Opinion ID: 2570772
Heading Depth: 3
Heading Rank: 2

Heading: Appellants' Negligence Claim

Text: The Appellants' complaint alternatively pled a negligence claim against Thayer. In the present case, the circuit court relied upon Kohala Agriculture to grant summary judgment in favor of Thayer; however, such reliance is misplaced. In Kohala Agriculture, the ICA addressed whether an accountant could be held liable to a third party investor for negligently preparing several business audits relied upon by third party investors. Kohala Agriculture, 86 Hawai`i at 322, 949 P.2d at 162. In its analysis, the ICA surveyed the various approaches of jurisdictions outside of Hawai`i that have addressed the liability of an accountant to a third party for the alleged negligent preparation of audits and held that an accountant may be held liable to third parties under [Restatement (Second)] section 552(2) for negligence in the preparation of an audit report that misrepresented the financial condition of several partnerships. Id. Accordingly, the ICA vacated the circuit court's grant of summary judgment against these particular plaintiffs because, when viewed in the light most favorable to them, there were sufficient facts, if proven, to establish their allegation of negligent misrepresentation. Id. at 328, 949 P.2d at 168. Here, the complaint did not allege negligent misrepresentation against Thayer, but rather alleged ordinary negligence. Negligent misrepresentation requires that: (1) false information be supplied as a result of the failure to exercise reasonable care or competence in communicating the information; (2) the person for whose benefit the information is supplied suffered the loss; and (3) the recipient relies upon the misrepresentation. See Kohala Agriculture, 86 Hawai`i at 323, 949 P.2d at 163; Restatement (Second) of Torts § 552. Although Kohala Agriculture stands for the proposition that an accountant may be held liable to a third party, we hold that the circuit court erred when it applied the analysis regarding negligent misrepresentation in the instant case because a claim of negligent misrepresentation had not been pled. Inasmuch as negligent misrepresentation was not pled and, therefore, inapplicable to the present case, we must determine whether the Appellants, who are non-clients, may bring a professional malpractice claim grounded in tort against Thayer for his alleged negligent failure to utilize federal disclaimers and the unified credit. In so doing, the analysis of Jewish Hospital is again relevant. Under a negligence claim, a duty is owed when, considering the policies favoring recovery against those limiting liability, the sum total of those policies leads the law to say that a particular plaintiff is entitled to protection. See Lee, 83 Hawai`i at 166, 925 P.2d at 336. Thus, a new duty will not be imposed upon members of society without a logical, sound, and compelling reason. Id. Similar to the reasons supporting a duty under legal malpractice, justification for holding accountants liable includes: (1) the extent to which the transaction was intended to affect the plaintiff; (2) the foreseeability of harm to the plaintiff; (3) the degree of certainty that the plaintiff suffered injury; (4) the closeness of the connection between the defendant's conduct and the injury; (5) the policy of preventing future harm; and (6) whether imposing liability imposed an undue burden upon the profession. Cf. Lucas, 15 Cal.Rptr. 821, 364 P.2d at 687-88. Here, based upon the pleadings and admissible evidence submitted by the parties, we conclude that there is no genuine issue of material fact as to whether Joan Hughes retained the services of Thayer for the preparation of estate tax returns, not estate tax advice. [19] The Appellants were not the intended beneficiaries of the relationship between Joan Hughes and Thayer. Because the Appellants were incidental, not intended, beneficiaries, the Appellants do not satisfy the first factor under Lucas. Therefore, as a matter of law, Thayer was entitled to summary judgment. Accordingly, we hold that the circuit court did not err when it granted summary judgment in Thayer's favor as to the third party beneficiary claim and, for the same reasons, affirm the grant of summary judgment in favor of Thayer as to the negligence claim.