FI L ED U.S. COURT OF A P P E A LS E LE V E N T H C IR C U IT Marc h 25, 2008 THOMAS K. KAH

N CL ERK

Honora ble W. Harold Albritton, United States District J udg e for the Middle District of * Alabama , sitti ngby

desig nation. [DO NOT PUBLISH] IN THE UN ITED STATES COURT OF APPEALS FO R T HE EL EV EN TH CIRC UI T

____ ____ ____ ____ ____ ____ ___ N o. 07- 1255 7

____ ____ ____ ____ ____ ____ ____ D. C. Docket N o. 06-01127 -CV -CA P-1 TRAVELERS CASUALTY & SURETY COMPANY OF AMERICA, a Co nne ct ic ut c or

por at ion , Pl ai nti ff -Appe llant, ve rs us REZNICK GROUP, P.C., a Mary land p ro fe ssi ona l c or por at ion , De fendant-Appellee.

____ ____ ____ ____ ____ ____ ____ Appeal f rom the United State s District Court fo r the N orthe rnD istri ct

of G eo rg ia

____ ____ ____ ____ ____ ____ ____ _ (M ar ch 25, 200 8) Before HU LL and W IL SO N, Circuit Judges, and AL BRIT TO N , D istrict Judg e. *2

PE R CU RIA M: Appe llant T rave le rs Ca sua lty & Sure ty Co m pany of A m er ic a ap pe al s th e dis tr ic t c ourt’ s or de r gr an tin g Appe lle e Re zn ic k G ro up, P . C. ’ s M oti on t o D ism iss br ough t purs uant t o F ed . R. Ci v. P . 12( b) (6 ) an d di sm iss ing T rave le rs ’ c om pla int fo r fa ilure to state ac la im , a nd the dis tr ic t c ourt’ s or de r de ny ing T rave le rs ’ Mo tio n fo r Re co nsi de ratio n, to A lte r or A m en d Ju dgm en t, f

or Re lie f fr om

Jud gm en t, or , in the A lte rn at ive , f

or L eave to Fi le a n A m en de d C om pla int . This suit inv olves a claim by Tr avelers that it suffer ed loss on a perf orm ance bond it iss ue d a ft er

r el y ing on a

f inanc ia l st at em en t pr ep ar ed by a cc ount an t, Reznick, which proved to be inaccurate, as a r esult of Reznick’ s alleged negligence. The issues before the court on appeal are ( 1) whether the district court erre d in c onc lud ing that T rave le rs ’ c om pla int f ai le d to state ac la im

f or ne gli ge nt m isr ep re se nta tio n, a nd ( 2) w he the r the dis tr ic t c ourt a buse d it s di sc re tio n by refu si ng to all ow Trav el ers to fil e an am en de d c om pl ai nt . T he c ourt r ev ie w s de nov o adis tr ic t c ourt' s gr an tin g of a12( b) (6 ) m oti on t o dism iss. G lover v. L iggett Group, Inc. , 459 F. 3d 13 04, 1308 (11t h Cir. 2006 ) (per curi am). T he c ourt r ev ie w s f or abuse of dis cr et ionadis tr ic t c ourt' s or de r de ny ing le av e to am en d a co m

pl ai nt . Flo rid a Eve rg reen Fo li ag e v . E.I. DuPo nt De3

N em our s and C o. , 470 F . 3d 1 036, 104 0 ( 11th C ir . 200 6) ( pe r curi am). I n th is diversity case w e apply

the subst antive law of Ge orgia, the state of the forum . See Provau v. S tate Farm

Mut. Auto. Ins. C o., 772 F.2d 817, 820 (11t h Cir. 1985 ) (per cu ria m ). Af ter re viewing the record and the parties’ appellate briefs, and hearing oral ar gum en t, f

or the r ea sons dis cu sse d be low , w e af fi rm the dis tr ic t c ourt’ s j udgm en t. In extending liabilityto professionals , including accountants , f or negligence in s uppl y ing inf

orm at ionr el ie d onby

thi rd part ie s, G eo rg iaha s a dopt ed a“ m idd le ground ” standard betwe en unlim ited foreseea bilityand privity , which is derived fr om Re state m en t ( Se co nd) of T orts, § 55 2 ( 1977 ). B ad isc he Co rp . v. Cay lor , 356 S. E . 2d 1 98, 199 -2 00 & n. 2 ( G a. 198 7) . U nde r thi s st an dard , apr of es sio na l w ho supp lie s in fo rm at ionc anbe li ab le f or ne gli ge nc e onl y

