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MICHAEL MURPHY et al., Plaintiffs and Appellants, v. BDO SEIDMAN, LLP, et
al., Defendants and Respondents.
COURT OF APPEAL OF CALIFORNIA, SECOND APPELLATE DISTRICT, DI-
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
As modified Dec. 24, 2003.
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)
APPEAL from the judgment of the Superior Court of Los Angeles County, No. BC
222929, Gregory C. O'Brien, Jr., Judge.
Affirmed in part, reversed in part and remanded with directions.
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.
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.