Court Opinion

ID: 9740687
Source: CourtListenerOpinion
Date Created: 2023-08-26 20:40:21.039083+00
Date Added: 2024-06-11T07:24:19.747666
License: Public Domain

*343FINE, J.
(dissenting). The jury found that Deloitte & Touche was not guilty of either intentional or negligent misrepresentation. Despite the unusual procedural posture of this case, the basic issue on appeal is whether there is sufficient evidence to support these determinations. Our standard of review is clear. Neither the trial court nor we may overturn a jury's verdict "if there is any credible evidence" in the record to support it. Fehring v. Republic Ins. Co., 118 Wis. 2d 299, 305, 347 N.W.2d 595, 598 (1984). Since I believe that there is credible evidence that Deloitte & Touche did not breach any legal duty to Chevron, I must dissent.
The torts of intentional and negligent misrepresentation share three common elements: "(1) The representation must be of a fact and made by the defendant; (2) the representation of fact must be untrue; and (3) the plaintiff must believe such representation to be true and rely thereon to his damage." Whipp v. Iverson, 43 Wis. 2d 166, 169, 168 N.W.2d 201, 203 (1969). The tort of intentional misrepresentation requires two additional elements: (1) "the defendant must either know the representation is untrue or the representation was made recklessly without caring whether it was true or false"; and (2) the defendant must have made the representation "with intent to deceive and induce the plaintiff to act upon it to the plaintiffs pecuniary damage." Ibid. Negligent misrepresentation, on the other hand, adds the following to the three core elements of "misrepresentation": (1) the defendant must have had either a legally-imposed "duty of care or a voluntary assumption of a duty"; and (2) the defendant must have failed "to exercise ordinary care" either in making the representation or in ascertaining the underlying fact. Id., 43 Wis. 2d at 170, 168 N.W.2d at 204. Silence, in the face of a duty to *344disclose, can be as much a misrepresentation as an assertion:
One who fails to disclose to another a fact that he knows may justifiably induce the other to act or refrain from acting in a business transaction is subject to the same liability to the other as though he had represented the nonexistence of the matter that he has failed to disclose, if, but only if, he is under a duty to the other to exercise reasonable care to disclose the matter in question.
Restatement (Second) of Torts §551(1) (emphasis added); see also Ollerman v. O'Rourke Co., 94 Wis. 2d 17, 26, 288 N.W.2d 95, 99-100 (1980). The crux of this case is thus whether Deloitte & Touche had a duty to disclose to Chevron the problems with American Fuel & Supply Company's 1985 financial statements. This issue is a question of law that we determine de novo. See id., 94 Wis. 2d at 27, 288 N.W.2d at 100.
In Wisconsin, "duty" is an element of negligence. A.E. Inv. Corp. v. Link Builders, Inc., 62 Wis. 2d 479, 484, 214 N.W.2d 764, 767 (1974). Under ordinary tort law "[a] defendant's duty is established when it can be said that it was foreseeable that his act or omission to act may cause harm to someone," and, if negligent, a defendant is "liable for unforeseeable consequences" and to "unforeseeable plaintiffs." Id., 62 Wis. 2d at 484, 214 N.W.2d at 766. Here, however, we are concerned with professional malpractice, a species of tort law where this state has long recognized that the parameters of duty, the breach of which is negligence and can subject the professional to civil liability, are best set by the particular profession.1 The majority ignores this long-standing *345principle.
Absent some compelling interest that the majority opinion does not articulate, and absent legislative action, accountants, like the other professions, should be permitted to determine the appropriate standards of care applicable to their profession; as with the other professions, they are best able to appreciate the ramifications of any legal principle that has the potential to impose on them civil liability.
The Accounting Examining Board has adopted the following rule:
The prohibition against disclosure of confidential information obtained in the course of a professional engagement does not apply to disclosure of such *346information when required to properly discharge the certified public accountant's or public accountant's responsibility according to the profession's standards. The prohibition would not apply, for example, to disclosure, as required by section 561 of Statement on Auditing Standards No. 1, of subsequent discovery of facts existing at the date of the auditor's report which would have affected the auditor's report had he been aware of such facts.
Wis. Admin. Code sec. Accy 1.301(4)(a) (emphasis added).
Section 561 of Statement on Auditing Standards No. 1 makes a distinction between an accountant's responsibility under two different scenarios: first, where the client co-operates; second, where the client does not co-operate. Where the client co-operates, the correction should be issued to all those persons whom the accountant knows are either "currently relying or who are likely to rely” on the inaccurate statements. Section 561.06 (emphasis added). Where the client will not co-operate, the correction should be issued "to each person known to the auditor to be relying on the [inaccurate] financial statements." Section 561.08(c) (emphasis added). If the client does not cooperate, section 561.08 specifically notes: "The steps that can appropriately be taken will depend upon the degree of certainty of the auditor's knowledge that there are persons who are currently relying or who will rely on the [inaccurate] financial statements." Mere "foreseeability," however, is not enough.2
*347The majority opinion rejects section 561's sensitive balance in favor of naked "foreseeability" as the universal test to determine whether a client's confidential information must be disclosed over the client’s objection.3 As a practical result, the majority's decision, by imposing a duty to disclose if any harm is "foreseeable," will henceforth require the disclosure of confidential financial data over the client's objection to all persons (perhaps even the world at large) who are, in fact, not relying on an earlier financial statement, and who will not be harmed by any failure to disclose.4 Unfortunately, the majority advances no rationale for this extreme result other than its own ipse dixit, and I perceive none. All section 561 requires is that the accountant take reasonable steps to ascertain the identity of persons who are, in fact, relying on the now-incorrect or misleading *348financial statements, or who will, at some later time, rely on those statements, and notify those persons; the threat of civil liability should not require more. The majority's decision goes too far.
Although there is evidence in the record that would have supported a jury's finding that Deloitte & Touche knew that Chevron was relying on the inaccurate financial statements, there is also evidence to the contrary. Additionally, there is no evidence that would support a finding that Deloitte & Touche had the "intent to deceive" Chevron, and "induce" Chevron to act upon the inaccurate 1985 financial statements to Chevron's "pecuniary damage,” all of which is a prerequisite to imposition of liability for intentional misrepresentation. See Whipp, 43 Wis. 2d at 169, 68 N.W.2d at 203. Accordingly, under our standard of review, we must reverse.

