| Barrett v Freifeld |
| 2010 NY Slip Op 07130 [77 AD3d 600] |
| October 5, 2010 |
| Appellate Division, Second Department |
| Andrew Barrett, Respondent, v Steven Freifeld et al.,Defendants, and Bernard Chipetine et al., Appellants. |
—[*1] Rattet, Pasternak & Gordon-Oliver, LLP, Harrison, N.Y. (Robert L. Rattet of counsel), forrespondent.
In an action, inter alia, to recover damages for fraud and breach of fiduciary duty, the defendantsBernard Chipetine and Chipetine, Neu & Silverman, LLP, appeal, as limited by their brief, from somuch of an order of the Supreme Court, Nassau County (Lally, J.), entered November 4, 2009, asdenied their cross motion for summary judgment dismissing the second amended complaint insofar asasserted against them.
Ordered that the order is reversed insofar as appealed from, on the law, with costs, and the crossmotion of the defendants Bernard Chipetine and Chipetine, Neu & Silverman, LLP, for summaryjudgment dismissing the second amended complaint insofar as asserted against them is granted.
In carefully circumscribed instances, accountants may be liable in negligence to third parties whorely on their work, even in the absence of contractual privity, provided the accountants were aware thatthe financial reports were to be used for a particular purpose or purposes, in the furtherance of which aknown party or parties was intended to rely, and there was some conduct on the part of theaccountants linking them to that party or parties, which evinces the accountants' understanding of thatparty or parties' reliance (see Security Pac. Bus. Credit v Peat Marwick Main & Co., 79NY2d 695, 702 [1992]; Credit Alliance Corp. v Arthur Andersen & Co., 65 NY2d 536, 551[1985]; Barrett v Freifeld, 64 AD3d736, 738 [2009]). Here, the defendants Bernard Chipetine and Chipetine, Neu & Silverman, LLP(hereinafter together the appellants), established their prima facie entitlement to judgment as a matter oflaw. Under the circumstances of this case, the evidence of "linking conduct," a single phone call madeby the plaintiff's accountant to the appellants, was insufficient as a matter of law to establish that theappellants owed the plaintiff a duty (see Security Pac. Bus. Credit v Peat Marwick Main &Co., 79 NY2d at 704-705). In opposition, the plaintiff failed to raise a triable issue of fact.Accordingly, the appellants were entitled to summary judgment dismissing the cause of action allegingnegligence insofar as asserted against them.
In order to establish accounting fraud, the plaintiff must show representation of [*2]material fact, falsity, scienter, reliance, and damages (see Barrett vFreifeld, 64 AD3d at 738). Since the fraud claim at issue here is based on an omission orconcealment of material fact, the plaintiff must also demonstrate that the appellants had a duty todisclose material information and failed to do so (id.). A duty to disclose may arise where thereis a fiduciary or confidential relationship, or one party's superior knowledge of essential facts rendersnondisclosure inherently unfair (id.). With respect to the alleged failure to disclose that theappellants and the defendant Steven Freifeld had made certain investments together unrelated to thepharmacy business Freifeld sold to the plaintiff, the appellants established their prima facie entitlement tojudgment as a matter of law by demonstrating that there was no duty to disclose this information (see Manti's Transp., Inc. v C.T. Lines, Inc.,68 AD3d 937, 940 [2009]). With respect to the appellants' alleged failure to disclose, in thefinancial documents they had prepared for Freifeld, that Freifeld had been arrested for involvement in ascheme to purchase and sell expired, counterfeit, and stolen medicine, the appellants established theirprima facie entitlement to judgment as a matter of law by demonstrating that Freifeld's arrest was amatter of public record which could have been discovered through the exercise of ordinary diligenceand, thus, the plaintiff did not justifiably rely on the appellants to disclose that information (seeNational Union Fire Ins. Co. of Pittsburgh, Pa. v Red Apple Group, 273 AD2d 140, 141 [2000];Auchincloss v Allen, 211 AD2d 417 [1995]). In opposition to these showings, the plaintifffailed to raise a triable issue of fact. Accordingly, the appellants were entitled to summary judgmentdismissing the cause of action alleging fraud insofar as asserted against them.
The parties' remaining contentions have been rendered academic or are without merit. Santucci,J.P., Balkin, Belen and Chambers, JJ., concur.