimack, “NCP did not [even] address the in pari delicto

doctrine and instead focused only on the related doctrine of estoppel.” 480 Mass.

at 629 n.7. Accordingly, “[t]he [NCP] court’s holding is better understood as

29

creating an exception to the traditional rules of imputation for cases involving

auditor negligence.” Id.7

In sum, the public interest is best served by not departing from settled

Massachusetts law, which accords with the great majority of other jurisdictions in

refusing to recognize an “auditor exception” to the in pari delicto doctrine. Such

courts have consistently held that, in the case of an organization whose

management has engaged in misconduct, application of the in pari delicto doctrine

to preclude claims against an auditor appropriately assigns responsibility to those

in the best position to prevent wrongdoing and aligns with the professional

standards that govern an audit. The decision below also respects these

fundamental points and should be affirmed.

II. Mass. G. L. c. 112, § 87A ¾ Did Not Supplant the In Pari Delicto

Doctrine.

The Court’s second question to amici curiae is whether Mass. G. L. c. 112,

§ 87A ¾ applies instead of the in pari delicto doctrine when a wrongdoing client

7 The New Jersey Supreme Court’s decision in NCP is also based on a

flawed conception of the independent auditor’s role. In that case, the majority

altogether “ignore[d] the basis of the bargain between [audit client] and [auditor]

and, instead, impose[d] its own view of the services an auditor is retained to

perform. . . .” 187 N.J. at 404. As one of the dissenting opinions rightly put it, “if

what [the client] wanted was a guarantee that its financial statements as prepared

by its selected corporate agents were entirely without blemish, it should have

bargained for, and paid for,” a different kind of accounting engagement. Id.

30

sues its auditor for negligence. The answer to that question is “no”––the statute

does not supplant in pari delicto.

Section 87A ¾ provides that where a “firm licensed to practice public

accountancy . . . is held liable for damages in a civil action arising from or related

to its provision of services,” and where the “plaintiff or other party, individual, or

entity has been found to have acted fraudulently” in connection with “the

performance of the duties of the . . . firm,” the accounting firm “shall not be

required to pay damages in an amount greater than” a percentage of “the total

amount of the plaintiff’s damages” commensurate with the firm’s “percentage of

fault” in contributing to the plaintiff’s damages. Purportedly relying on this

Court’s decision in Merrimack, CHA contends that § 87A ¾ somehow “supplant[s]

the common law doctrine of in pari delicto . . . [in] cases where an accounting firm

is sued by its client for its failure to detect or report fraud,” CHA Br. at 17, and

therefore precludes application of that doctrine here. Merrimack, however, was

decided solely on imputation grounds as applied to the in pari delicto doctrine, and

did not hold that § 87A ¾ supplanted in pari delicto. Indeed, the Court expressly

stated it did not need to address, and was not resolving, that issue. 480 Mass. at 9-

10. In any event, CHA’s argument lacks a basis in law and fact.

CHA’s interpretation of § 87A ¾ would reverse the longstanding

presumption that, absent a clear legislative statement to the contrary, statutes

31

embody the common law. As this Court has stated on numerous occasions, “[a]

statute is not to be interpreted as effecting a material change in or a repeal of the

common law unless the intent to do so is clearly expressed.” Queler v. Skowron,

438 Mass. 304, 312 (2002) (internal quotation marks omitted); see also,

Commercial Wharf E. Condo. Ass’n v. Waterfront Parking Corp., 407 Mass. 123,

129 (1990) (courts “will not presume that the Legislature intended . . . a radical

change in the common law without a clear expression of such intent”).8 That is

because legislators act “against a background of common-law adjudicatory

principles,” Astoria Fed. Sav. & Loan Ass’n v. Solimino, 501 U.S. 104, 108 (1991),

and “are presumed to know the common law before a statute was enacted,” 2B

SUTHERLAND STATUTORY CONSTRUCTION § 50.1 (7th ed.). This Court and other

courts in Massachusetts have consistently applied these principles when construing

the General Laws. See, e.g., Kerins v. Lima, 425 Mass. 108, 110 (1997) (“Since

G.L. c. 231, § 85G, derogates from the common law, it therefore is to be strictly

construed.”); People’s United Bank v. B&B Fire Prot., Inc., 94 Mass. App. Ct. 626

8 See also Kirtsaeng v. John Wiley & Sons, Inc., 568 U.S. 519, 538 (2013)

(“when a statute covers an issue previously governed by the common law, we must

presume that ‘Congress intended to retain the substance of the common law.’ ”)

(citation omitted); In re PHC, Inc. S’holder Litig., 894 F.3d 419, 433 (1st Cir.

2018) (“it is a familiar tenet that when a statute addresses issues previously

governed by common law, an inquiring court should presume that—except where

explicit changes are made—the legislature intended to retain the substance of

preexisting law”).

32

(2019) (instructing that G.L. c. 156D, § 8.31 should not be interpreted to effect a

“change in the common law without a clear expression of such intent”).9

Here, amici have found no law to rebut the presumption that § 87A ¾ leaves

intact the common law doctrine of in pari delicto. The text of § 87A ¾ itself

contains no explicit mention of or reference to that doctrine. Instead, § 87A ¾, in

CHA’s own words, merely “ensur[es] that [accountants] w[ill] be liable for

damages not to exceed their ‘percentage of fault’” and “will not be subject to joint

and several liability.” CHA Br. at 17. That is not the “clear expression” that this

jurisdiction and others have required to abrogate the common law.

