Sharp v. Coopers & Lybrand

Westland Minerals Corporation (WMC) solicited investors to purchase limited-partnership interests in an oil-drilling business. To help sell the limited-partnership interests, WMC hired Coopers & Lybrand (C&L) (defendant), a large accounting firm, to issue an opinion on the tax benefits of the limited partnerships being sold. Herman Higgins, a tax supervisor at C&L, wrote an opinion letter on the firm’s behalf that overstated the tax benefits of the investment and made important omissions. Although the letter was signed by a partner at the firm, Higgins was not supervised in writing the letter. Stanley Sharp, among others (the investors) (plaintiffs), purchased limited-partnership interests from WMC. WMC engaged in fraud and used the investors’ money for its own benefit. The investors sued C&L for violations of the Securities Exchange Act of 1934 (the act), fraudulent misrepresentation, and negligent breach of duty under the common law. The trial court held a bifurcated trial and submitted preliminary questions to the jury. The jury found that Higgins made material misrepresentations in the opinion letter, that C&L controlled Higgins’s work, and that C&L failed to adequately supervise Higgins’s writing of the opinion letter, among other findings. The jury also found that the investors’ injury was not foreseeable. C&L moved for judgment in accordance with the verdict, judgment notwithstanding the verdict, and for a new trial.