Waters v. Autuori

• Citation: 676 A.2d 357,236 Conn. 820
• Decision Date: 07 May 1996
• Docket Number: No. 15190,15190
• Court: Supreme Court of Connecticut
• Parties: Barbara WATERS v. Edmund AUTUORI et al. Edward HADIGIAN et al. v. ARTHUR ANDERSEN AND COMPANY et al. Ronald CHRISTOFORO et al. v. ARTHUR ANDERSEN AND COMPANY et al. Vincent F. TRIPODINA v. ARTHUR ANDERSEN AND COMPANY et al. Armand AUDETTE et al. v. Edmund AUTUORI et al. Thomas MURTHA v. ARTHUR ANDERSEN AND COMPANY et al. Donald REILLY v. ARTHUR ANDERSEN AND COMPANY et al. Armand AUDETTE et al. v. ARTHUR ANDERSEN AND COMPANY et al. Christine SIRACUSA et al. v. COLONIAL REALTY et al. Steven LIEBMAN v. Edmund AUTUORI et al. Robert CALNEN v. Edmund AUTUORI et al. Ronald CORRENTI v. Edmund AUTUORI et al.

Page 357

676 A.2d 357

236 Conn. 820

Barbara WATERS v. Edmund AUTUORI et al.

Edward HADIGIAN et al. v. ARTHUR ANDERSEN AND COMPANY et al.

Ronald CHRISTOFORO et al. v. ARTHUR ANDERSEN AND COMPANY et al.

Vincent F. TRIPODINA v. ARTHUR ANDERSEN AND COMPANY et al.

Armand AUDETTE et al. v. Edmund AUTUORI et al.

Thomas MURTHA v. ARTHUR ANDERSEN AND COMPANY et al.

Donald REILLY v. ARTHUR ANDERSEN AND COMPANY et al.

Armand AUDETTE et al. v. ARTHUR ANDERSEN AND COMPANY et al.

Christine SIRACUSA et al. v. COLONIAL REALTY et al.

Steven LIEBMAN v. Edmund AUTUORI et al.

Robert CALNEN v. Edmund AUTUORI et al.

Ronald CORRENTI v. Edmund AUTUORI et al.

No. 15190.

Supreme Court of Connecticut.

Argued Jan. 10, 1996.

Decided May 7, 1996.

Richard A. Bieder, Bridgeport, with whom were Joel Faxon, Danbury and, on the brief, Lillian C. Gustilo, Bridgeport, for appellants (plaintiffs).

William H. Narwold, with whom were Charles D. Ray, Hartford, Michael R. Young, pro hac vice, and, on the brief, Louis A. Craco, New York City, pro hac vice, Stacey E. Paradise, pro hac vice, and Richard I. Miller, Stamford, pro hac vice, for the appellee (defendant American Institute of Certified Public Accountants).

Before PETERS, C.J., and CALLAHAN, BORDEN, BERDON and NORCOTT, JJ.

PETERS, Chief Justice.

The dispositive issue in this appeal is whether the promulgation of professional accounting standards is sufficient, by itself, to impose upon the promulgating professional organization a duty of care to an unknown third party who relies on the opinion of a certified public accountant claiming to have followed those standards. The plaintiff Barbara Waters (plaintiff) brought this action against the defendant American Institute of Certified Public Accountants (AICPA), and others, ¹ on behalf of herself and as a representative of a class of persons who had lost the money they had invested in a limited partnership. The plaintiff sought damages for the AICPA's allegedly negligent promulgation of professional accounting standards. Alleging a failure to state a claim upon which relief can be granted, the AICPA moved to strike those counts of the plaintiff's second amended complaint that were directed toward it. The trial court granted the motion to strike and rendered partial judgment in favor of the AICPA. The plaintiff appealed from the judgment of the trial court to the Appellate Court, and we transferred the appeal to this court pursuant to Practice Book § 4023 and General Statutes § 51-199(c). We affirm the judgment of the trial court.

In an appeal from a judgment following the granting of a motion to strike, we must take as true the facts alleged in the plaintiff's complaint and must construe the complaint in the manner most favorable to sustaining its legal sufficiency. Sassone v. Lepore, 226 Conn. 773, 780, 629 A.2d 357 (1993); Michaud v. Wawruck, 209 Conn. 407, 408, 551 A.2d 738 (1988). Accordingly, we assume as true the following facts as alleged in the plaintiff's second amended complaint. The AICPA is a national professional organization of certified public accountants. One of the purposes of the AICPA is the promotion and maintenance of professional accounting practices. In furtherance of this purpose, the AICPA has promulgated professional accounting standards. The bylaws of the AICPA require its members to adhere to its standards in the performance of their duties. The AICPA recognizes that the accounting profession has responsibilities to the public as well as to its clients.

In November, 1986, the plaintiff purchased a partnership interest in Colonial Potomac Limited Partnership (Colonial Potomac). Colonial Potomac had solicited the purchase of partnership interests by distributing various marketing documents to potential investors. Colonial Potomac's marketing documents included financial reports prepared by Kostin and Co. (Kostin), an accounting firm that is a member of the AICPA. The financial reports, which included forecasts of Colonial Potomac's expected future economic performance, contained a statement that, in preparing these forecasts, Kostin had followed standards promulgated by the AICPA. The plaintiff, in deciding to invest in Colonial Potomac, relied on information provided in the financial reports prepared by Kostin. The plaintiff eventually lost the money she had invested in Colonial Potomac.

