Castleman v Interactive Brokers LLC

Holding The in pari delicto doctrine bars a federal equity receiver from suing a third party for negligence or aiding and abetting breach of fiduciary duty because the receiver stands in the shoes of the wrongdoing corporation. The adverse interest exception does not apply because the wrongdoer was the sole owner of the entity at the time of the misconduct.

The court’s words

The Supreme Court correctly found that under Kirschner v KPMG LLP (15 NY3d 446 [2010]), the equitable defense of in pari delicto bars plaintiff's claims

2026 NY Slip Op 05904, at the official text

there is no significant difference between bankruptcy trustees and nonbankruptcy receivers for purposes of in pari delicto

2026 NY Slip Op 05904, at the official text

the adverse interest exception does not apply if the alleged wrongdoer was, at the time of the misconduct, either the sole manager or the sole owner of the entity

2026 NY Slip Op 05904, at the official text

plaintiff, as a representative fiduciary of EminiFX, the wrongdoing entity, is precluded under in pari delicto from litigating this action against IBKR

2026 NY Slip Op 05904, at the official text