Opinion ID: 493289
Heading Depth: 3
Heading Rank: 3

Heading: The Reasonably Foreseeable Standard

Text: 14 The district court determined that [t]wo jurisdictions have proceeded beyond the 'actually foreseeable' test of the Restatement and adopted a 'reasonably foreseeable' test. Under this standard, accountants owe a duty of care to all parties who are reasonably foreseeable recipients of financial statements for business purposes, provided the recipients rely on the statements pursuant to those business purposes. See Rosenblum v. Adler, 93 N.J. 324, 461 A.2d 138 (1983); Citizens State Bank v. Timm, Schmidt & Co., 113 Wis.2d 376, 335 N.W.2d 361 (1983). Order at 992. 15 The district court then noted that Indiana had not yet had occasion to address directly the question of accountant liability. The district court therefore turned to an analysis of Indiana cases that had addressed the issue of professional liability to third parties who have had limited or no contact with the provider of services. Id. at 992. After surveying the early cases, Brown v. Sims, 22 Ind.App. 317, 53 N.E. 779 (1899); Ohmart v. Citizens' Sav. & Trust Co., 82 Ind.App. 219, 145 N.E. 577 (1924); Peyronnin Constr. Co. v. Weiss, 137 Ind.App. 417, 208 N.E.2d 489 (1965), the court focused on the more recent holding in Essex v. Ryan, 446 N.E.2d 368 (Ind.Ct.App.1983). There, subsequent purchasers of property sued a surveyor who allegedly had made an inaccurate survey for the prior owner. After considering the three cases noted above, the Essex court held that the surveyor owed no duty to the successor owners because he had no knowledge that they would rely on his survey. The district court noted that the Indiana court in Essex had explicitly considered the three approaches for professional liability outlined above and had quoted with approval the privity or near-privity standard as outlined in Ultramares and had specifically rejected the actually foreseeable Restatement position. Id. at 373. 16 On the basis of this survey of the earlier cases, the district court concluded: 17 It is clear that Indiana falls among those jurisdictions which follow the narrow Ultramares standard requiring either a contractual relationship between the parties or at least affirmative evidence of contact between the professional and the third party which indicates the professional's knowledge of the third party's reliance. In Brown, the only case to allow the cause of action to go forward, this contact was extensive and explicit. 18 Order at 994. 19 The district court did not believe that the present situation should be distinguished from that presented in Essex. The district judge noted that the Indiana court in Essex had considered similar cases involving many other professions, including accountants. Moreover, noted the district court, the Essex court had squarely considered and rejected the Restatement position while relying on New York's Ultramares decision. Nor did the district court believe that there was any policy reason that might induce the Indiana courts, when confronted with the issue, to adopt a different standard in the case of accountants: 20 Certainly an examination of the nature of exposure experienced by surveyors who negligently render their services as compared with accountants does not suggest that accountants should be subject to a more liberal standard. If such a comparison is at all helpful, it counsels the opposite conclusion. Surveyors generally base their opinions on fewer calculations from fewer sources than do accountants. This fact is readily demonstrated by Krouse's answer to Toro's Interrogatory No. 8, which recounts in detail the accounting methods and procedures utilized by Krouse in conducting the Summit audits. Fourteen procedures are outlined, each involving detailed examination and confirmation of various financial records and transactions. 21 Id. at 994. 22