The plaintiff's complaint alleged that Kostin, in one of two ways, had prepared unreasonable financial forecasts for use in Colonial Potomac's marketing documents. Kostin had either failed to follow AICPA standards or, if it had followed the standards, the standards themselves had been negligently promulgated.

On the latter theory, count twenty-six of the complaint alleged that the AICPA owed a duty of care to the plaintiff and had violated that duty by its negligent promulgation of standards that it knew, or should have known, would invite reliance by third parties such as the plaintiff and would thereby create an unreasonable risk of harm to them. Count twenty-six further alleged that the AICPA's negligent promulgation of standards had caused the plaintiff to suffer economic harm and emotional distress. Count twenty-seven of the complaint alleged that the plaintiff had suffered emotional distress as a result of the negligence of all of the defendants.

The AICPA moved to strike counts twenty-six and twenty-seven of the plaintiff's second amended complaint to the extent that they alleged claims against it. The trial court granted the AICPA's motion on the grounds that: (1) the AICPA owed no duty of care to the plaintiff; and (2) the plaintiff had failed to allege the elements necessary to establish a claim against the AICPA for negligent infliction of emotional distress. The trial court first determined that, under existing case law from Connecticut trial courts and from courts in other jurisdictions, a certified public accountant owes a duty of care to a third party only if the accountant and the third party are in privity or have a "relationship sufficiently intimate to be equated with privity." The trial court then concluded that the AICPA did not owe a duty of care to the plaintiff under these principles of accountant liability, and that "[t]he law cannot be expanded to create a duty on the part of the AICPA, as the promulgator of professional standards, that is broader than the duty owed under Connecticut law by the practitioners who are expected to conform to [those standards]." In striking count twenty-seven as against the AICPA only, the trial court further concluded that the plaintiff's complaint was devoid of any allegations indicating how the AICPA should have realized that its promulgation of standards would create an unreasonable risk of causing emotional distress that might result in "illness" or "bodily harm" to the plaintiff. After its denial of the plaintiff's motion for reconsideration, the trial court rendered partial judgment in favor of the AICPA. This appeal followed. ²

The plaintiff claims that the trial court improperly concluded that the AICPA did not owe her a duty of care, as a matter of law, and thus improperly struck counts twenty-six and twenty-seven of her complaint as against the AICPA. The plaintiff has not alleged either a privity relationship or a statutory basis that could possibly impose a duty of care to her on the part of the AICPA. Rather, the plaintiff claims that the AICPA owed her a duty of care solely because it had promulgated professional accounting standards that had been followed by Kostin, upon whose financial reports she had relied in deciding to invest in Colonial Potomac. We disagree with the plaintiff that the AICPA's promulgation of standards establishes a cognizable duty of care owed by the AICPA to her. ³

"The purpose of a motion to strike is to contest ... the legal sufficiency of the allegations of any complaint ... to state a claim upon which relief can be granted. In ruling on a motion to strike, the court is limited to the facts alleged in the complaint. The court must construe the facts in the complaint most favorably to the plaintiff." (Citations omitted; internal quotation marks omitted.) Novametrix Medical Systems, Inc. v. BOC Group, Inc., 224 Conn. 210, 214-15, 618 A.2d 25 (1992). If facts provable in the complaint would support a cause of action, the motion to strike must be denied. Westport Bank & Trust Co. v. Corcoran, Mallin & Aresco, 221 Conn. 490, 496, 605 A.2d 862 (1992). In order to reverse the judgment of the trial court, therefore, this court must find that the allegations of the plaintiff's complaint, if proven, would constitute negligence by the AICPA. RK Constructors, Inc. v. Fusco Corp., 231 Conn. 381, 384, 650 A.2d 153 (1994).

The claims asserted by the plaintiff against the AICPA are grounded solely in negligence. There can be no actionable negligence, however, unless there exists a cognizable duty of care. Id., at 384-85, 650 A.2d 153; Frankovitch v. Burton, 185 Conn. 14, 20, 440 A.2d 254 (1981). Whether a duty of care exists is a question of law to be decided by the court. Shore v. Stonington, 187 Conn. 147, 151, 444 A.2d 1379 (1982). The starting point of our analysis, therefore, is an examination of the allegations in the plaintiff's complaint to determine whether, if proven, they establish a cognizable duty of care.

We have often observed that "[t]he law does not recognize a 'duty in the air.' " Id., at 151, 444 A.2d 1379; Gordon v. Bridgeport Housing Authority, 208 Conn. 161, 171, 544 A.2d 1185 (1988). The plaintiff invokes principles of foreseeability as the basis for her contention that the AICPA owed her a duty of care. Specifically, the plaintiff claims that the AICPA owed her a duty of care because "it was foreseeable that persons relying on reports required to be prepared pursuant to the AICPA's standards would be injured if [the] AICPA negligently promulgated such standards...." We disagree with the plaintiff's...