The omission of in pari delicto from the text of § 87A ¾ should come as no

surprise. As noted in Appellees’ briefing, Section 87A ¾ and in pari delicto may

apply in materially different circumstances; there are many instances in the context

of accounting malpractice in which § 87A ¾ would apply but in pari delicto would

not, and vice versa. See Marotto Br. at 37-41; Scafidi Br. at 40-44. The

Merrimack College case is another example. 480 Mass. at 630-631. There, the

9 CHA cites Lipsitt v. Plaud, 466 Mass. 240, 247 (2013), in support of its

argument that the common law may be preempted merely by implication, but that

case stands for the opposite proposition. Not only did the Lipsitt Court conclude

that the statute at issue left the common law intact, but the Court also reiterated

that “statutory repeal of the common law will not be lightly inferred; the

Legislature’s intent must be manifest.” Id. at 248 (internal quotation marks

omitted). In other words, “[h]ad the Legislature intended the [statute] . . . to

abrogate . . . longstanding common-law causes of action, we think it would have

done so explicitly.” Id. (internal quotation marks omitted).

33

Court determined that the in pari delicto defense relating to the financial aid

officer’s actions may be precluded, but apportionment pursuant to § 87A ¾ may

not be. Had the Legislature wished to express clearly its intent to displace the in

pari delicto defense, it could have (and would have) enacted a provision with the

same substantive reach.

The legislative history of § 87A ¾ underscores the point, for it, too, lacks

any indication that the Legislature intended to eliminate the in pari delicto

doctrine. To the contrary, the only stated intent in enacting that provision “[w]as

to replace joint and several liability for accountants with proportionate liability.”

1999-2000 Senate Doc. No. 2096. As then-Governor Paul Cellucci put it when

proposing the amendment to § 87A ¾’s original formulation (in the session before

it was passed), “the principle underlying this bill [is that] it would be more

equitable to limit a tortfeasor’s responsibility to pay damages in proportion to his

fault, rather than to impose on a single tortfeasor the responsibility to pay all

damages, including those caused by the fault of others.” Id.10 Moreover, although

§ 87A ¾’s original formulation was later amended to narrow the scope of its

application, there is no evidence that, following Governor Cellucci’s statement,

any member of either legislative chamber suggested that § 87A ¾ was meant to do

10 This Court looks to the Governor’s messages to assist in its interpretation

of the General Laws. See Finch v. Commonwealth Health Ins. Connector Auth.,

461 Mass. 232, 241 n.7 (2012).

34

anything other than “replace joint and several liability for accountants with

proportionate liability.” Id.

The statute’s focus on replacing joint and several liability rather than

limiting the in pari delicto makes sense in view of the broader historical context in

which the Legislature enacted § 87A ¾. At that time, the accounting profession,

including the Massachusetts Society, supported the provision’s passage because of

a recurring form of lawsuit: suits following the bankruptcy of an organization

against the organization’s accountants when the accountants, the only solvent

entities left standing, were forced to pay full damages, no matter their level of

culpability. See “Accountants Seek Law to Protect Them from Business Failure

Lawsuits,” STATE HOUSE NEWS SERVICE, Mar. 22, 2001. These public

statements corroborate the Legislature’s intent to displace joint and several liability

where auditors and their clients are held liable in tort, and there is no indication in

§ 87A ¾’s legislative history that the provision was intended to curtail the

application of in pari delicto where auditors are sued by their wrongdoing clients

for alleged malpractice.

The absence of any evidence that the Legislature intended to supplant the in

pari delicto doctrine explains why, even after the enactment of § 87A ¾, courts

have consistently applied that defense to bar wrongdoing clients’ claims of auditor

malpractice. For instance, in Nisselson v. Lernout, the First Circuit held that, under

35

Massachusetts law, the “in pari delicto doctrine barred” a malpractice claim against

an auditor because the auditor’s client engaged in fraud. 469 F.3d 143, 152 (1st

Cir. 2006). Likewise, in Baena v. KPMG LLP, the First Circuit not only applied in

pari delicto to foreclose claims of auditor malpractice, but also rejected the

plaintiff’s proposed limitation on “the use of the in pari delicto doctrine” on the

ground that no such limitation had been established by the Massachusetts

Legislature. 453 F.3d 1, 21 (1st Cir. 2006).

None of these cases suggests that § 87A ¾ displaced Massachusetts’ in pari

delicto doctrine. To the contrary, these decisions reaffirm the basic point that “the

in pari delicto defense [is] woven into the fabric” of Massachusetts law, and

remains intact. Nisselson, 469 F.3d at 151.

CHA’s efforts to bury the in pari delicto doctrine in favor of § 87A ¾ cannot

be reconciled with the language of that provision, its historical context, and nearly

two decades of precedent since its enactment. Its position depends on wrenching §

87A ¾ from its text and legislative history and presuming that the Legislature

meant to displace a well-settled doctrine of the common law. That, under basic

principles of statutory interpretation, CHA cannot do.