 See Helmbrecht v. St. Paul Ins. Co., 122 Wis. 2d 94, 111-112, 362 N.W.2d 118, 128 (1985) (An attorney has a duty to *345" 'use a reasonable degree of care and skill, and to possess to a reasonable extent the knowledge requisite to a proper performance of the duties of his profession . . .' [and to do what] a reasonable or prudent attorney [would] have done in the same circumstance.") (quoting Malone v. Gerth, 100 Wis. 166, 173, 75 N.W. 972, 974 (1898)); A.E. Inv. Corp., 62 Wis. 2d at 489, 214 N.W.2d at 769 ("An architect has the duty of using the standard of care ordinarily exercised by the members of that profession."); Shier v. Freedman, 58 Wis. 2d 269, 283-284, 206 N.W.2d 166, 174 (1973), modified, 58 Wis. 2d 285, 208 N.W.2d 328 (1973) (Physician has duty to "exercise that degree of care and skill which is exercised by the average practitioner in the class to which he belongs, acting in the same or similar circumstances."); Barnes v. Lozoff, 20 Wis. 2d 644, 650, 123 N.W.2d 543, 546 (1963) ("An engineer is not required by the standards of his profession to conduct a title search on property which his client represents to be his own."). Cf. sec. 227.21(2)(a), Stats. (Administrative agencies may "adopt standards established by technical societies and organizations of recognized national standing....") (Agency rules may, "with the consent of the revisor and the attorney general" incorporate those standards in agency rules by reference. Section 227.21(2)(a), Stats.).

 The trial court specifically rejected Deloitte & Touche's requested jury instruction patterned on section 561.08(c). Nevertheless, the trial court did instruct the jury that: "A person in a particular business or profession owes a duty to exercise the care that is usually exercised by persons of ordinary intelligence and prudence engaged in a like kind of business or profession."

 Citizens State Bank v. Timm, Schmidt & Co., 113 Wis. 2d 376, 335 N.W.2d 361 (1983), concerned the liability of negligent accountants to those with whom they were not in privity. The court decreed: "Liability will be imposed on these accountants for the foreseeable injuries resulting from their negligent acts unless, under the facts of this particular case, as a matter of policy to be decided by the court, recovery is denied on the grounds of public policy." Id., 113 Wis. 2d at 386, 335 N.W.2d at 366. Thus, "foreseeability," as that term is used in Timm, Schmidt, refers to the causation prong of a tort claim rather than, as it is used here, the negligence prong. Stated another way, the majority here uses "foreseeability" to impose a "duty" upon accountants to disclose confidential client information over the client's objection, and holds that a breach of that duty is negligence. In Timm, Schmidt, on the other hand, negligence by the accountants was assumed. Ibid.

 Here, for example, there is evidence in the record that Chevron relied, at least to some degree, on security provided by the personal guarantee executed by American Fuel & Supply Company's sole shareholder.