113_Cal._App._4th_687,_6_Cal._Rptr._3d_770,

113_Cal._App._4th_687,_6_Cal._Rptr._3d_770, - 1 of 1...

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1 of 1 DOCUMENT MICHAEL MURPHY et al., Plaintiffs and Appellants, v. BDO SEIDMAN, LLP, et al., Defendants and Respondents. B154584 COURT OF APPEAL OF CALIFORNIA, SECOND APPELLATE DISTRICT, DI- VISION EIGHT 113 Cal. App. 4th 687 ; 6 Cal. Rptr. 3d 770; 2003 Cal. App. LEXIS 1734; 2003 Cal. Daily Op. Service 10101; 2003 Daily Journal DAR 12696 November 24, 2003, Filed NOTICE: As modified Dec. 24, 2003. SUBSEQUENT HISTORY: Rehearing denied by Murphy v. BDO Seidman, 2003 Cal. App. LEXIS 1919 (Cal. App. 2d Dist., Dec. 24, 2003) Time for Granting or Denying Review Extended Murphy v. Seidman, 2004 Cal. LEXIS 1985 (Cal., Mar. 1, 2004) Review denied by Murphy v. BDO Seidman, 2004 Cal. LEXIS 2790 (Cal., Mar. 24, 2004) Appeal after remand at, Writ granted by, Sub nomine at Kouri v. Superior Court of Cal. for L.A., 2007 Cal. App. LEX- IS 320 (Cal. App. 2d Dist., Mar. 8, 2007) PRIOR HISTORY: [***1] APPEAL from the judgment of the Superior Court of Los Angeles County, No. BC 222929, Gregory C. O'Brien, Jr., Judge. DISPOSITION: Affirmed in part, reversed in part and remanded with directions. CASE SUMMARY: PROCEDURAL POSTURE: Appellant investors sought review of a judgment of the Superior Court of Los Angeles County (California), which dismissed their corrected fifth amended complaint for failing to state a cause of action. The complaint alleged that respondent accountants intentionally or negligently overstated their client's assets in financial statements they prepared and that the investors relied on those statements and ultimately lost their investments. OVERVIEW: While a proposed merger was pending, the accountants misrepresented the value of the companies. The companies later filed for bankruptcy. The investors alleged that they relied on the accountants' financial statements to buy stock and that they lost their investments. The court held that the investors pleaded fraud with sufficient detail be- cause the complaint provided enough information for the accountants to know what purported falsehoods they had to defend against. Demanding that the investors provide even more detail risked making an already long complaint even longer. The complaint also sufficiently stated a claim for negligent and intentional misrepresentation because it alleged that the accountants could with substantial certainty foresee and could reasonably foresee that potential investors would rely on the misstatements. The complaint alleged a duty from the accountants to shareholders by alleging that the ac- countants knew the investors would rely on the other company's financial statements in deciding whether to approve the merger. The trial court erred to the extent that it dismissed holding investors for not having alleged reliance. The statute of frauds did not apply.
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OUTCOME: The court directed the trial court to sustain the demurrers without leave to amend to the investors' cause of action for violation of the corporations code, to sustain the demurrers as to some investors without leave to amend for
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This note was uploaded on 03/10/2010 for the course ACCTG 351B taught by Professor Inama during the Fall '09 term at Golden Gate.

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113_Cal._App._4th_687,_6_Cal._Rptr._3d_770, - 1 of 1...

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