PriceWaterhouseCoopers LLP failed in its effort to have a federal court in New York City dismiss a malpractice claim brought against it by the plan administrator for MF Global Holdings, Ltd. for the accounting and auditing firm’s alleged role in the collapse of MF Global in 2011. According to a complaint previously filed by the plan administrator, PwC engaged in “extraordinary and egregious” professional negligence in approving MF Global’s accounting methods for certain transactions in European sovereign debt (known as repurchase to maturity or RTM transactions) and for certain tax advice regarding the propriety of not recording a valuation allowance against certain deferred tax assets (thus effectively increasing reported income). (For fiscal year 2011, MF Global accounted for its European sovereign debt transactions – which were structured as RTM transactions – as sales, thus not including a future obligation to repay as a liability on the firm’s balance sheet. This permitted MF Global to report the transactions as gains at the time of the sale, notwithstanding its subsequent obligation to repay the sale price.) PwC and the plan administrator disagree whether it was MF Global's own business decision to engage in the RTM transactions or whether it did so based on PwC's accounting advice; the parties also disagree why PwC did not record a valuation allowance until late October 2011. The plan administrator claims that MF Global's reliance on PwC's advice substantially caused the firm's collapse. PwC denies the plan administrator's allegations. Moreover, each party was likely at worse an equal wrongdoer, says PwC – a defense known as in pari delicto  – and thus, the plan administrator's lawsuit against it should not stand. However, in ruling against PwC, the court held that PwC had not satisfied its burden at this time to demonstrate the absence of “any genuine issue of material fact on the in pari delicto defense or on the Plan Administrator’s [negligence] claim.” The plan administrator initially filed its complaint against PwC in March 2014. Most of the plan administrator's causes of action against PwC were previously dismissed by order of the relevant federal court, except for the professional malpractice claim. (Click here for more details on the plan administrator’s legal action against PwC in the article, “PwC Loses Motion to Dismiss Malpractice Action Brought by MF Global Plan Administrator” in the July 13, 2014 edition of Bridging the Week.)