The only safe rule is to confine the right to recover to those who enter into the contract: if we go one step beyond that, there is no reason why we should not go fifty." Credit Alliance Corp. v. Arthur Andersen & Co. In Credit Alliance Corp. v. Andersen & Co. ("Credit Alliance "), plaintiffs are major financial service companies engaged primarily in financing the purchase of capital equipment through installment sales or leasing agreements. Whether an accountant may be held liable, absent privity, to a third party who relies to his detriment on a negligently prepared financial statement? Co. v Coopers & Lybrand (70 Ohio St.2d 154, 436 N.E.2d 212); Spherex, Inc. v Grant & Co. (122 N.H. 898, 451 A.2d 1308); Larsen v United Fed. Alaska Restatement § 522 Selden v. Burnett, 754 P. 2d 256 (Alaska 1988). Party Name: Credit Alliance Corp. v. Arthur Andersen & Co.. Case Date: May 13, 1983. arthur andersen co Motion to amend remittitur granted. In reliance upon the 1977 statements, plaintiffs provided substantial amounts in financing to Smith through various extensions of credit. Click the citation to see the full text of the cited case. Credit Alliance Corp. v. Arthur Andersen & Co. b. Rosenblum v. Adler c. Ernst & Ernst v. Hochfelder d. Escott v. BarChris Construction Corporation: Term. It was a consequence which, to the weighers' knowledge, was the end and aim of the transaction. Read Case 51.1, Credit Alliance Corporation v. Arthur Andersen & Co., and answer the question about the case on p. 807 in Business Law: Legal Environment, Online Commerce, Business Ethics, "near privity" approach was established in Credit Alliance Corp. v. Arthur Andersen & Company. The latter, relying upon the misinformation contained in the balance sheet, made loans to the accountants' client who, only months later, was declared bankrupt. The client, in turn, gave one to the plaintiff company. Credit Alliance Corporation v. Arthur Andersen & Co 1. The Defendant in European Am. Read Case 51.2, Industrial Loan Thrift Guaranty Corporation of Iowa v. Reese & … EAB commenced this action in May 1983, seeking damages for those losses allegedly resulting from its reliance upon S & K's reports. We conclude, as did the Appellate Division, that plaintiff has not satisfied the test and his complaint must be dismissed. (300 N.W.2d 281 [Iowa]), the same court permitted recovery by a nonprivy party who had actually paid for the accountant's appraisal, and was specifically designated on the appraisal itself as the one for whose benefit it was being prepared. Arizona Restatement § 552 Standard Chartered PLC v. Price Waterhouse, 945 P.2d 317 (Ariz. Ct. App. Similarly, in Coleco Indus. (Ultramares Corp. v Touche, supra, at p 183.)9. A much less restrictive rule has been. (767 Third Ave. LLC v Greble & Finger, LLP, 8 AD3d 75; American-European Art Assoc. IV. In making such a loan to a borrower that later went bankrupt, Credit Alliance had relied on financial statements prepared by Arthur Andersen … Party Name: Credit Alliance Corp. v. Arthur Andersen & Co.. Case Date: May 13, 1983. Modifications have thus been applied to create a new requirement of ‘near privity’ in the case of Credit Alliance Corp v Arthur Andersen & Co (65 N.Y.2d 536, 493 N.Y.S.2d 435, 483 N.E.2d 110 (1985). Hosp. Accountants will not be held liable to third parties who rely on their financial statements absent privity, or a showing that the accounting firm knew or should have known that the party would rely on their statements in extending credit. Recovery was permitted where the audit report was used as the accountants had contemplated, by a known nonprivy party, to whom one of the accounting partners personally explained the report at meetings they both attended. In European American, the order of the Appellate Division should be affirmed, with costs, and the certified question answered in the affirmative. 1463, 1468 n. 1 (S.D.N.Y. Focusing on the direct communications between the parties, the court held that contractual privity was not a prerequisite to liability inasmuch as S & K specifically knew that their reports would be relied upon by EAB for a particular purpose. Co. of Kansas, Inc, International Products Co. v. Erie R.R. Not only is it alleged, as in Credit Alliance, that the accountants knew the identity of the specific nonprivy party who would be relying upon the audit reports, but additionally, the complaint and affidavit here allege both the accountants' awareness of a particular purpose for their services and certain conduct on their part creating an unmistakable relationship with the reliant plaintiff. Motion to amend remittitur granted. In analyzing the holding of these cases, it is important to see the distinction. Listed below are the cases that are cited in this Featured Case. Credit Alliance Corp. v. Arthur Andersen & Co. (1985) Procedure: Motion to amend remittitur granted. In Larsen v United Fed. 351 [ND Ill] [no special relationship of any kind existed between plaintiff and the accountants]); Koch Indus. It is alleged that both statements overstated Smith's assets, net worth and general financial health, and that Andersen failed to conduct investigations in accordance with proper auditing standards, thereby failing to discover Smith's precarious financial condition and the serious possibility that Smith would be unable to survive as a going concern. Al-' See Ultramares Corp. v. Touche, 255 N.Y. 170, 179-89, 174 N.E. (300 N.W.2d 281 [Iowa]); Seedkem, Inc. v Safranek (466 F.Supp. was aware that their financial statements would be used by outside creditors. 1988). (255 NY, at p 180.) Indeed, we referred to this court's holding in MacPherson v Buick Motor Co. (217 N.Y. 382) where it was decided that the manufacturer of a defective chattel — there an automobile — may be liable in negligence for the resulting injuries sustained by a user regardless of the absence of privity — a belated rejection of the doctrine of privity as applied to the facts in Winterbottom. Their calling european American Bank and Trust Company, Respondent, v. Strauhs &:... And denied Andersen 's knowledge, was the end and aim of the citing case v, Andersen... Courts is instructive the Carroll rule was applied Andersen cites in support, Lake..., EAB partially financed Majestic Electro with: Proportionate liability [ 7th ]!, 83 A.D.2d 507, affd 27 N.Y.2d 564. ) 9 the in. Discover the precarious financial position of Smith reflected therein Restatement § 522 Selden v.,! From its reliance upon the inaccurately certified weight, the duty in terms of contract or of privity a accounting. Which it gave to its clients v. 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