Nycal Corporation v. Kpmg Peat Marwick Llp,

688 N.E. 2d 1368 (1998)

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Nature of the Case

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Facts

P was interested in taking a position in Gulf. Gulf provided P with a copy of its 1990 annual report that was prepared by D. Gulf was a public company. P relied on D's report of the financial condition of Gulf and as such then entered into a stock purchase agreement with the controlling shareholders of Gulf. The sale was completed, and less than two years later Gulf declared bankruptcy rendering P's investment worthless. D first learned of the P-Gulf transaction a few days prior to the July 12, 1991 closing. Until that time, D had no knowledge of what had been agreed upon or even contemplated. P sued D seeking damages and costs incurred as a result of its alleged reliance on D's audit report. P claimed that the report materially misrepresented the financial condition of Gulf. The trial judge applied the liability standard under 552 Restatement of Torts and granted summary judgment to D. P appealed.