Touche Ross & Co. v. Redington

Touche Ross & Co. (defendant) was a firm of certified public accountants. Touche Ross was hired by Weis Securities, Inc. (Weis), a securities brokerage firm, to audit Weis’s financial records and file annual financial reports with the Securities and Exchange Commission (SEC) as required by § 17(a) of the Securities and Exchange Commission Act of 1934 (the act). In 1973 the SEC learned Weis was experiencing financial difficulties and had potentially conducted business that violated the act. The Securities Investor Protection Corporation (the corporation) (plaintiff) filed an application with the United States District Court for the Southern District of New York seeking a decree that Weis’s customers needed protection provided by the corporation under the Securities Investor Protection Act of 1970. The district court appointed Edward Redington (plaintiff) to act as trustee in the liquidation of Weis. In 1976 Redington and the corporation filed a lawsuit against Touche Ross in federal district court, arguing that Touche Ross improperly audited Weis’s financial information in violation of § 17(a) of the act. Section 17(a) provided that securities brokerage firms were required to file annual financial reports with the SEC. However, § 17(a) did not explicitly provide a private right of action to customers of brokerage firms to sue the accountants who audited those financial reports. The district court dismissed the complaint, holding that no private right of action could be implied in § 17(a). The court of appeals reversed, holding that § 17(a) imposed a duty on accountants and that an implied private right of action existed for customers to sue accountants for breaching this duty. The United States Supreme Court granted certiorari.