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Ellis v. Grant Thornton LLP

530 F.3d 280 (2008)

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Ellis v. Grant Thornton LLP

United States Court of Appeals for the Fourth Circuit

530 F.3d 280 (2008)

Facts

In May 1998, government regulators required First National Bank of Keystone (Keystone) to retain accountants to perform an audit due to suspicious practices by Keystone. Grant Thornton LLP (defendant), led by one of its partners, Quay, conducted the audit. Grant Thornton and Quay negligently performed the audit and erroneously stated that Keystone was solvent. In fact, Keystone was not solvent. The audit stated that it was for the use of Keystone’s board and government regulators and should not be relied upon by third parties. At about the same time that the audit was completed, a president of United National Bank (United), Gary Ellis (plaintiff), was considering leaving United to become Keystone’s president. Quay told Ellis that Keystone had a clean audit. Relying on this information, Ellis resigned from United and became Keystone’s president. Keystone was later sued in class-action securities litigation, and the class also named Ellis as a defendant. Ellis cross-claimed against Grant Thornton for negligent misrepresentation, seeking damages because Ellis would not have left United had Ellis known that Keystone was insolvent. The trial court awarded Ellis $2.4 million. Grant Thornton appealed.

Rule of Law

Issue

Holding and Reasoning (Hamilton, J.)

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