SYLLABUS

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

NCP Litigation Trust v. KPMG LLP (A-19-04)

Argued January 3, 2005 -- Decided June 28, 2006

ZAZZALI, J., writing for the Court.

In this appeal, the Court must determine whether the imputation doctrine, which holds that knowledge of an agent is generally attributable to its principal, bars the suit of a litigation trust, acting as a corporation’s successor and representing the corporation’s shareholders, against the corporation’s auditor for negligently failing to discover the intentional misrepresentation by corporate officers of details concerning the corporation’s financial status.

Physician Computer Network (PCN) retained defendant KPMG LLP (KPMG) as its independent auditor from mid-1993 to mid-1998. John Mortell and Thomas Wraback, officers of PCN who were KPMG’s primary contacts, had orchestrated a series of fraudulent transactions to inflate PCN’s reported revenues and reduce its reported expenses. They intentionally misrepresented PCN’s financial status to KPMG, which KPMG did not detect for several years.