Opinion ID: 769835
Heading Depth: 4
Heading Rank: 2

Heading: Linking conduct

Text: 36 The plaintiffs also fail to allege linking conduct between Seidman and Baron's customers sufficient to impose negligence liability on Seidman. To demonstrate linking conduct, a plaintiff generally must show some form of direct contact between the accountant and the plaintiff, such as a face-to-face conversation, the sharing of documents, or other substantive communication between the parties. See, e.g., Prudential Ins. Co. v. Dewey, Ballantine, Bushby, Palmer & Wood, 80 N.Y.2d 377, 385 (1992) (finding linking conduct where accountant sent its financial opinion letter directly to the plaintiff); Credit Alliance, 65 N.Y.2d at 554 (finding linking conduct where the parties communicated repeatedly to discuss the financial situation of the entity being audited). 37 Where direct contact between the accountant and the plaintiff has been nonexistent or even minimal, however, the plaintiff cannot recover for negligence. In Security Pacific, for example, the New York Court of Appeals found linking conduct absent because the accountant had never provided or agreed to provide a copy of the audit report directly to the plaintiff, had not mentioned the plaintiff in its audit engagement letter with its client, and had shown no awareness that the audit would benefit primarily the plaintiff. See Security Pacific,79 N.Y.2d at 706. The court noted that the plaintiff, a lender, did in fact speak to the accountant by telephone on one occasion to discuss the audit report. Nonetheless, the court found this contact insufficient to establish liability, reasoning that the plaintiff could not, with one phone call, create such an extraordinary obligation on the defendant's part. Id. at 705; see also CMNY Capital, L.P. v. Deloitte & Touche, 821 F. Supp. 152, 161 (S.D.N.Y. 1993) (finding no linking conduct where the accountant's client had made one phone call informing the accountant that the plaintiffs, investors in the client corporation, would be relying on the audit report);cf. Westpac, 66 N.Y.2d at 19 ([T]here is simply no allegation of any word or action on the part of the accountants directed to [the plaintiff, a lender], or anything contained in [the accountants'] retainer agreement . . . which provided the necessary link between them.). 38 Given this high standard for establishing linking conduct, we have little difficulty concluding that the plaintiffs have not shown such a link between Seidman and Baron's customers. The complaint in this case alleges no direct contact whatsoever between the customers and the defendant. At best, it alleges contact between Seidman and the SIPC regulators, who themselves operate at least one step removed from Baron's investors. The plaintiffs therefore cannot establish the direct nexus necessary to give the customers - or, by extension, the SIPC and the Trustee suing on their behalf - a cause of action against Seidman for negligent misrepresentation. 7