Chelsea Housing Authority v. McLaughlinAnnotate this Case
The Supreme Judicial Court vacated the superior court's grant of summary judgment in favor of Defendants, the former accounts of Plaintiff, the Chelsea Housing Authority, on the ground that Plaintiff's claim of negligence against Defendants was barred by the common-law doctrine of in pari delicto, holding that, by enacting Mass. Gen. Laws ch. 112, 87A 3/4, the Legislature intended to preempt the doctrine of in pari delicto in cases where an accountant is sued for failing to detect fraud committed by a client.
In this action, Plaintiff sought to recover the losses incurred from the accountants' alleged negligent failure to detect the fraudulent conduct of its former executive director, its former finance director, and others. A superior court judge concluded that Plaintiff's claim was barred by the doctrine of in pari delicto without addressing the applicability of section 87A 3/4. The Supreme Judicial Court vacated the summary judgment, holding that the Legislature has preempted the common-law doctrine of in pari delicto doctrine as it applies to the negligent conduct of accountants and auditors in failing to detect fraud.