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Standard Chartered PLC v. Waterhouse11/7/1996
e narrower range of risk set forth in Restatement (Second) § 552 (1979) ("section 552").
Section 552 provides in pertinent part:
Information Negligently Supplied for the Guidance of Others
(1) 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, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
(2) Except as stated in subsection (3) [not relevant in this case], the liability stated in Subsection (1) is limited to loss suffered
(a) By the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and
(b) Through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction.
In subsection 552(2), the Restatement (Second) deliberately rejects foreseeability as the proper measure of the range of liability. The drafters make the distinction plain in comment h:
It is not required that the person who is to become the plaintiff be identified or known to the defendant as an individual when the information is supplied. It is enough that the maker of the representation intends it to reach and influence either a particular person or persons, known to him, or a group or class of persons, distinct from the much larger class who might reasonably be expected sooner or later to have access to the information and foreseeably to take some action in reliance upon it.
RESTATEMENT (SECOND) § 552 cmt. h (emphasis added).
Arizona courts have recognized the tort of negligent misrepresentation since Van Buren v. Pima Community College District Board, 113 Ariz. 85, 87, 546 P.2d 821, 823 (1976). Our supreme court stated in Donnelly that negligent misrepresentation claims are governed by section 552. 139 Ariz. at 188, 677 P.2d at 1296. And in Donnelly and later cases, Arizona courts have repeatedly accepted section 552(2) as defining the range of liability for such claims. See id. at 189, 677 P.2d at 1297 ; Hoffman v. Greenberg, 159 Ariz. 377, 379-80, 767 P.2d 725, 727-28 (App. 1988); Western Technologies, 154 Ariz. 1, 739 P.2d at 1318, 1320 (App. 1986).
We come then to PW's contention that to permit S. Ct. to submit a separate and distinct auditor negligence claim under a foreseeability test "would sanction an end-run around RESTATEMENT (SECOND) § 552, which represents the law in Arizona for negligent misrepresentation-based claims against professionals." We agree. We engaged in a similar compression of theories in Western Technologies. There, the defendant engineering firm was engaged to investigate the cause of cracks in Sun Devil Stadium and report its findings to the Arizona Board of Regents. In its report, the defendant identified the plaintiff firm, which had performed geotechnical engineering testing prior to expansion of the stadium, as a party responsible for the cracks. The plaintiff filed a complaint that included several counts of negligence. We concluded, however, that these counts boiled down to a single negligent misrepresentation claim:
The essence of these counts is that [the defendant] negligently, recklessly or intentionally supplied the Board with false and misleading information. While the record in this case indicates that at times [the plaint
Page 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 Arizona Personal Injury Attorneys
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