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Kohala Agriculture v. Deloitte & Touche11/10/1997
OPINION OF THE COURT BY ACOBA, J.
We hold that the tort of negligent misrepresentation, as set forth in the Restatement (Second) of Torts § 552 (1977) (section 552), applies in actions against an accountant for the negligent obtaining and/or communication of information contained in an audit report. Under section 552, an accountant owes a duty to exercise reasonable care and competence in obtaining and communicating this information.
We further hold that section 552 governs actions brought by parties who are not clients of an accountant. With respect to such third parties, an accountant's liability for the negligent obtaining and/or communicating of information furnished in an audit report extends to persons for whose benefit and guidance the accountant intends to supply the report or to whom the accountant knows the recipient of the report intends to supply it, and the accountant's liability is limited to the loss suffered by such persons through reliance on the report in a transaction the accountant intended the report to influence, or knew that the recipient so intended, or in a substantially similar transaction. Section 552(2).
Defendant-Appellee/Third-Party Plaintiff Deloitte & Touche (D&T;, the accounting firm involved in this case, prepared two audit reports which are of primary significance in this appeal. One audit was performed for Plaintiff-Appellant Kohala Agriculture (Kohala) of Kohala's 1983 financial statements (the 1983 Kohala audit) and resulted in an audit report (the 1983 Kohala report). Keaau Agriculture (Keaau) and its investors were not D&T;s clients for purposes of the 1983 Kohala audit. However, the complaint filed herein asserted that Keaau and some of Keaau's investors suffered damages in justifiably relying on the 1983 Kohala report.
The first circuit court (the court) ruled, without specifying the extent of an accountant's duty, that D&T;owed no duty to Keaau or to its investors. We believe that applying section 552, there were genuine issues of material fact as to whether D&T;owed a duty to Keaau in obtaining and communicating information contained in the 1983 Kohala report. We thus vacate that part of that October 8, 1993 summary judgment order which concluded as a matter of law that D&T;owed no duty to Keaau in connection with the 1983 Kohala report and the corresponding part of the August 31, 1994 partial final judgment which granted summary judgment in favor of D&T;"on all claims relating to Keaau."
D&T;also performed an audit and prepared an audit report of the 1984 financial statements of Keaau (the 1984 Keaau audit and report). The record does not establish whether the court determined that a claim based on the 1984 Keaau audit and report was sufficiently alleged in the complaint and/or whether such a claim was included in that October 8, 1993 summary judgment order dismissing "all claims" relating to Keaau. Accordingly, we remand these issues for determination by the court.
As a subsidiary matter, we confirm that an interlocutory appeal under Hawai'i Revised Statutes (HRS) § 641-1(b) (1993) must be perfected within thirty days of the entry of the order which was appealed. Thus, we dismiss Plaintiffs-Appellants' (Plaintiffs) interlocutory appeal of that October 8, 1993 order granting summary judgment in favor of D&T;on Kohala's claims for losses incurred before the 1983 Kohala report was issued, because Plaintiffs did not file their appeal within thirty days of October 8, 1993.
I.
A.
This case concerns ventures in Hawai'i's macadamia nut industry. Hawaiian Holiday Macadamia Nut Company, Inc. (Hawaiian H
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