A recent Appellate Division, First Department, decision may offer the Court of Appeals its first opportunity in years to refine the scope of a professional’s liability to third parties who are not its clients and with whom the professional lacks privity of contract.
In its 3-2 decision in Sykes v. RFD Third Avenue 1 Associates, LLC1 dismissing a cause of action for negligent misrepresentation, the court determined that an engineering company that provided faulty mechanical specifications to its client, a condominium sponsor, to be incorporated into an offering plan, owed no duty to third parties who relied on the information in purchasing condominiums. Based upon the closely divided court, Sykes has been appealed to the Court of Appeals, and may ultimately prove influential in a number of existing lawsuits against accountants and other professionals in which private feeder and hedge fund investors allege they were induced to purchase2 or hold3 investments relying on negligent audits and other misrepresentations.
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