Signature Bank v. Rubenste (In re in Reminick, LLP)

• Decision Date: 07 August 2013
• Citation: 2013 N.Y. Slip Op. 05564,970 N.Y.S.2d 281,109 A.D.3d 465
• Parties: SIGNATURE BANK, respondent, v. HOLTZ RUBENSTEIN REMINICK, LLP, appellant.
• Court: New York Supreme Court — Appellate Division

109 A.D.3d 465

970 N.Y.S.2d 281

2013 N.Y. Slip Op. 05564

SIGNATURE BANK, respondent,

v.HOLTZ RUBENSTEIN REMINICK, LLP, appellant.

Supreme Court, Appellate Division, Second Department, New York.

Aug. 7, 2013.

Troutman Sanders LLP, New York, N.Y. (Mark I. Schlesinger of counsel), for appellant.

Jaspan Schlesinger LLP, Garden City, N.Y. (Steven R. Schlesinger and Michael A. Leon of counsel), and Arkin Solbakken LLP, New York, N.Y. (Stanley S. Arkin of counsel), for respondent (one brief filed).

DANIEL D. ANGIOLILLO, J.P., RUTH C. BALKIN, JOHN M. LEVENTHAL, and CHERYL E. CHAMBERS, JJ.

In an action, inter alia, to recover damages for negligent misrepresentation, the defendant appeals, as limited by its brief, from so much of an order of the Supreme Court, Nassau County (Bucaria, J.), entered August 16, 2012, as denied that branch of its motion which was pursuant to CPLR 3211(a)(7) and 3016(b) to dismiss the cause of action to recover damages for negligent misrepresentation.

ORDERED that the order is reversed insofar as appealed from, on the law, with costs, and that branch of the defendant's motion which was pursuant to CPLR 3211(a)(7) and 3016(b) to dismiss the cause of action to recover damages for negligent misrepresentation is granted.

The plaintiff commenced this action against the defendant, an accounting firm, to recover damages for, among other things, negligent misrepresentation. The complaint alleged that the defendant audited certain year-end financial statements of nonparty Quality Food Brands, Inc. (hereinafter Quality), and related companies. The complaint further alleged that in December 2009, the plaintiff, relying upon the audited financial reports prepared by the defendant, extended a term note to Quality in the principal sum of $10,000,000. The complaint alleged that Quality thereafter filed a petition under chapter 7 of the United States Bankruptcy Code, and that the plaintiff only then learned of various false and misleading statements contained in the audited financial reports. In the order appealed from, the Supreme Court denied that branch of the defendant's motion which was pursuant to CPLR 3211(a)(7) and CPLR 3016(b) to dismiss the cause of action to recover damages for negligent misrepresentation.

In determining a motion to dismiss a complaint pursuant to CPLR 3211(a)(7), the court must “accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory” ( Leon v. Martinez, 84 N.Y.2d 83, 87–88, 614 N.Y.S.2d 972, 638 N.E.2d 511). Where, as here, a cause of action is based upon misrepresentation, “the circumstances constituting the wrong shall be stated in detail” (CPLR 3016 [b]; see Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 178, 919 N.Y.S.2d 465, 944 N.E.2d 1104).

In certain circumstances, accountants may be held liable for negligent misrepresentations made to third parties with whom they have no contractual relationship, but who have relied to their detriment on inaccurate financial statements prepared by the accountant ( see Health Acquisition Corp. v. Program Risk Mgt., Inc., 105 A.D.3d 1001, 964 N.Y.S.2d 554, citing Credit Alliance Corp. v. Arthur Andersen & Co., 65 N.Y.2d 536, 551, 493 N.Y.S.2d 435, 483 N.E.2d 110;see Caprer v. Nussbaum, 36 A.D.3d 176, 196, 825 N.Y.S.2d 55). In order to establish such liability, the relationship between the accountant and the party must be found to approach privity, through a showing that the following prerequisites are satisfied: “(1) the accountants must have been aware that the financial reports were to be used for a particular purpose or purposes; (2) in the furtherance of which a known party or parties was intended to rely; and (3)...