Academic journal article Journal of Accountancy

Court Upholds Privity Defense in Illinois

Academic journal article Journal of Accountancy

Court Upholds Privity Defense in Illinois

Article excerpt

CIV 93-0406, U.S. Dist. Ct., District of New Mexico)

The U.S. District Court for tile Northern District of Illinois ruled that under Illinois law unless the plaintiff is in privity of contract with an accountant, the accountant generally will not be held liable for negligence. Maureen Dougherty brought an action against accountant Albert Zimbler, alleging he had made false statements of fact to her and omitted material facts in his representations to convince her to purchase a business from one of his clients, Tad Bero. Specifically, Dougherty alleged that the accountant had been aware the business had accumulated liabilities and liens against it for failing to pay state sales taxes and state and federal payroll taxes. Dougherty claimed she had met with both the owner and the accountant to discuss buying the business. She further alleged that the accountant had given her all income statement for the business, assisted in the negotiations and orally represented that the business was very successful and stable and had profit margins of 35% to 40%. Dougherty's own accountant also reviewed the business and indicated it had a reasonable chance to make a profit if she was able to keep costs at the level estimated and made sales of $850,000.

The defendant denied he had met on any occasion with either the purchaser or her accountant before the closing date. …

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