Opinion ID: 895250
Heading Depth: 4
Heading Rank: 2

Heading: Was Cayman within a limited class?

Text: Cayman bought bonds in December 2000, allegedly in reliance on the 1999 audit report, issued in April 2000. Grant Thornton contends that Cayman, which had never before purchased Epic bonds, was indistinguishable from any other unknown potential investor, and thus outside Grant Thornton's scope of liability. Cayman counters that it falls within a limited class because few investors actually purchase high yield debt like the bonds at issue here. We find Cayman's argument unpersuasive. Epic's bonds were sold on the open market: that only certain investors bought them does not make those investors a limited group. As the United States Court of Appeals for the Fifth Circuit has explained, to interpret the `limited group' requirement as including all potential investors would render that requirement meaningless. Scottish Heritable Trust, PLC v. Peat Marwick Main & Co., 81 F.3d 606, 613 (5th Cir.1996) (applying Texas law). [13] Like the Fifth Circuit, we do not suggest that a potential purchaser can never be a member of a `limited group,' but the facts here do not support such a determination. See Scottish Heritable Trust, 81 F.3d at 614 (noting that potential investor with no previous connection to either the corporation or the accountant was not within such a group). Cayman had no prior connection to Epic or Grant Thornton, and predicating scope of liability on Grant Thornton's general knowledge that investors may purchase Epic bonds would eviscerate the Restatement rule in favor of a de facto foreseeability approachan approach [we] have refused to embrace. See id. The court of appeals in this case held that a fact issue precluded summary judgment on the limited class issue because appellants already owned Epic bonds and were not merely members of a large universe of potential investors. 203 S.W.3d at 615-16 (noting that authorities suggest that existing investors may fall within limited class). While this may have been true as to some of the Funds, it was not the case for Cayman, which did not buy bonds until December 2000. Because Cayman was not within a limited group when it bought bonds in December 2000, it was outside Grant Thornton's scope of liability. See McCamish, 991 S.W.2d at 794.