CONCLUSION

For the reasons set forth above, amici curiae respectfully submit that the

Court should affirm the lower court’s judgment.

36

Respectfully submitted,

/s/ Nicholas D. Stellakis








Tel: (202) 955-1864 Fax: (617) 433-5022


[email protected]

[email protected]

Dated: February 19, 2019

37

ADDENDUM

38

ADDENDUM

TABLE OF CONTENTS

G. L. c. 112, § 61 ...................................................................................................... 39

G. L. c. 112, § 87A ¾ ............................................................................................... 42

G. L. c. 112, § 87C ½ ............................................................................................... 43

“Accountants Seek Law to Protect Them from Business Failure Lawsuits,”

STATE HOUSE NEWS SERVICE, Mar. 22, 2001 ...................................... 47

1999-2000 Senate Doc. No. 2096 ............................................................................ 49

§ 61. Suspension, revocation or cancellation of certificate,..., MA ST 112 § 61

© 2019 Thomson Reuters. No claim to original U.S. Government Works. 1

Massachusetts General Laws AnnotatedPart I. Administration of the Government (Ch. 1-182)

Title XVI. Public Health (Ch. 111-114)Chapter 112. Registration of Certain Professions and Occupations (Refs & Annos)

M.G.L.A. 112 § 61

§ 61. Suspension, revocation or cancellation of certificate, registration, license orauthority by boards; disciplinary measures; sanctions; student loan defaulters; review

Effective: March 30, 2005Currentness

Except as otherwise provided by law the board of registration in medicine each board of registration or examination inthe department of public health in the executive office of health and human services and, each board of registration orexamination in the division of professional licensure in the office of consumer affairs and business regulation, after ahearing, may, by a majority vote of the whole board, suspend, revoke or cancel any certificate, registration, license orauthority issued by it, if it appears to said board that the holder of such certificate, registration, license or authority,is incapacitated by reason of mental illness, or is guilty of deceit, malpractice, gross misconduct in the practice of hisprofession, or of any offense against the laws of the commonwealth relating thereto. Any person whose certificate,registration, license or authority is suspended or revoked hereunder shall also be liable to such other punishment as maybe provided by law. The said boards may make such rules and regulations as they deem proper for the filing of chargesand the conduct of hearings.

A board of registration under the supervision of the division of professional licensure may discipline the holder of alicense, certificate, registration or authority issued pursuant to this chapter or chapters 141 and 142 if it is determined,after a consent agreement between the parties or after an opportunity for an adjudicatory proceeding conducted pursuantto chapter 30A, that such holder has:

(1) engaged in conduct which places into question the holder's competence to practice the profession including, but notlimited to, gross misconduct; practicing the profession fraudulently; practicing his profession beyond the authorizedscope of his license, certificate, registration or authority; practicing the profession with gross incompetence; or practicingthe profession with negligence on 1 or more than 1 occasion;

(2) engaged in the practice of his profession while the ability to practice was impaired by alcohol or drugs;

(3) violated any law, rule or regulation of the board of registration governing the practice of the profession;

(4) been convicted of a criminal offense which is reasonably related to the practice of the profession;

(5) engaged in dishonesty, fraud or deceit which is reasonably related to the practice of the profession;

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(6) knowingly permitted, aided or abetted an unauthorized person in performing activities requiring a license, certificate,registration or authority; or

(7) had a license, certificate, registration or authority issued by another state or territory of the United States, the Districtof Columbia, or a foreign state or nation with authority to issue such a license, certificate, registration or authorityrevoked, cancelled, suspended, not renewed or otherwise acted against, or if the holder has been disciplined, if the basisfor the action would constitute a basis for disciplinary action in the commonwealth.

Notwithstanding any general or special law to the contrary, a board of registration under the supervision of the division ofprofessional licensure, may by a majority vote and after a consent agreement between the parties or after an opportunityfor an adjudicatory proceeding conducted pursuant to chapter 30A, upon determination made that the holder of alicense, certificate, registration or authority issued by any such board of registration is subject to discipline based on anyprovision enumerated in this section, undertake 1 or more of the following actions:--

(1) suspend, revoke, cancel, decline to renew, or place on probation such license, certificate, registration or authority;

(2) reprimand or censure a holder;

(3) assess upon the holder a civil administrative penalty, as determined by the board, not to exceed $100 for a firstviolation; $500 for a second violation; $1,500 for a third violation; or $2,500 for a fourth or subsequent violation;

(4) require the holder to complete additional education and training as a condition of retention or future considerationof reinstatement of the license, certificate, registration or authority;

(5) require the holder to practice under appropriate supervision for a period of time as determined by the board as acondition of retention or future consideration of reinstatement of the license, certificate, registration or authority;

(6) require the holder to participate in an alcohol or drug rehabilitation program as a condition of retention or futureconsideration of reinstatement of the license, certificate, registration or authority.

Nothing in this section shall be deemed a limitation on a board's authority to impose such reasonable sanctions as itdeems appropriate by the board after a hearing or by a consent agreement. A person sanctioned under this section shall besubject to such other sanctions or punishment provided by law. The boards shall promulgate such rules and regulationsnot inconsistent with chapter 30A as necessary for the filing of charges and the conduct of proceedings.