to a known pe rs on, or lim ite d c la ss o f pe rs ons, w he re the pr of es sio na l w as a lso m an if

es tly a w ar e of the use to which the inform ation was to be put and int ended that it be so u sed. R obert & Co. Assoc. v. Rhodes-H averty P’ ship, 300 S.E .2d 503, 504 (Ga. 1983 ); Ba dis ch e Co rp . , 356 S . E . 2d a t 20 0. T he duty of pr of es sio na ls t o th ir d part ie s is a relative standard of care which “ m ay be defined only

in term s of the use to which the inf orm at ionw ill be put , w ei ghe d a ga ins t the m ag nit ude a nd p ro babil ity

of los s that m igh t a tte nd tha t us e if the inf orm at ionpr ove s to be inc or re ct . ” Re state m en t4

(Sec ond) of Torts, § 552 cmt. a . Ina rg uin g th at

it a de qua te ly

ple d ac la im

of ne gli ge nt m isr ep re se nta tio n unde r G eo rg ialaw , T rave le rs ha s po int ed to a state m en t of

the e le m en ts o f suc h a claim , including th at third persons m ust reasonably

rely on inform ation provi ded by the pr of es sio na l, a s st at ed

in Squis h L a Fi sh, I nc . v. T hom co S pe ci al ty Pro du ct s, In c., 14 9 F .3d12 88 , 12 91 (11 th Cir . 19 98 ). Und er Geo rg ia law, ho wev er, i t i s “ th e p ur

po se forwhi ch th e rep or t o r rep res en ta ti on was m ad e,” w hic h in fo rm s th e inquir

y of the r ea sona

ble ne ss o f re lianc e. R obe rt & Co . , 300 S. E . 2d a t 50 4. T he pr of

es sio na l w ho p ro vid es the inf orm at ionr el ie d onm

ust know the purpos e for which the inform ation would be usedand intend th at pur pose . I d. T he ide nti fi catio n of

the pur pose f or w hic h th ir d part ie s w er e al le ge d to r el y on the inf orm at ionpr ovi de d by

Re zn ic k is c ont ai ne d inpara gr ap h 11 of the co m pla int f ile d by T rave le rs . P ar ag ra

ph 1 1 st at es that thir d part ie s w oul d r el y on Re zn ic k’ s audi t st at em en t i n de ci din g w he the r to “ ex te nd c re dit or oth er w ise ac ce pt l ia bil iti es ” of

P RS Co nstru ct ion , L L C. ( Co m pla int p. 3, ¶ 11) . T his state m en t of

pur pose inc lud es , a nd i s m

uc h br oa de r than, the iss uanc e of perform ance bonds refer enced elsew here in the com plaint. Paragraph 12 further state s th at Re zn ic k w as m an if

es tly a w ar e of the use to w hic h th e inf

orm at ion5

would be put and in tended that us e. When these two paragra phs are re ad together, the y a lle ge that R ez nic k w as m an if es tly a w ar e tha t thir d part ie s w oul d us e the inf orm at ionRe zn ic k pr ovi de d inde ci din g w he the r to e xte nd c re dit or oth er w ise acce pt li ab il it ie s o f PRS C on st ru ct io n, LLC i n u ns pe ci fie d a m ou nt s. T he c om pla int a lle ge s kn ow le dge of

suc h br oa d purp ose s th at it is inc onsi ste nt w iththe r equir em en t of G eo rg ialawthat the pr of es sio na l’ s li ab ili ty be li m ite d to los s su ff

er ed thr oughr el ianc e on i nf

orm at ionsup pli ed

“ in a transaction [the professional] intends th e inform ation to in fluence or knows that th e rec ip ie nt so in te nd s o r in a su bs ta nt ia ll y si m il ar t ran sa ct io n.” Rob ert& Co ., 300 S. E . 2d a t 50 4 n. 1 ( quot ing Re state m en t ( Se co nd) of T orts § 552 ). T he allegations of the com

plaint are not lim ited to int ended or subs tantially sim ilar tr an sa ct ion s, but

