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North American Specialty Insurance Co. v. LaPalme

In third party action by bonding company for accountant malpractice, summary judgment properly granted for defendants where plaintiffs failed to show that defendants knew accounting statement would be used in deciding whether to write further bonds; future bonds were not transactions substantially similar to those defendants intended to influence.

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APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Joseph L. Tauro, U.S. District Judge]

Audit reports and financial statements are staples of the accounting profession. Accuracy is a paramount concern, for much can turn on a relatively minor bevue. But mistakes occur, and courts have grappled with the extent of an accountant’s liability to third parties (i.e., non-clients) for such errors. This appeal requires us to enter the fray.

The case at hand involves ostensible misstatements attributed to the carelessness of the defendants (an accounting firm and one of its principals). The court below, ruling on a motion for summary judgment, concluded that even if the financial statement prepared by the defendants for their client corporation contained negligent misrepresentations, the defendants were not liable to the plaintiff (a third party) for those misrepresentations. Although our appraisal of the governing law differs in one salient respect from that of the lower court, we reach the same conclusion. Accordingly, we affirm.

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