A Cautionary Ruling For Bankruptcy Trustees

Law360 (April 21, 2008, 12:00 AM EDT) -- In an important ruling issued on March 21, 2008, Maxwell v. KPMG LLP, No. 07-2819, 2008 WL 746849 (7th Cir. 2007), the U.S. Court of Appeals for the Seventh Circuit drew on the concept of “loss causation” from securities law to illustrate why an accounting firm’s alleged malpractice was not the legal “cause” of financial losses claimed by the plaintiff.

The plaintiff, a trustee in bankruptcy of a company called marchFirst, brought suit against the accounting firm, KPMG, alleging that the firm’s negligent performance of its...
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