What is the in pari delicto defense to an aiding and abetting claim?

MultiRegion, United States of America

The following excerpt is from Kirschner v. Large Shareholders (In re Tribune Co. Fraudulent Conveyance Litig.), 19-3049-cv, 19-449-cv (2nd Cir. 2021):

The in pari delicto doctrine acts as an affirmative defense to an aiding and abetting claim by barring a plaintiff "from recovering damages if his losses are substantially caused by activities the law forbade him to engage in." Stewart v. Wilmington Tr. SP Servs., Inc., 112 A.3d 271, 301-02 (Del. Ch.), aff'd, 126 A.3d 1115 (Del. 2015) (internal quotation marks omitted). In other words, a plaintiff can generally only sue for aiding and abetting a breach of fiduciary duty if the plaintiff's hands are clean. As applied to corporations, the illegal actions of a corporation's officers and directors are imputed to the corporation itself. Id. at 303. There are, however, exceptions that render the in pari delicto doctrine inapplicable and therefore permit a plaintiff to sue, even if its hands are not clean.

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