## Facts

- Parmalat Finanziaria S.p.A., an Italian food conglomerate, collapsed after a large accounting fraud allegedly overstated assets and understated debt by billions of dollars.
- Purchasers of Parmalat-related securities brought a consolidated securities class action alleging losses from materially false financial reporting and audit opinions.
- Parmalat’s audits were performed by Grant Thornton S.p.A. (GT-Italy), a member of the Grant Thornton global network.
- The motion concerned Grant Thornton LLP (GT-US), the U.S. member firm, which did not sign Parmalat’s audit opinions but allegedly had a significant role within the global network.
- Plaintiffs alleged GT-International set network-wide policies and procedures and that GT-US, as the largest member firm, exercised influence or control sufficient to attribute GT-Italy’s audit misconduct to GT-US.
- Plaintiffs filed a Third Amended Complaint seeking to reassert claims against GT-US with allegations paralleling those found sufficient in related Parmalat litigation.

## Issues

1. Whether the Third Amended Complaint plausibly stated claims against GT-US under Exchange Act § 10(b) and Rule 10b-5 based on audit-related misstatements issued by GT-Italy.
2. Whether allegations of agency/vicarious liability or a “single firm” global-network theory were pleaded with sufficient particularity under Rule 9(b) and the PSLRA to survive Rule 12(b)(6).
3. Whether the complaint adequately alleged a basis to proceed to discovery on GT-US’s responsibility for, involvement in, or control over the alleged fraudulent auditing conduct.

## Decision

- The court denied GT-US’s motion to dismiss the Third Amended Complaint.
- The court held the complaint contained enough particularized factual allegations to plausibly support liability theories tying GT-US to GT-Italy’s audit misconduct.
- The court concluded the pleading met the heightened requirements applicable to securities-fraud claims at the motion-to-dismiss stage.

## Legal Principles

- On a Rule 12(b)(6) motion, the court asks whether well-pleaded facts plausibly support liability, including whether they raise a reasonable expectation that discovery will produce supporting evidence.
- Securities-fraud claims must satisfy Rule 9(b) and the PSLRA by specifying misleading statements, explaining why they were misleading, and pleading facts supporting a strong inference of scienter.
- A U.S. member firm in a global professional-services network may face potential Rule 10b-5 exposure at the pleading stage where plaintiffs allege specific facts supporting agency, control, or “single firm” operation sufficient to attribute a foreign member’s audit statements to the U.S. firm.
- In closely related proceedings involving substantially similar allegations, consistent application of pleading-stage standards may weigh against dismissing one complaint while allowing parallel theories to proceed in another.

## Conclusion

The court allowed the securities-fraud claims against GT-US to proceed, holding that the complaint plausibly and particularly alleged—consistent with heightened pleading standards—that GT-US could be responsible for GT-Italy’s audit misstatements through agency and global “single firm” theories warranting discovery.


In re Parmalat Sec. Litig., 474 F. Supp. 2d 547 (S.D.N.Y. 2007)