|Loss Due to Negligence Must Be Reasonably Foreseeable|
|Description||Oregon high court held that an accounting firm would not be held liable for losses due to a stock sale that was delayed due to accounting errors. The decline in stock price was due to market forces, not due to accounting errors that delayed SEC filings.|
|Key Words||Negligence; Delay; Foreseeability; Market Forces|
|C A S E S U M M A R Y|
|Facts||For years, Coopers provided accounting and auditing services for Oregon Steel. In 1994, Oregon Steel sold stock in a subsidiary. Coopers advised Oregon that the transaction should be reported as a $12.3 million gain on its financial reports, which Oregon did. Oregon contends that this advice was incorrect, and Coopers admits to that fact. In 1995, Oregon was planning a public stock offering for 1996. In preparing SEC documents for the stock sale, Coopers discovered the 1994 error and told Oregon that it needed to change the accounting treatment of that transaction. Oregon did, which delayed the stock offering. Oregon sued, contending that if the stock sale had occurred when originally planned, the price would have been $16 per share, rather than the $13.50 per share received in the later sale, the difference being $35 million total. The trial court held for Coopers; Oregon appealed. The court of appeals reversed; Coopers appealed.|
Reversed. Liability in negligence for economic harm must be predicated on some duty of the negligent actor to the injured party beyond the common law duty to exercise reasonable care to prevent foreseeable harm. When a plaintiff alleges a special relationship as the basis for the defendant’s duty, the scope of that duty may be defined or limited by principles of foreseeability. Decline in the market value of the company’s stock was not a reasonably foreseeable result of delay in the sale of stock, and thus, even though the delay was caused by Cooper’s incompetence, and the parties had a “special relationship” of accountant and client, Coopers was not liable in negligence for the loss, which was caused by market forces and was unrelated to Cooper’s misconduct.
|Citation||Oregon Steel Mills, Inc. v. Coopers & Lybrand, LLP, --- P.3d --- (2002 WL 32348479, Sup. Ct., Ore., 2004)|
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