OF RECENT CASES HAVE CALLED UPON THIS COURT TO APPLY THE PROFESSIONAL LIABILITY RULE OF CREDIT ALLIANCE (SEE E.G., PARROT V COOPERS & LYBRAND, 2000 NY LEXIS 3836, N.Y.2d; STATE OF CALIFORNIA PUB. EMPLOYEES' RETIREMENT SYS. V SHEARMAN & STERLING, 2000 NY LEXIS 3501, N.Y.2d; PRUDENTIAL INS. CO. V DEWEY, BALLANTINE, BUSHBY, PALMER & WOOD, 80 N.Y.2d 377). AS WE HAVE MADE CLEAR, "END AND AIM" IS NOT THE ONLY FOCUS OF THE NEGLIGENT MISREPRESENTATION ANALYSIS. WHILE WE EXPLICITLY ADHERED TO THE PRINCIPLES SET FORTH IN ULTRAMARES CORP. V TOUCHE (255 NY 170) FOR IMPOSING NEGLIGENCE LIABILITY ON ACCOUNTANTS, IN APPLYING THOSE PRINCIPLES WE IDENTIFIED THREE CRITICAL CRITERIA FOR IMPOSING LIABILITY. IN DECIDING WHETHER LIABILITY CAN BE IMPOSED BY A NON PRIVY THIRD PARTY, WE ASK WHETHER THE ACCOUNTANT WAS AWARE THAT THE REPORTS WERE TO BE USED FOR A PARTICULAR PURPOSE, WHETHER IN FURTHERANCE OF SUCH PURPOSE A KNOWN PARTY WAS INTENDED TO RELY AND, FINALLY, WHETHER THERE WAS SOME LINKING CONDUCT WHICH EVINCED THE ACCOUNTANT'S UNDERSTANDING OF THAT PARTY'S RELIANCE (CREDIT ALLIANCE CORP. V ANDERSON & CO., SUPRA, 65 N.Y.2d, AT 551).
APPLYING THOSE CRITERIA HERE, THERE WAS NO "LINKING CONDUCT" THAT PUT SIPC AND BDO IN A RELATIONSHIP APPROACHING PRIVITY. BDO'S AUDITS WERE NOT PREPARED FOR THE SPECIFIC BENEFIT OF SIPC, WERE NOT SENT TO SIPC, WERE NOT READ BY SIPC AND, AS A RESULT, DID NOT PLACE SIPC IN A RELATIONSHIP SIGNIFICANTLY DIFFERENT FROM ANYONE ELSE IN THE REGULATORY COMMUNITY OR THE INVESTING PUBLIC AT LARGE. HENCE, THE THIRD PRONG OF THE CREDIT ALLIANCE TEST IS NOT MET. ABSENT ALLEGATIONS TENDING TO SHOW LINKING CONDUCT, SIPC'S COMPLAINT CANNOT STATE A CAUSE OF ACTION FOR NEGLIGENT MISREPRESENTATION.
ACCORDINGLY, BOTH CERTIFIED QUESTIONS, IN THE CONTEXT OF THE FACTS AND CIRCUMSTANCES PRESENTED, SHOULD BE ANSWERED IN THE NEGATIVE.
FOLLOWING CERTIFICATION OF QUESTIONS BY THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT AND ACCEPTANCE OF THE QUESTIONS BY THIS COURT PURSUANT TO SECTION 500.17 OF THE RULES OF PRACTICE OF THE NEW YORK STATE COURT OF APPEALS, AND AFTER HEARING ARGUMENT BY COUNSEL FOR THE PARTIES AND CONSIDERATION OF THE BRIEFS AND THE RECORD SUBMITTED, CERTIFIED QUESTIONS, IN THE CONTEXT OF THE FACTS AND CIRCUMSTANCES PRESENTED, ANSWERED IN THE NEGATIVE. OPINION BY JUDGE CIPARICK. CHIEF JUDGE KAYE AND JUDGES SMITH, LEVINE, WESLEY, ROSENBLATT AND GRAFFEO CONCUR.
DECIDED FEBRUARY 20, 2001