Commercial Division Blog

Posted: January 10, 2017 / Categories Commercial, Fraud/Misrepresentation, Accounting and Accountants

Negligent Misrepresentation Claim Against Accountants Fails For Lack of Link to Plaintiff's Use

On January 5, 2017, the First Department issued a decision in GSP Finance LLC v. KPMG LLP, 2017 NY Slip Op. 00087, affirming the denial of a motion to amend to add of a negligent misrepresentation claim against an accounting firm, explaining:

The court . . . providently exercised its discretion in denying plaintiff's motion for leave to file an amended complaint, since the amended negligent misrepresentation claim still failed to allege linking conduct. To the extent Health Acquisition Corp. v Program Risk Mgt., Inc. (105 AD3d 1001 [2d Dept 2013]) found that the defendants' knowledge of the plaintiffs' needs constituted linking conduct, it is contrary to this Court's decision in LaSalle Natl. Bank v Ernst & Young (285 AD2d 101, 107 [1st Dept 2001]). We note that Health Acquisition Corp. relied on White v Guarente (43 NY2d 356 [1977]) (see 105 AD3d at 1004), which was superseded by Credit Alliance (Parrott v Coopers & Lybrand, 263 AD2d 316, 324 [1st Dept 2000], affd 95 NY2d 479 [2000]). The fact that defendant's Debt Compliance Letters, which were addressed to Hicks Sports Group LLC, were intended for the use of plaintiff (among others) does not constitute linking conduct. Rodin Props.-Shore Mall v Ullman (264 AD2d 367 [1st Dept 1999]), which plaintiff cites in reply, dealt with whether tort claims were duplicative of contract claim. It did not specifically discuss the Credit Alliance test, let alone linking conduct.

(Internal quotations and citations omitted).