Each such board of registration or examination, upon receiving a written list of names of educational loan defaultersfrom the Massachusetts Education Financing Authority established pursuant to section four of chapter fifteen C or theMassachusetts Higher Education Assistance Corporation created under chapter two hundred and ninety-eight of the actsof nineteen hundred and fifty-six, shall suspend, revoke or cancel a professional or occupational certificate, registration,license, or authority issued by it if the holder is so listed as being in default on an educational loan made under anyof the programs administered by such authority or corporation, hereinafter referred to in this paragraph as the loanagency. Any such holder whose certificate, registration, license or authority is suspended, revoked or cancelled pursuantto this paragraph because of such holder's default on an educational loan shall be informed by the applicable board of

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registration of the availability of the review procedure provided by this paragraph. Within thirty days of the receipt ofnotice of such suspension, revocation or cancellation, the holder may request the loan agency which notified the board ofregistration of the default to conduct a review of the applicant's alleged loan default. Upon receipt of a request for review,the loan agency shall notify the board of registration that the applicant has requested a review, whereupon the board ofregistration shall provisionally cancel the suspension, revocation or cancellation of the certificate, registration, licenseor authority until the board of registration is notified by said loan agency of the disposition of the review. Such reviewshall include a determination that said loan agency has complied with all federal requirements applicable to student loandefaulters, and any further requirements specified by the director of consumer affairs and business regulation. If the loanagency which conducts the review determines that the notice of default was in error, or enters into an arrangement forrepayment or enters into any other arrangement with the applicant, the loan agency shall promptly notify the applicableboard of registration and such board shall reinstate or renew the certificate, registration, license or authority of theholder, provided the holder meets all other requirements therefor. If the loan agency determines that the notice ofdefault was warranted, the loan agency shall notify the applicable board of registration to suspend, revoke or cancelsaid certificate, registration, license or authority. The director of consumer affairs and business regulation is herebyauthorized to promulgate regulations pursuant to sections one to eight, inclusive, of chapter thirty A to enforce theprovisions of this paragraph.

Each such board, if it appears after a hearing that a statement in an application to it for certification, registration,licensure or authority, which is required to be under oath or affirmation or to contain or be verified by a writtendeclaration that it is made under penalties of perjury, is false and known to the applicant to be false, shall refuse to grantor issue or shall revoke or cancel such certificate, registration, license or authority. The provisions of this paragraph shallnot affect, but shall be in addition to, any other penalty provided by law.

Except as otherwise provided in this chapter, no such board shall make any rule or regulation prohibiting the advertisingor dissemination of truthful information concerning the price, nature and availability of goods and services to consumers,the effect of which would restrain trade or lessen competition.

CreditsAmended by St.1963, c. 241, §§ 2, 3; St.1978, c. 508, § 5; St.1987, c. 522, § 3; St.1990, c. 415, § 2; St.1996, c. 304, § 3;St.1998, c. 161, §§ 441, 442; St.2000, c. 159, § 211; St.2002, c. 184, § 94; St.2004, c. 450, § 2, eff. Mar. 30, 2005.

M.G.L.A. 112 § 61, MA ST 112 § 61Current through Chapter 450, except Ch. 369, of the 2018 2nd Annual Session

End of Document © 2019 Thomson Reuters. No claim to original U.S. Government Works.

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§ 87A3/4. Individuals or firms practicing public accountancy;..., MA ST 112 § 87A 3/4




M.G.L.A. 112 § 87A 3/4

§ 87A ¾ . Individuals or firms practicing public accountancy; liabilityfor damages in civil actions involving claim or defense of fraud

Effective: February 23, 2002Currentness

When an individual or firm licensed to practice public accountancy under section 87B or 87B ½ is held liable for damagesin a civil action arising from or related to its provision of services involving the practice of public accountancy, in whichaction a claim or defense of fraud is raised against the plaintiff or another party, individual or entity, and that plaintiffor other party, individual, or entity has been found to have acted fraudulently in the pending action or in another actionor proceeding involving similar parties, individuals, entities and claims, and the fraud was related to the performance ofthe duties of the individual or firm licensed to practice public accountancy, the trier of fact shall determine: (a) the totalamount of the plaintiff's damages, (b) the percentage of fault attributable to the fraudulent conduct of the plaintiff orother party, individual or entity contributing to the plaintiff's damages, and (c) the percentage of fault of the individualor firm in the practice of public accountancy in contributing to the plaintiff's damages. Under the circumstances set forthin this section, individuals or firms in the practice of public accountancy shall not be required to pay damages in anamount greater than the percentage of fault attributable only to their services as so determined. This section shall notapply where a finding is made that the acts of the individual or firm in the practice of public accountancy were willful andknowing. In such an action involving the practice of public accountancy in which a claim or defense of fraud is raised, ifthere is pending a separate action or proceeding in which the alleged fraudulent conduct of the same party, individualsor entity against whom the claim or defense is raised is to be adjudicated or determined, the court may stay, on its ownor by motion, the action involving the practice of public accountancy until the other action or proceeding is concludedor the issue of fraudulent conduct is determined in that other action.

CreditsAdded by St.2001, c. 147, § 1.

