Credit Alliance Corp. v. Arthur Andersen & Co.
Court of Appeals of New York
483 N.E.2d 110 (N.Y. 1985)
This decision involves two consolidated appeals regarding accountants’ liability for negligently preparing financial reports. The first is Credit Alliance, where Arthur Andersen & Co. (Andersen) (defendant) prepared financial statements for L.B. Smith, who in turn furnished the reports to his lender, Credit Alliance Corp. (Credit Alliance) (plaintiff) for the purpose of getting a loan. Credit Alliance alleged that the statements were inaccurate. Smith did not hire Andersen to prepare the reports specifically for getting a loan or specifically to be reviewed by Credit Alliance, and there is no evidence that Andersen had any direct dealing with Credit Alliance. Credit Alliance brought suit against Andersen nonetheless for negligent preparation of the reports. Andersen filed a motion to dismiss the claim which was denied by the trial court. The denial was affirmed by the appellate court. Andersen appealed. The second appeal came from European American Bank & Trust Co. v. Strahs & Kaye. In Strahs & Kaye, Strahs & Kaye (S & K) (defendant) prepared financial reports for Majestic Electro Industries (Majestic). European American Bank (EAB) (plaintiff) relied on those financial reports to make substantial loans to Majestic. S & K knew that the primary, if not only reason it was hired to audit Majestic was to give the results to EAB. In addition, EAB and S & K communicated regularly to discuss Majestic’s financial situation. Subsequently, Majestic went bankrupt. EAB brought suit against S & K for negligently preparing the reports. The trial court dismissed the complaint. The appellate court reversed. S & K appealed.
Rule of Law
Holding and Reasoning (Jasen, J.)
What to do next…
Unlock this case brief with a free (no-commitment) trial membership of Quimbee.
You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 97,000 law students since 2011. Some law schools—such as Yale, Vanderbilt, Berkeley, and the University of Illinois—even subscribe directly to Quimbee for all their law students. Read our student testimonials.
Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.
Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students. Read more about Quimbee.
Here's why 170,000 law students have relied on our case briefs:
- Written by law professors and practitioners, not other law students. 13,800 briefs, keyed to 187 casebooks. Top-notch customer support.
- The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
- Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
- Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.