Plaintiff alleges PricewaterhouseCoopers’ Negligence Led to Financial Losses

In a dramatic legal battle, the Appvion, Inc. Retirement Savings and Employee Stock Ownership Plan (ESOP) has taken on accounting giant PricewaterhouseCoopers LLP (PwC) in an appeal following a circuit court decision. The ESOP, represented by Grant Lyon, filed the complaint on July 15, 2020, in Outagamie County Circuit Court against PwC and RSM US LLP. This case stems from allegations that PwC was negligent in its audits of Appvion’s financial statements from 2001 to 2014, which allegedly led to significant financial losses for the ESOP participants when Appvion declared bankruptcy in October 2017.

The core of the lawsuit is the claim that PwC failed to detect fraudulent activities by Appvion’s management and advisors, resulting in the ESOP purchasing company stock at inflated prices. According to the complaint, this negligence contributed to substantial damages when Appvion filed for bankruptcy protection and the stock became worthless. The ESOP argued that PwC should have identified discrepancies in stock valuations during their audits and alerted stakeholders to these issues. However, the circuit court dismissed these claims on August 1, 2023, ruling that PwC owed no duty to the ESOP as it was not their direct client and could not have reasonably foreseen reliance on their audit opinions by the ESOP.

The appeal focuses on challenging this dismissal, with the ESOP asserting that there was indeed a “triangular relationship” between PwC, Appvion, and themselves that should have made such reliance foreseeable. They argue that if PwC had adhered to proper auditing standards and procedures, they would have exposed the inflated stock prices earlier. Furthermore, they claim that public policy considerations should prevent dismissal at this stage without further exploration of potential negligence.

The plaintiffs are seeking reversal of the dismissal and permission to amend their complaint to address perceived shortcomings identified by the court. They aim for a judgment that holds PwC accountable for professional negligence and negligent misrepresentation while also seeking damages corresponding to their alleged financial losses due to overvalued stock purchases.

Representing these parties are attorneys from various law firms: Grant Lyon leads for the plaintiff while defense counsel includes lawyers from prestigious firms representing PwC. The case is presided over by Judges Stark P.J., Hruz J., Colon J., with Judge Tammy Jo Hock having affirmed the initial circuit court decision. The case ID is 2023AP1709.