Dworman v. Lee
| Decision Date | 09 July 1981 |
| Court | New York Supreme Court — Appellate Division |
| Parties | Alvin DWORMAN, et al., Plaintiffs-Respondents, v. Gerald LEE, et al., Defendants, and Arthur Andersen & Co., Defendant-Appellant. |
L. Iason, New York City, for plaintiffs-respondents.
E. J. Ross, New York City, for defendant-appellant.
Before MURPHY, P. J., and BIRNS, ROSS and MARKEWICH, JJ.
Order of the Supreme Court, New York County, entered September 11, 1980, which denied defendant-appellant's motion to dismiss plaintiffs-respondents' supplemental complaint for failure to state a cause of action (CPLR 3211) and failure to plead the circumstances of the alleged fraud specifically (CPLR 3016unanimously reversed, on the law, and the complaint dismissed, with costs.
In this action by plaintiffs for damages, we are of the opinion that Special Term was in error in denying motion of defendant Arthur Andersen & Co. to dismiss the complaint. Although the plaintiffs alleged that they became sureties under an international construction contract executed in 1977 in reliance upon the consolidated financial statements prepared by defendants for the years 1973-1976, none of the causes of action contained in the supplemental complaint submitted to Special Term take this appeal outside of the rule enunciated in Ultramares v. Touche Ross, 255 N.Y. 170, 174 N.E. 441, which held that accountants may be liable in negligence only to persons with whom they are in privity.
Plaintiffs allege five causes of action. All are insufficient. The third, fourth and fifth causes of action charge defendants with negligence, and the first and second with fraud. Notwithstanding the nomenclature of the first and second causes sounding in fraud and the language in the third cause of action that defendants "knew or should have known the falsity of their representations", we find that the first, second and third causes essentially plead negligence. These causes are not transformed into causes of action in fraud merely by pleading conclusory allegations of fraud.
Contrary to the view expressed by Special Term, there can be no doubt that the rule in Ultramares remains authoritative, as it was in fact reaffirmed in White v. Guarente, 43 N.Y.2d 356, 401 N.Y.S.2d 474, 372 N.E.2d 315. There, the Court of Appeals simply allowed limited partners of the limited partnership which had contracted with defendant accountant to sue for alleged negligence by the...
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