M.G.L.A. 112 § 87A 3/4, MA ST 112 § 87A 3/4Current through Chapter 450, except Ch. 369, of the 2018 2nd Annual Session


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§ 87C1/2. Public accountancy; revocation or suspension of..., MA ST 112 § 87C 1/2




M.G.L.A. 112 § 87C 1/2

§ 87C ½ . Public accountancy; revocation or suspension of certificate or license;discipline; investigations; complaint; hearing; order; judicial review; modification of order

Effective: July 1, 2010Currentness

(a) After notice and hearing, the board may revoke any certificate or license issued under sections eighty-seven A ½,eighty-seven B and eighty-seven B ½ suspend any such certificate or license or refuse to renew any such license for aperiod of not more than five years, reprimand, censure or limit the scope of practice of any licensee or any individualqualifying for practice privileges pursuant to paragraph (1) of subsection (h) of section 87B, impose an administrativefine not exceeding one thousand dollars, or place any licensee on probation, all with or without terms, conditions andlimitations, for any one or more of the following reasons:--

(1) Fraud or deceit in obtaining a certificate or license;

(2) Cancellation, revocation, suspension or refusal to renew authority to engage in the practice of public accountancyin any other state or foreign country for any cause;

(3) Failure, on the part of a holder of a license under section eighty-seven B or eighty-seven B ½, to maintain compliancewith the requirements for issuance or renewals of such license or to report changes to the board;

(4) Revocation or suspension of the right to practice before any state or federal agency;

(5) Dishonesty, fraud or gross negligence in the practice of public accountancy or in the filing or failure to file his ownincome tax returns;

(6) Violation of any of the provisions of sections eighty-seven A to eighty-seven E, inclusive, or any rules promulgatedby the board;

(7) Conviction of a felony, or of any crime an element of which is dishonesty or fraud, under the laws of the UnitedStates, or the commonwealth, or of any other state, if the acts would have constituted such a crime under the laws ofthe commonwealth;

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(8) Performance of any fraudulent act while holding a certificate or license issued under prior law dealing with registrationand the conduct of public accountancy;

(9) Any conduct reflecting adversely upon the licensee's fitness to engage in the practice of public accountancy.

(b) In lieu of or in addition to any remedy specifically provided in paragraph (a) the board may require of a licensee:

(1) A quality review conducted in such fashion as the board may specify; and

(2) Satisfactory completion of such continuing professional education programs as the board may specify.

(b ½ ) The board may revoke or suspend a license granted pursuant to section 87B ½ if at any time a licensee is nolonger qualified under the law by which he qualified for registration, and the board may revoke or suspend any suchlicense for any of the causes enumerated in this section and for the following additional causes: (i) upon the revocation orsuspension of the certificate, registration or biennial license of any partner or any officer, director, shareholder, memberor employee of the firm for whom such licensee is employed; and (ii) upon the cancellation, revocation, suspension orrefusal to renew the authority of the firm to practice public accountancy in any other state, for any cause other thanfailure to pay a registration fee in such another state.

(c) In any proceeding in which a remedy provided by paragraph (a), (b) or (b ½ ) is imposed, the board may also requirethe respondent licensee to pay the cost of the proceeding.

The board may, upon receipt of a complaint or other information alleging violations of section eighty-seven A ½ toeighty-seven E, inclusive, or of the rules of the board, conduct investigations to determine whether there is probable causeto institute proceedings against any person or firm for such violation; but an investigation under this section shall not bea prerequisite to such proceedings in the event that a determination of probable cause can be made without investigation.In aid of such investigations, the board or the chairman thereof may issue subpoenas to compel witnesses to testify andto produce evidence.

The board may designate a member, or any other person of appropriate competence, to serve as investigating officer toconduct an investigation. Upon completion of an investigation, the investigating officer shall file a report with the board.The board shall find probable cause or lack of probable cause upon the basis of the report, or shall return the report tothe investigating officer for further investigation. Unless there has been a determination of probable cause, the report ofthe investigating officer, the complaint, if any, the testimony and documents submitted in support of the complaint orgathered in the investigation, and the fact of pendency of the investigation shall be treated as confidential informationand shall not be disclosed to any person except law enforcement authorities and, to the extent deemed necessary inorder to conduct the investigation, the subject of the investigation, persons whose complaints are being investigated, andwitnesses questioned in the course of the investigation.

Upon a finding of probable cause, if the subject of the investigation is a licensee, the board shall direct that a complaintbe issued and, if the subject of the investigation is not a licensee, the board shall take appropriate action pursuant to theprovisions of section 87D ½. Upon a finding of no probable cause, the board shall close the matter and shall thereafterrelease information related thereto only with the consent of the person or firm under investigation.

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In any case where probable cause with respect to a violation by a licensee has been determined by the board, whetherfollowing an investigation, or upon receipt of a written complaint furnishing grounds for a determination of suchprobable cause, or upon receipt of notice of a decision by the board of accountancy of another state furnishing suchgrounds, the board shall issue a complaint setting forth appropriate charges and set a date for hearing before the boardon such charges. The board shall, not less than thirty days prior to the date of the hearing, serve a copy of the complaintand notice of the time and place of the hearing upon the licensee, together with a copy of the board's rules governingproceedings under this section, either by personal delivery or by mailing a copy thereof by registered mail to the licenseeat his last known address.

