Second Circuit Denies Audit Firm’s Request for a Rehearing

On January 7, 2025, the Second Circuit issued an order denying BDO USA LLP’s petition for rehearing, or, in the alternative, for rehearing en banc in New England Carpenters Guaranteed Annuity and Pension Funds v. AmTrust Financial Services, Inc., No. 20-1643-cv (2d Cir.).  According to the Second Circuit’s order denying BDO’s petition, “the panel that determined the appeal has considered the request for panel rehearing,” and “active members of the court” considered the alternative request for a rehearing en banc.

As we previously reported in the April 24, 2020, August 25, 2023, and November 1, 2024 Auditor Liability Bulletins, the claims related to BDO’s audit of the financial statements and system of internal controls of AmTrust Financial Services, Inc., which restated five years of financial results based upon improper revenue recognition and expense timing.  In its December 2024 petition for rehearing, BDO argued that its audit certification of AmTrust’s financial statements was not material because it did not alter the “total mix of information” about AmTrust’s financials made available to investors.  BDO’s petition followed the Second Circuit’s amendment, following a prior petition for rehearing, of its August 23, 2023 Opinion.  In its Amended Opinion, the Second Circuit vacated the Southern District of New York’s dismissal of Section 10(b) and Rule 10b-5 claims against BDO, while affirming in part and vacating in part the dismissal of claims against other defendants, as covered in the November 1, 2024 Auditor Liability Bulletin.  The Second Circuit initially affirmed the dismissal of all claims against BDO, as covered in the August 25, 2023 Auditor Liability Bulletin.

The case is New England Carpenters Guaranteed Annuity and Pension Funds, et al. v. DeCarlo, et al., No. 20-1643-cv (2d Cir. Jan. 7, 2025).  Plaintiffs are represented by Robins Geller Rudman & Dowd LLP.  BDO is represented by McDermott Will & Emery LLP.  A copy of the order is linked here, and a copy of the petition for rehearing or rehearing en banc is linked here.