This article was originally published on law.com.
By Victor M. Metsch
(Victor M. Metsch is a Senior Litigation/ADR partner at Hartman & Craven LLP. He can be reached at vmetsch@hartmancraven.com. He maintains a website at www.LegalVictor.net and can be found on Twitter at @LegalVictor1).
In Part 1 of this trilogy – the Citadel of Privity — we explored the historical/legal antecedents/precedents in New York in respect of claims sounding in either contract or tort. The Cardozo “quartet” – Glanzer, MacPherson, H.R. Moch and Ultramares –left the “citadel” of privity substantially in tact. In Glanzer, defendants, who were engaged in business as public weighters, had every reason to know that the buyers intended to rely upon their certificates of weight. In MacPherson, the automobile manufacturer knew that the retail dealer intended to re-sell the car to a third party. In H.R. Moch, the record did not establish that the waterworks supplying water to the city undertook to be answerable to the public at large. And, in Ultramares, the public accountants clearly owed a duty to both their client and their client’s counter-parties to prepare financial statements that were not fraudulent.However, absent fraud or gross negligence, the auditor had no duty or obligation to an open-ended class of possible recipients of the statements.
In Part 2 of this trilogy – the Attack on the ‘Citadel,’ we concluded that, as the 20th Century came to an end, the Court of Appeals still based its “privity” jurisprudence on a continuum that began with the Cardozo “quartet” of Glanzer, MacPherson, H.R. Moch and Ultrameres and continued through Ossining, Credit Alliance, European American Bank and Security Pacific. The Credit Alliance “trifecta” of “awareness”, “reliance” and “linking conduct” formed the basis of determining the liability of accountants, attorneys and other professionals to third-parties not in direct privity. The requirement of direct “privity” was being superseded by “a nexus” that “sufficiently approached” or was “sufficiently close” to privity.And the Court of Appeals continued to adjudicate the “privity”/”near privity” issues on a fact-specific, case-by-case basis.
In this Part 3 we will examine the “privity” jurisprudence of the Court of Appeals in the Twenty-First Century.