A licensee against whom a complaint has been issued under this section shall have the right, reasonably in advance ofthe hearing, to examine and copy the report of investigation, if any, and any documentary or testimonial evidence andsummaries of anticipated evidence in the board's possession relating to the subject matter of the complaint. The board'srules governing proceedings under this section shall specify the manner in which such right may be exercised.

In a hearing under this section the respondent licensee may appear in person, or, in the case of a firm, through apartner, officer, director, member, or shareholder, by counsel, examine witnesses and evidence presented in support ofthe complaint, and present evidence and witnesses on his own behalf. The licensee shall be entitled, on application to theboard, to the issuance of subpoenas to compel the attendance of witnesses and the production of documentary evidence.

The evidence supporting the complaint shall be presented by the investigating officer, by a board member designated forthat purpose, or by counsel. A board member who presents the evidence, or who has conducted the investigation of thematter shall not participate in the board's decision of the matter.

In a hearing under this section the board shall be advised by counsel, who shall not be the same counsel who presentsor assists in presenting the evidence supporting the complaint.

In a hearing under this section the board shall not be bound by technical rules of evidence.

In a hearing under this section a stenographic or electronic record shall be made, and filed with the board. A transcriptneed not be prepared unless review is sought or the board determines that there is other good cause for its preparation.

In a hearing under this section a recorded vote of a majority of all members of the board then in office, excluding membersdisqualified, shall be required to sustain any charge and to impose any penalty with respect thereto.

If, after service of a complaint and notice of hearing the respondent licensee fails to appear at the hearing, the board mayproceed to hear evidence against the licensee and may enter such order as it deems warranted by the evidence, which ordershall be final unless the licensee petitions for review; provided, however, that within thirty days from the date of any suchorder, upon a showing of good cause for the licensee's failure to appear and defend, the board may set aside the orderand schedule a new hearing on the complaint, to be conducted in accordance with applicable subsections of this section.

Any person or firm adversely affected by any order of the board entered after a hearing may obtain review thereof byfiling a written petition for review with the supreme judicial court within thirty days after the entry of said order. Theprocedures for review, and the scope of the review shall be as specified in chapter thirty A.

In any case where the board renders a decision imposing discipline against a licensee under this section, the board shallexamine its records to determine whether the licensee holds a certificate or a license to practice public accountancy in anyother state; and if so, the board shall notify the board of accountancy of such other state of its decision by mail withinforty-five days of rendering the decision. The board may also furnish information relating to proceedings resulting in

WESTl.AW 45



disciplinary action to other public authorities and to private professional organizations having a disciplinary interestin the licensee.

In any case where the board has suspended or revoked a certificate or a license or refused to renew a license, the boardmay, upon application in writing by the person or firm affected and for good cause shown, modify the suspension orreissue the certificate or license.

The board shall by rule specify the manner in which such applications shall be made, the times within which they shallbe made, and the circumstances in which hearings will be held thereon.

Before reissuing or terminating the suspension of a certificate or license, and as a condition thereto, the board mayrequire the applicant to show successful completion of specified continuing professional education; and the board maymake the reinstatement of a certificate or permit conditional, and subject to satisfactory completion of a quality reviewconducted in such fashion as the board may specify.

(d) A person engaged in the practice of certified public accountancy pursuant to paragraph (2) of subsection (h) of section87B shall be included, for purposes of this section, within the definition of a licensee.

CreditsAdded by St.1985, c. 705, § 4. Amended by St.1996, c. 285, § 10; St.1997, c. 19, § 45; St.2010, c. 22, §§ 16 to 18A, eff.July 1, 2010.

M.G.L.A. 112 § 87C 1/2, MA ST 112 § 87C 1/2Current through Chapter 450, except Ch. 369, of the 2018 2nd Annual Session


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1/25/2019 ACCOUNTANTS SEEK LAW TO PROTECT THEM FROM BUSINESS FAILURE LAWSUITS (3-22-2001) .: The State House News Service

http://www.statehousenews.com

ACCOUNTANTS SEEK LAW TO PROTECT THEM FROM BUSINESS FAILURE LAWSUITS (3-22-2001)

By Adrian Brune

STATE HOUSE NEWS SERVICE

STATE HOUSE, BOSTON, MARCH 22, 2001.. .... As the economy tightens and executives face new challenges, a group of certified

public accountants wants legislators to pass a law that would ensure they won't be left holding the bill if a client's stock price

plummets or business folds.

The Committee on Government Relations today heard requests for liability exemptions from representatives of local accounting

firms and Massachusetts Society of Certified Public Accountants.

The proportional liability standard they're seeldng would shield them from the fallout of failed business ventures or fraudulent

lawsuits resulting from inaccurate audits. While non-audit services that accountants provide to businesses are fair legal game, they

should not be held liable for audits based on fraudulent or erroneous financial statements that have been compiled by their clients,

said Jean M. Joy, president of the Massachusetts Society of CPAs and an accountant with Wolf & Company P.C.

"A company's success or failure is not determinable by an audit," Joy told committee members. "We are sometimes unfairly targeted

because of professional liability insurance policies we hold and without this legislation, we are exposed to liability of an

undeterminable amount when we are not even involved in the day-to-day operations of a business." Joy said 38 states have

proportionate liability standards.

