Friday, February 2, 2007
In Lattanzio v. Deloitte Touche, 2007 WL 259877 (2d. Cir. 1/31/07), the Court upheld the dismissal of a securities fraud class action against the accounting firm arising from alleged misstatements in Warnaco's financial statements. The court held that the requirement that the auditing firm review the unaudited statements did not make the maker of the unaudited statements for purposes of Central Bank and did not give rise to a duty to correct any misstatements. In addition, plaintiffs failed to allege loss causation -- a connection between the misstatements and the losess suffered as a result of Warnaco's bankruptcy. In particular, Deloitte's "going concern" warning would give investors adequate warning of the risk of bankruptcy, even if the underyling financial information was inaccurate.