The Pennsylvania Superior Court has ruled that the applicability of a key state Supreme Court decision on negligent misrepresentation is not limited to architects, as some previously thought, but instead could pertain to any professional who provides information meant to be relied upon by a third party.
In a case in which a bank has accused an accountant and his firm of negligent misrepresentation related to financial statements prepared on behalf of a commercial loan applicant, the Superior Court reversed a Chester County trial judge’s ruling granting the defendants’ preliminary objections.
In Fulton Bank v. Sandquist, plaintiff Fulton Bank had relied on the Supreme Court’s 2005 ruling in Bilt-Rite Contractors v. The Architectural Studio in support of its negligent misrepresentation claim against defendants Barry L. Spevak and Downey Spevak & Associates.
The justices in Bilt-Rite expressly adopted Section 552 of the Restatement (Second) of Torts, which assigns liability to “‘one who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions … if he fails to exercise reasonable care or competence in obtaining or communicating the information.’”
Bilt-Rite involved a contractor’s allegations that an architectural firm had made misrepresentations about the design of a school, resulting in construction costs being much higher than originally anticipated and contracted for. While Fulton Bank claimed its situation was analogous to that of the contractor-plaintiff in Bilt-Rite, the trial court held that Bilt-Rite‘s applicability was limited only to architects and design professionals in their dealings with contractors.
A three-judge Superior Court panel disagreed, however.
“We find the court applied a too narrow reading to Bilt-Rite in determining that the case only concerns disputes involving an architect/contractor scenario,” Judge Paula Francisco Ott said in a Sept. 27 nonprecedential opinion. “Rather, we conclude Bilt-Rite can be applied to other factual scenarios where a party is providing professional information that is designed to be relied upon by a third party.”
Ott was joined in this aspect of the decision by Judge Lillian Harris Ransom and Senior Judge James J. Fitzgerald III.
“As the bank argues, the Bilt-Rite holding points to the architect or design professional example as an illustrative suggestion, but the court’s wording does not impose a limitation on which kind of situation Section 552 can apply,” Ott said, noting that another panel of the Superior Court previously held in the 2012 case Kirschner v. K&L Gates that Bilt-Rite ‘s theory of liability could extend to a law firm and an auditor.
“Contrary to the trial court’s comments, we find that at this stage of the pleadings, the bank presented a plausible claim alleging a legally sufficient cause of action for negligent misrepresentation,” Ott said.
The panel agreed with the trial court that Fulton Bank fell short in its negligence per se and fraud claims, however, and adopted the trial judge’s reasoning with regard to both.
Ransom filed a concurring and dissenting opinion in which she noted that she would have reversed the trial judge’s dismissal of the fraud claim.
“Here, the trial court concluded that 1) appellant’s allegations were not pleaded with sufficient specificity and 2) the company’s financial officer, not accountants, presented this false information to appellant,” Ransom said.
“Accordingly, the court concluded that appellant was unable to sustain a viable claim for fraud. The majority adopts this view wholesale, and, in so doing, affords the trial court unwarranted deference.”
Counsel for Spevak and his firm, Jonathan S. Ziss of Goldberg Segalla in Philadelphia, declined to comment.
Counsel for Fulton Bank, Sigmund Fleck of Brown McGarry Nimeroff in West Chester, said he and his client were pleased with the decision.
“We appreciate all the work that they put in on this rather complex issue and we look forward to a resolution of the case on its merits,” Fleck said.