A liability law would reduce frivolous lawsuits filed after a business fails, when owners may be looking for someone to blame,

especially a large accounting firm with seemingly deep pockets, Joy said. She and three other CPAs called to testify maintained that

CPAs are different from other professions because they are not in total control of their work product and therefore, are deserving of

different liability status.

"A lot of the cases never make it to the jury and an accounting firm is often left to stand for the company," said David Trusdale, a

CPA. "Settlements are many times made before a trial because most firms never want to publicize that they are getting sued.

"Underwriters of a business have all of the upside and none of the down, while an accountant has none of the upside and is faced

with all of the down if something goes wrong."

The accountants received an intense grilling from Rep. Michael Festa CD-Melrose). He said he didn't see a reason for pursuing this

bill unless professional liability insurance premiums have risen so high that CPAs are unable to perform audit work or future CPAs

are being deterred from the profession. Committee members questioned how the bill wound up before them, and not the Judiciary

Committee.

"I still don't understand how this bill will keep you from getting scooped up in lawsuits," Festa said. "A doctor, like a CPA, does not

have complete control of the information his patients provide him and he still gets sued. Why would a jury hold you liable, if you

have no negligence?"

Lawyers from the Massachusetts Association of Trial Attorneys and the Massachusetts Bar Association were on hand to oppose the

legislation, saying CP As should be held to the same standard of the law as every other professional, in that each person involved in

the demise of a business is held fully responsible.

"Z

https:/ /www.statehousenews.com/news/2001249 1/2

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1/25/2019 ACCOUNTANTS SEEK LAW TO PROTECT THEM FROM BUSINESS FAILURE LAWSUITS (3-22-2001) .: The State House News Service

© Copyright 1997-2019 State House News Service

https://www.statehousenews.com/news/2001249 2/2

48

4 SENATE - No. 2095 [February 2000]

15 (b) Any owner, lessee or mortgagee in possession of such a 16 structure who. h~s been notified that the structure appears dan-17 gerous or that 1t 1s not secure pursuant to the provisions of section 18 6 of chapter 143 and who fails to make such structure safe or 19 secure within a reasonable period of time and death or serious 20 b??ily injury occurs as a result of the dangerous or unsecure con-21 ~1t10n shall be punished by .imprisonment in the house of correc-22 t10n fo~ not more than two and one-half years or by five years in 23 state pnson. ..

24 ( c) For. pu~p~ses of ~his statute, "serious bodily injury" shall 25 mean bodily mJur~ wh_1ch results in a permanent disfigurement, 26 protracted !oss or 1mpa1rment of a bodily function, limb or organ 27 or substantial risk of death.

' This Document Has Been Printed On 100% Recycled Paper.

SENATE. • • • • • • No. 2096

~be «:ommonbJealtb of .fflassacbusetts

ARGEO PAUL CEUUCCI --.. -JANESWIFT

-Ul!UTltNMT_.._

THE COMMONWEALTH OF MASSACHUSETTS

EXECUTIVE DEPARTMENT

STATE HOUSE • BOSTON 02133

(617) 727-3600

February 11, 2000

To the Honorable Senate and House of Representatives:

Pursuant to Article L VI of the Amendments to the Constitution of the Commonwealth, as amended by Section 3 of Article XC, I am hereby returning to you for amendment Senate Bill No. 368, entitled "An Act Relative to the Practice of Public Account.ency." ·

The pUl])Ose of this legislation. as articulated by its proponents, is to replace joint and several liability for accountants with proportionate liability. Ute bill is not intended to change the current standard of accountant professional liability, but only to apportion · an accoun~t's responsibility to pay damages in direct proportion to his fault ·

I am sympathetic to the principle underlying this bill that, in some cases, it would be more equitable to limit a tortfeasor's responsibility to pay damages in proportion to his fault, rather than to impose on a single tortfeasor the responsibility to pay all damages, including those caused by the fault of others. I am concerned, however, that, as drafted, this bill could have the broader effect of changing our current standard of accountant pro~ional liability by severely narrowing the scope of conduct and damages for which accountants may be held liable. Such a result would be especially troubling given the critical role that accountants play in our complex system of commerce and the extensive reliance that individuals, businesses, and government place on the expertise they provide. I therefore recommend that this bill be amended to more clearly limit its effect to its stated purpose.

Accordingly, I recommentftbat Senate Bill No. 368 be amended by~ out all text after the enacting clause and inserting in place thereof the following text:

Section I. Chapter 112 ofthe General Laws is hereby amended by inserting after section 87A 1/2 the following section: -

49

2 SENATE - No. 2096 [February 2000] ~<.~

Section 87A 3/4. When an individual or firm licensed to practice public accountancy pursuant to section 87B or 87B 1/2 is held liable for damages in a civil action arising from, or related to, its provision of services involving the practice of public accountancy, there shall be a determination by the trier of fact both of(l) the total amount of each plaintiff's damages. and (2) the percentage of fault of the individual or firm in contributing to each plaintiff's damages. No in~dual or firm shall be required to pay damages in an amount greater than the percentage of fault as so determined. This section shall not apply where a finding is made that the acts of the individual or firm were willful and knowing.

