Oregon Steel Mills, Inc. v. Coopers & Lybrand, LLP

Coopers & Lybrand, LLP (C&L) (defendant) provided accounting and auditing services to Oregon Steel Mills, Inc. (Oregon) (plaintiff). Pursuant to C&L’s advice, Oregon reported a transaction on Oregon’s 1994 financial statements as a $12.3 million gain. Oregon was planning a public offering of stock and expected the initial filing to occur on February 27, 1996, and the securities to be priced and sold on May 2, 1996. On February 22, 1996, C&L discovered that the 1994 transaction may have been reported incorrectly. The Securities and Exchange Commission concluded that the accounting treatment was incorrect and required Oregon to restate its 1994 financial statements. As a result, Oregon could not issue the stock until June 13, 1996, when the stock price was $13.50 per share. The stock price was $16 per share on May 2, 1996, the date Oregon originally intended to issue the stock. Oregon sued C&L for professional malpractice, seeking to recover damages for the difference between the $13.50 per share it received and the $16 per share it would have received but for C&L’s negligence. Evidence in the record showed that Oregon wanted to issue stock quickly to finance a capital-improvement program and comply with bank covenants. The trial court granted C&L summary judgment, concluding that C&L’s negligence caused the offering to be delayed but did not cause the market to drop. Reversing, the Oregon Court of Appeals held that the losses were foreseeable because C&L knew that the offering date was timed to take advantage of first-quarter earnings and market conditions. C&L appealed.