On January 16, 2026, the Supreme Court of the State of New York issued a ruling (Ruling) in which it rejected a challenge to an arbitration panel’s findings that an auditor and its affiliates were negligent and had harmed investors by issuing clean audits of the fraudulent financial statements of several hedge funds. Although the investors did not directly retain the services of the auditor, they successfully argued that the facts of the case demonstrated “near-privity” between them and the auditor, distinguishing their lawsuit from others in which courts have found third-party service providers immune from investor lawsuits. Although the auditor has filed a notice of its intent to appeal, the lawsuit stands to have an impact on evolving views of the role of third-party service providers engaged by private funds. This article summarizes the Ruling, analyzes the reasons for the lawsuit’s success so far, examines changes in the standing of third-party providers once considered off-limits to lawsuits and assesses the possibility of similar lawsuits, with expert legal commentary. For more on audits, see “What Role Should the GC or CCO Play in the Audit of a Fund’s Financial Statements?” (Feb. 4, 2020).