Section 2. The provisions of this act shall apply only to conduct occurring after the effective date of this act.

Respectfully submitted,

! '£)~ p Argeo Paul Cellucci . Governor

'

This Document Has Been Prinlcd On 100% Recycled Paper.

SENATE. • • • • • • No. 2097 By Ms. Tucker, a petition (accompanied by bill, Senate No. 2097) of

Susan C. Tucker and Barry R. Finegold (by vote of the town) for legislation to authorize the town of Andover to enter into certain agreements and to convey and accept certain interests in real estate. Local Affairs. [Local approval received.]

m:ue C!Commont.nealtb of ftlassacbusetts

In the Year Two Thousand.

AN ACT AUTHORIZING THE TOWN OF ANDOVER TO ENTER INTO CERTAIN

AGREEMENTS AND TO CONVEY AND ACCEPT CERTAIN INTEREST IN REAL

ESTATE.

Be it enacted by the Senate and House of Representatives in General C~urt assembled, and by the authority of the same, as follows:

SECTION I. Notwithstanding the provisions of chapter 30B 2 and chapter 41 of the General Laws, or any other general or 3 special law to the contrary, the board of selectmen of the town of 4 Andover and the conservation commission of the town may enter 5 into one or more agreements or to ratify any existing agreement 6 with the trustees of Phillips Academy and the Greater Lawrence 7 Regional Vocational High School District, including a manages ment agreement with an initial term of ten years and provisions 9 for automatic renewal or renegotiation, upon such terms as the

10 board and the commission deem to be in the best interest of the 11 town; and the board of selectmen and the conservation commis-12 sion may grant and accept easements in real estate and convey and 13 .~ccept conveyances of real estate lying between River road and I 4 the Merrimack river as shown on plans entitled "Plan of Land in 15 Andover, Massachusetts" dated April 14, 1999 by Dana F. 16 Perkins, Inc.; and "Subdivision and Easement Plan of Land in 17 Andover, Massachusetts" dated April 17, 1995 by Dana F. 18 Perkins, Inc., on file in the office of the town of Andover.

SECTION 2. This act shall take effect upon its passage.

This Document Has Been Printed On 100% Recycled Paper, 50

51

CERTIFICATE OF COMPLIANCE

I hereby certify, as required by Mass. R. A. P. 17(c)(5)(9), that this brief

complies with Mass. R. A. P. 17 and Mass. R. A. P. 20. This brief has been

prepared in Times New Roman, 14 point, proportionally spaced font and does not

contain more than 11,000 words.









Tel: (202) 955-1864 Fax: (617) 433-5022


[email protected]

[email protected]

Dated: February 19, 2019

52

CERTIFICATE OF SERVICE

Pursuant to Mass.R.A.P. 13(d), I hereby certify, under the penalties of

perjury, that on February 19, 2019, I have made service of this Brief upon the

attorney of record for each party, by email and the Electronic Filing System on:

Richard C. Pedone

Ronaldo Rauseo-Ricupero

Patrick MacDonald

NIXON PEABODY LLP

100 Summer Street

Boston, MA 02110

Tel: (617) 345-1000

Fax: (617) 345-1300

[email protected]

Attorney for Plaintiff-Appellant Chelsea Housing Authority

William L. Boesch

SUGARMAN, ROGERS, BARSHAK & COHEN LLP

101 Merrimac Street

Boston, MA 02114

Tel: (617) 227-3030

Fax: (617) 523-4001

[email protected]

Attorney for Defendant-Appellee Martin J. Scafidi, P.C.

Nancy M. Reimer, BBO # 555373

Eric A. Martignetti, BBO # 678377

FREEMAN MATHIS & GARY, LLP

60 State Street, 6th Floor

Boston, MA 02109

Tel: (617) 963-5975

[email protected]

[email protected]

Attorney for Defendant-Appellee John Marotto

53

S. James Boumil

BOUMIL LAW OFFICE

120 Fairmount Street

Lowell, MA 01852

Tel: (978) 458-0507

[email protected]

Attorney for Defendant Michael E. McLaughlin









Tel: (202) 955-1864 Fax: (617) 433-5022


[email protected]

[email protected]

54

RULE 17(c)(5) DECLARATION

Pursuant to Mass. R. App. P. 17(c)(5), I, Nicholas D. Stellakis, depose and state as

follows:

1. I, together with my firm Hunton Andrews Kurth LLP, am counsel of

record for amici curiae American Institute of Certified Public Accountants and the

Massachusetts Society of Certified Public Accountants (“amici”).

2. No party or party’s counsel authored this brief in whole or in part.

3. No party or party’s counsel contributed money that was intended to fund

preparing or submitting the brief.

4. No person or entity other than amici contributed money that was intended

to fund preparing or submitting the brief.

5. None of the counsel for amici or their firm represents or has represented

any of the parties to this appeal in another proceeding involving similar issues or in

a proceeding or legal transaction that is at issue in this appeal, nor were amici

parties to the proceeding or legal transaction that is at issue in this appeal.

I declare under penalty of perjury under the laws of the Commonwealth of

Massachusetts that the foregoing is true and correct.

Executed this 19th day of February 2019 at Boston, Massachusetts.


Nicholas D. Stellakis

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