Logourl black
From our private database of 14,000+ case briefs...

AUSA Life Insurance Co. v. Ernst & Young

United States Court of Appeals for the Second Circuit
206 F.3d 202 (2d Cir. 2000)


Facts

AUSA Life Insurance Company (AUSA) (plaintiff) invested in the securities of JWP, Inc. (JWP), by purchasing notes in November 1988. AUSA continued to purchase more notes through March 1992, in accordance with note agreements that contained JWP’s financial representations, future procedures, and assurances of financial viability. AUSA relied on JWP’s past financial statements, including annual reports certified by Ernst & Young (E&Y) (defendant). The reports were required to be kept in accordance with generally accepted accounting principles (GAAP). E&Y was also required by the agreement to provide to JWP a letter containing an audit statement and proof that JWP was compliant with the financial covenants. However, E&Y’s statements were consistently inaccurate and were not always in accordance with GAAP. E&Y would notice the failures, protest against the failures, and then acquiesce to the failures. In particular, John LaBarca, the partner in charge of audit, and Ernest Grendi, the chief executive officer of JWP, seemed to bully or persuade others that the books did not need to be adjusted. JWP rapidly expanded between 1984 and 1992 due to aggressive acquisitions financed by private placements of debt securities. JWP’s acquisition of Businessland, Inc. (Businessland), in 1991 turned out to be a failure and led to JWP’s involuntary bankruptcy in December 1993. As a result, AUSA lost approximately $100,000,000 of its $149,000,000 in total investments. AUSA then brought suit against E&Y, but the district court dismissed for failure to prove loss causation. AUSA appealed.

Rule of Law

The rule of law is the black letter law upon which the court rested its decision.

To access this section, please start your free trial or log in.

Issue

The issue section includes the dispositive legal issue in the case phrased as a question.

To access this section, please start your free trial or log in.

Holding and Reasoning (Oakes, J.)

The holding and reasoning section includes:

  • A “yes” or “no” answer to the question framed in the issue section;
  • A summary of the majority or plurality opinion, using the CREAC method; and
  • The procedural disposition (e.g. reversed and remanded, affirmed, etc.).

To access this section, please start your free trial or log in.

Concurrence (Jacobs, J.)

The concurrence section is for members only and includes a summary of the concurring judge or justice’s opinion.

To access this section, please start your free trial or log in.

Dissent (Winter, J.)

The dissent section is for members only and includes a summary of the dissenting judge or justice’s opinion.

To access this section, please start your free trial or log in.

What to do next…

  1. Unlock this case brief with a free (no-commitment) trial membership of Quimbee.

    You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 97,000 law students since 2011. Some law schools—such as Yale, Vanderbilt, Berkeley, and the University of Illinois—even subscribe directly to Quimbee for all their law students. Read our student testimonials.

  2. Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.

    Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students. Read more about Quimbee.

Here's why 175,000 law students have relied on our case briefs:

  • Written by law professors and practitioners, not other law students. 14,000 briefs, keyed to 188 casebooks. Top-notch customer support.
  • The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
  • Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
  • Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.