Houston business plaintiffs’ firm Susman Godfrey recently obtained an $87.5 million settlement from Big Four accounting firm PricewaterhouseCoopers in connection with a negligent misrepresentation claim of over $1 billion that arose from Laidlaw Environmental Services’ ill-fated 1999 takover of scandal-ridden Safety-Kleen Corp.
Susman Godfrey represented a syndicate of lenders headed by Toronto Dominion Bank that provided almost $3 billion in financing to Laidlaw in connection with the Safety-Kleen adverse takeover. Shortly after Laidlaw acquired the company, Safety-Kleen filed a chapter 11 case amidst revelations of an internal accounting scandal. As a result of the scandal and Safety-Kleen’s reorganization, the value of the bank syndicate’s loans declined dramatically.
The banks sued PW and alleged that the loans would not have been made but for the fact that PricewaterhouseCoopers had provided audit reports indicating that Safety Kleen was financially healthy. PricewaterhouseCoopers contended that Safety-Kleen’s management had misled it in connection with the audits (former Safety-Kleen executives were sanctioned by the SEC and at least one criminal proceeding arose from the scandal), and that besides, the banks had not relied on the PricewaterhouseCoopers’ audits anyway in making the loans to fund the takeover. The case settled on the courthouse steps before trial last October, but the details of the settlement are just now becoming public.
The settlement is interesting in that it was came in mediation after the parties had engaged in a summary jury trial last May, in which the parties engage in a non-binding, streamlined presentation of their cases to a jury, which then gives each side feedback on how the jury would decide the key fact issues in the case. Although not used nearly enough in complex litigation, summary jury trials are an efficient and effective tool for parties involved in such mattrs to assess the risks of proceeding to trial versus a pre-trial settlement.