inc lud e al l transa ct ion s inw hic h li ab ili ty of P RS Co nstru ct ion , LLC is acce pt edby thi rdpa rti es . In addition , the a llegations of the com plaint parallel the illust ration offere d in the Re state m en t se ct iona dopt ed by G eo rg ia , w he re in an a cc ount an t w oul d no t b e l i ab l e t o a b an kwh i ch re l i es o n an au d i ts t at emen tp re p ar ed fo r t h e a cc o u n t an t ’s cl ie nt t o is sue aloan, e ve n th oughthe a cc ount an t kn ow s th at f inanc ia l st at em en ts ar e use d inf

inanc ia l transa ct ion s and r el ie d onby le nde rs , inv es tor s, a nd share hol de rs , be ca

use the a cc ount an t i s no t i nf orm ed of the int en t t o us e the6

ac co unt an t’ s audi t t o ob ta in tha t part ic ular loan. R es ta te m en t ( Se co nd) of T orts § 55 2, cmt. h , il lu s. 1 0. A cc or din gly , und er

de nov o r ev ie w , G lov er

v. L igg ett G ro up, I nc . , 459 F . 3d 1304 , 130 8 ( 11th C ir . 200 6) , the di str ic t c ourt di d no t e rr in co nc lud ing that the al le gatio ns o f the or igi na l c om pla int w er e ins uf

fi ci en t t o st at e a cl ai m

of ne gli ge nt m isr ep re se nta tio n un de r G eo rg ialaw . S ee a lso Bank o f N . G a. v. Re zn ic k G ro up, P. C., No. 07-1191 9, 2008 W L 134118 (11t h Cir. Jan. 15, 2008 ) (unpublis hed). The sec ond is sue presented in this appeal is whether the district court ab us edit s d is cret io n b y

di sa ll owi ng Trav el ers ’ pr op os edam en de d c om pl ai nt . Re gard le ss o f the ti m ing of T rave le rs ’ r eque st, the dis tr ic t c ourt ne ed not ha ve allowed the am endm ent if it would have been futile because it fa iled to state a cl ai m . D ae w oo M oto r A m er ic a, I nc . v. G en er al Mo tor s C or p. , 459 F . 3d 1 249, 1260 -61 (2006), cer

t. denied, 127 S.Ct. 2032 (2007). The proposed am ended com plaint added to the allegations of the origin al com plaint bylim iting the scope of the allegations in p aragra ph 11 to “ a lim ited cl as s of thi rd part ie s, suc h a s sure tie s, ” w he n id en tif y ing the part ie s R ez nic k is al le ge d to ha ve a ct

ua lly kno w n w oul d r el y

on i ts a udi t st at em en t i n de ci din g whether to accept liabilities of PRS Construction , I nc. (Pr opos ed Am ended Co m pla int ¶ 11) . A lso , in anappare nt atte m pt t o pr ovi de m or e fa ct

ua l de ta il,7

T rave le rs inc lud ed

a lle ga tio ns a

bout Re zn ic k’ s r el at ion shi ps w ithbon din g and in su ran ce co m

pa ni es an d abo ut act io ns of s ur et ie s i n g en eral . Id. ¶¶ 1 2, 1 3. T he c hange s to the c om

pla int pr opos ed by T rave le rs did

not r em edy the pleading d eficiencie s identified. T he new language regarding thi rd parties, which m er el y li sts sur et ie s a s an e xa m

ple of thi rd part ie s a lle ge d to be kno w n to Re zn ic k, does not lim it the purpos es for which the inform ation was to be used by that broad group of thi rd parties. Furtherm ore, proposed n ewparagra phs 12 and 13 are al l eg at i o n s o f R ez n i ckan ds u re t i es ’ bu s i n es s p ra ct i ce s g en er al l y, no to f R ez n i ck ’s know le dge in thi s c as e. T he re is no a lle ga tio n inthe pr opos ed a m en de d c om

pla int that a t the ti m e it au dit ed non -p ar ty P RS Co nstru ct ion , L L C’ s f inanc ia l st at em en ts for the y ear ending De cem ber 31, 2003, Rez nick actually knew its audit report w oul d be use d inde ci din g w he the r to i ssu e paym en t and p er fo rm an ce bon ds f or particular proj ects or ranges of am ount s, and that Rez nick intend ed that its work be use d f or that purp ose . A cc or din gly , the dis tr ic t c ourt di d no t a buse it s discretion in d isallowing the am endm ent, beca use it would have been futile. For the fore goin g reasons, w e A FFI RM.