Myers v. Finkle

In 1977, Arthur Myers, II; Mary Myers; and Arthur Myers, III (the Myers family) (plaintiffs) engaged Finkle & Company (Finkle) (defendant), an accounting firm, for accounting services. The Myers family were not sophisticated investors, but rather they made their wealth in the seafood business. In 1981, Finkle advised the Myers family on reducing income-tax liability. Finkle recommended that the Myers family invest in a number of real estate limited partnerships. Finkle sent the Myers family a private-placement memorandum for each investment, which described the risks for each investment. However, the Myers family claimed that they either received the memoranda without enough time before tax deadlines to consider the information carefully or months after they had already invested in a partnership. Also, Finkle claimed that the Myers family initiated the transactions to avoid tax liability, but the Myers family claimed that Finkle advised them to invest in the partnerships during the final stage of preparation of their tax returns. The Myers family brought an action against Finkle and its partners (defendants) for violations of Securities and Exchange Commission (SEC) Rule 10b-5. Finkle filed a motion for summary judgment. The district court entered summary judgment in favor of Finkle, finding that the Myers family had not justifiably relied on a false statement or omission of material fact in part because it found that the Myers family were sophisticated investors, that Finkle did not owe a fiduciary duty to the Myers family, and that they did not have a longstanding relationship. The Myers family appealed.