At that trial, the jury awarded the Portugal-based bank $170 million in compensatory damages, together with $351 million in punitive damages for a total of $521 million.The bank claimed in its original lawsuit that BDO Seidman was negligent in its failure to detect fraud in a series of audits relating to a company Banco Espirito Santo had backed financially.
That company, E.S. Bankest, was eventually exposed as a massive fraud and closed down in 2003 by US regulators. Banco Espirito Santo sued the accounting firm, which resulted in the jury award of 2007.
However, the Appellate court ruled on appeal that the lawsuit was improperly divided into three phases—with jurors in the Miami-Dade court finding for negligence in just the first phase. According to the Third District Court of Appeal, such a verdict and award in only the first phase of the trial had the effect of increasing the likelihood that the accounting firm would receive a huge punitive damage award before the jury had access to and heard all the important evidence.
"The cart cannot lead the horse," the judges wrote. "The jurors should have been allowed to consider all of the evidence" before deciding that BDO Seidman was negligent.
BDO Seidman said in the AP report that such a judgment would sink the company.
"We have consistently stated that we were confident that the jury's erroneous verdict in this case would be reversed on appeal," said Jack Weisbaum, chief executive officer at BDO Seidman.
An attorney for the plaintiff noted that the ruling by the appellate court related to procedural matters and did not speak to the accusations against the defendant. A spokesperson for the legal team bringing the Banco Espirito Santo case against BDO Seidman was confident that a jury participating in a new trial would arrive at the same conclusion as the original jury.
AP reports that no new trial date has been set for the accounting malpractice lawsuit. The first took four months to try once it actually got going.
BDO Seidman is based in Chicago.