Title: The Honorable Karen Weldin Stewart, et al. v. Wilmington Trust SP Services, Inc., et al.
Citation: N/A
Docket Number: 204, 2015
State: Delaware
Issuer: Delaware Supreme Court
Date: November 2, 2015

IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
 
THE HONORABLE KAREN WELDIN  
§ 
STEWART, CIR-ML, INSURANCE 
§ 
COMMISSIONER OF THE STATE OF 
§ 
DELAWARE, IN HER CAPACITY AS 
§ 
THE RECEIVER OF SECURITY PACIFIC § 
INSURANCE COMPANY, INC. IN 
§ 
No. 204, 2015 
LIQUIDATION, SPI-202, INC. IN  
§ 
LIQUIDATION, SPI-203, INC. IN 
§ 
Court Below:  Court of Chancery 
LIQUIDATION, and SPI-204, INC. IN 
§ 
of the State of Delaware, 
LIQUIDATION, 
§ 
in and for New Castle County  
 
 
 
§ 
 
Plaintiff Below-Appellant, 
§ 
C.A. No. 9306-VCP 
 
 
§ 
 
 
 v.  
§ 
 
 
 
§  
 
WILMINGTON TRUST SP SERVICES,  
§ 
 
INC.; JOHNSON LAMBERT & CO., LLP; § 
JOHNSON LAMBERT, LLP; MCSOLEY §  
 
MCCOY & CO.; and STEPHEN D. 
§ 
 
KANTNER,  
§ 
 
 
 
 
§ 
 
 
Defendants Below-Appellees. 
§ 
 
 
 
 
Submitted:   October 28, 2015 
Decided:   
November 2, 2015 
 
Before STRINE, Chief Justice; HOLLAND and VAUGHN, Justices; SMALLS, Chief 
Judge; and WELCH, Judge,* constituting the Court en Banc.  
 
O R D E R 
 
This 2nd day of November 2015, upon consideration of the parties’ briefs and the 
record below, it appears to the Court that: 
(1) On this appeal, a receiver of an insolvent insurer seeks to appeal the Court of 
Chancery’s decision to dismiss its claims for breach of contract and professional 
                                                 
* Chief Judge Smalls and Judge Welch sit by designation under Del. Const. art. IV, § 12. 
2 
 
negligence against Wilmington Trust, which the insurer retained as its captive manager in 
Delaware and Johnson Lambert and McSoley McCoy, which the insurer retained to 
prepare its audited financial statements.  The receiver’s complaint alleges that the sole 
stockholder and CEO of the insurer, James M. Jackson, engaged in pervasive fraud and 
that the insurer was never adequately capitalized.  Wilmington Trust, Johnson Lambert, 
and McSoley McCoy are alleged to have knowingly been complicit in Jackson’s 
behavior, by understanding that the insurer was not adequately accounting for its assets 
and for knowingly turning a blind eye to the unacceptable state of affairs for several 
years.  For that reason, the receiver pled a count against these three defendants for aiding 
and abetting a breach of fiduciary duty.  At the very least, the receiver alleged, 
Wilmington Trust, Johnson Lambert, and McSoley McCoy breached their duty of care as 
professional advisors to the insurer, and are responsible in tort and contract for resulting 
damages. 
(2) The Court of Chancery dismissed the professional negligence and contract 
claims, holding that they were barred by the doctrine of in pari delicto.1  By contrast, the 
Court of Chancery did not dismiss the aiding and abetting claims against Wilmington 
Trust and Johnson Lambert, reasoning that under Delaware law, the doctrine of in pari 
delicto should, consistent with the recognized fiduciary exception to that doctrine, not bar 
claims against professional advisors for aiding and abetting.2  By so holding, the Court of 
                                                 
1 See Stewart v. Wilmington Trust SP Servs., Inc., 112 A.3d 271, 319 (Del. Ch. 2015). 
2 See id. at 319–23.  The Court of Chancery dismissed the aiding and abetting claim as to 
McSoley McCoy for failure to state a claim upon which relief could be granted.  Id. at 323.  That 
decision was not appealed. 
3 
 
Chancery took into account various policy factors, such as the need to hold professional 
advisors accountable for serious wrongdoing while avoiding a litigation-intensive 
approach that would expose professional advisors to more than an optimal threat of 
liability in situations when their clients had engaged in unlawful behavior.3   
(3) On appeal, the receiver’s main argument is that the Court of Chancery erred in 
its application of the in pari delicto doctrine and should have: i) allowed the receiver to 
raise all claims the insurer possessed and disregard the doctrine because the underlying 
company was an insurer; and ii) allowed for an exception to the in pari delicto doctrine to 
allow a company to bring claims of professional negligence or breach of contract 
regardless of whether the economic damages at issue flow from unlawful behavior of the 
company’s own managers.  We do not embrace either argument.  Rather, we agree with 
the Court of Chancery’s careful analysis of this difficult area of the law.4 
(4) The balance the Court of Chancery struck between the need for accountability 
of professional advisors and the costs of exposing professional advisors to potentially 
excessive risks is a sensible one, and reflects the one chosen by sister states, such as New 
York, whose laws are often involved in situations involving Delaware corporations.5  
This harmony is beneficial and if it is to be disturbed, that decision is best made by the 
General Assembly. 
                                                 
3 Id. at 318–20. 
4 See id. at 308–20. 
5 See id. at 306–08 (explaining that New York law governed two previous in pari delicto cases in 
the Court of Chancery, In re Am. Int’l Grp., Inc., Consol. Derivative Litig., 965 A.2d 763 (Del. 
Ch. 2009), aff’d, 11 A.3d 228 (Del. 2011), and In re Am. Int’l Grp., Inc., Consol. Derivative 
Litig., 976 A.2d 872 (Del. Ch. 2009), aff’d, 11 A.3d 228 (Del. 2011)). 
4 
 
  
NOW, THEREFORE, IT IS ORDERED that the well-reasoned decision of the 
Court of Chancery of April 27, 2015 is AFFIRMED. 
BY THE COURT: 
 
 
 
 
 
 
/s/ Leo E. Strine, Jr. 
 
 
 
 
 
 
Chief Justice