Court Opinion

ID: 5876105
Source: CourtListenerOpinion
Date Created: 2022-01-13 01:59:49.938588+00
Date Added: 2024-06-11T08:44:51.515513
License: Public Domain

Kupferman, J. P.
(concurring). The Turnkey defendants were engaged in the business of purchasing word-processing and related equipment and services in a lease-back arrangement to third parties for use in their businesses. The arrangement gave certain tax benefits to the third party.
The Turnkey defendants commenced discussions for an underwriting commitment for the purpose of a public offering. However, before the underwriter would give a commitment, it stipulated that independent public accountants be retained. The defendant-respondent accounting firm was chosen, and it examined the Turnkey defendants’ financial statements. The Turnkey defendants negotiated with the plaintiff-appellant for a loan to finance their operations pending a public offering of their stock, which arrangement is commonly known as a bridge loan. The original underwriter withdrew but a new underwriter gave a commitment, and the plaintiff-appellant loaned a substantial amount of money. Several months later, the accounting firm notified the Turnkey defendants that its report on the financial statements could no longer be relied upon and, shortly thereafter, the Turnkey parent company made an assignment for the benefit of creditors and ceased doing business.
The plaintiff’s claim against the accountants is on the basis that they had a duty to potential bridge lenders to use due professional care and skill and that they failed to do so.
The applicable law in this department is set forth in Credit Alliance Corp. v Andersen & Co. (101 AD2d 231). The only issue is the current state of law regarding privity. It seems clear that the possible class for bridge loans is reasonably definable and that the plaintiff has set forth a cause of action with respect thereof.