LAWFUEL – The Law News Wire – Reuters report that a U.S. appeals court ruled on Wednesday that accounting firm KPMG will not have to face a trial over who should pay the legal fees for 16 former partners charged with selling illegal tax shelters.
The decision reverses an order by U.S. District Judge Lewis Kaplan last year to hold a proceeding, separate from the pending criminal trial, over the payment of legal fees.
Kaplan, who sits in Manhattan, had ruled then that the government unconstitutionally pressured the firm to withhold payment of legal fees for its 16 former partners. The former partners subsequently filed a civil complaint against KPMG, requesting it pay the fees.
The U.S. Second Circuit Court of Appeals heard arguments in November on whether Kaplan or an outside arbitrator — as requested by KPMG — should decide who should pay the fees.
In its decision on Wednesday, a three-judge panel of the appeals court said Kaplan does not have the authority to hold a separate proceeding to determine if KPMG should pay the fees.
“The prejudice to KPMG in having these claims resolved in a proceeding ancillary to a criminal prosecution in the Southern District of New York is clear,” the appeals court said in the opinion.
KPMG spokesman Dan Ginsburg said: “We respect the court’s ruling and believe it is appropriate under the circumstances.”