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Prudential Securities Inc. v. E-Net9/5/2001
a total of $900,000 in damages. K & D subsequently assigned to the Joneses its right to sue Hyatt, and both of them filed suit against Hyatt to recover the damages. The Court of Appeals found that, in the suit against Hyatt, their damages were purely economic. Jones, at 658. Consequently, the Court looked for an "intimate nexus" or "direct relationship" between the Joneses and Hyatt, finding:
Moreover, there was no "intimate nexus" or "direct relationship" between Hyatt and the Joneses. At the time of the contract between Hyatt and K&D; the Joneses were not even identified third-party beneficiaries of that contract. It was not until the motor vehicle accident that the Joneses fell into a class whose members were among the intended beneficiaries of the contract. See Napier v. Bertram, 191 Ariz. 238, 954 P.2d 1389 (1998), where the Supreme Court of Arizona held that an insurance agent may not be held liable in negligence to a taxicab passenger for failure to procure uninsured motorist coverage for the agent's client, a taxicab company required by state law to have such coverage on behalf of its passengers. The Arizona court noted that, for it to hold a professional liable for negligence, it traditionally required "a duty of care" founded upon the "relationship between the non-client and professional" that "exceeded mere general foreseeability." Napier, 191 Ariz. at 242-243, 954 P.2d 1393-1394.11
11 Under certain circumstances a third-party beneficiary of a contract between principal and agent, who is identified when the contract is entered into, may bring a tort action against the agent who has made representations to the beneficiary or otherwise assumed a duty owed to the beneficiary. Flaherty v. Weinberg, 303 Md. 116, 135-137, 492 A.2d 618, 627-628 (1985) (agent allegedly made negligent representations directly to the plaintiff, who was the identified third-party beneficiary of the agency contract, and who was allegedly not in an adversarial position to the principal, and the agent intended that the plaintiff would act upon the representations). The opinion in Flaherty v. Weinberg, however, clearly leads to the conclusion that the Joneses would not be entitled to bring a direct tort action against Hyatt. Jones, 356 Md. at 658-59.
The Court of Appeals has recently expanded the concept of duty in cases of pure economic loss. Walpert, 361 Md. 645. Walpert is an accountant liability case but provides guidance. In many accountant liability cases, a third party has relied on an accountant's statement to invest money or make a loan. See Willis W. Hagen II, Accountants' Common Law Negligence Liabilities to Third Parties, 1988 Colum. Bus. L. Rev. 181, 207 (1988); Walpert, 361 Md. 645.
In Walpert, George and Shirley Katz (jointly the "Katzes") sued their former accountants, Walpert, Smullian & Blumenthal, P.A. ("WS&B;), for negligence, gross negligence, negligent misrepresentation, and breach of contract in connection with loans they had made to Magnetics, Inc. Magnetics was formerly owned by George Katz, who relinquished ownership in 1987 to his wife and two sons. George Katz retained the title of president and remained financially interested, but his son Philip actually controlled the company. After Philip took control, he retained WS&B;to perform annual audits and prepare unaudited reports every six months. WS&B;also did personal accounting work for the Katzes.
Between 1990 and 1992, the Katzes entered into four financial transactions with Magnetics. In June 1993, an independent audit revealed that Magnetics had inflated its inventory and accounts receivable. Consequently, Magnetics's principal lender, the Bank of Baltimore, called its $2
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