CA1: Corporate In Pari Delicto

Nisselson v. Lernout, No. 05-1774. Selya is strangely entertaining. 

In the underlying series of events, a corporate shark, using fraudulent means, induced an allegedly innocent target corporation to enter into an ill-advised merger. After both the shark and the merged entity drowned in red ink, plaintiff-appellant Alan Nisselson (the trustee), appointed by the bankruptcy court to prosecute any causes of action that the merged entity might possess, attempted to mount various claims arising out of the innocent target's legal rights.

Applying the In Pari Delicto Doctrine, The First sides against the trustee, because it concludes that it is a successor to the shark, and these claims really belong to the first corporations shareholders. 

Obviously, if you have been involved in the KPMG litigation, this decision, and the First’s allocation of moral condemnation will be of interest to you.