392 P.3d 905
Utah Ct. App.2017Background
- Reperex Inc. and two individual buyers purchased May’s Custom Tile after broker Coldwell Banker Commercial (Bush) and accountant J. Russton Bradshaw provided financial records; business later failed.
- Buyers allege broker and accountant misrepresented financial strength, hid commingled funds, failed to disclose a major client’s bankruptcy, and misrepresented licensing timeframes.
- Buyers sued the Broker (fraud, negligent misrepresentation, breach of fiduciary duty) and the Accountant (fraud, negligent misrepresentation, breach of fiduciary duty).
- District court dismissed Buyers’ fraud and negligent misrepresentation claims against Broker based on a non-reliance clause and granted summary judgment on breach of fiduciary duty for lack of expert; dismissed Accountant negligent misrepresentation and fiduciary claims under Utah’s accountant-liability statute; fraud claim against Accountant went to trial and resulted in verdict for Accountant.
- On appeal, the court affirmed summary judgment for the Accountant, upheld denial of fraudulent nondisclosure instruction, vacated dismissals against the Broker, and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the non-reliance clause bars Buyers’ fraud and negligent misrepresentation claims against Broker | Non-reliance clause was procured or rendered ineffective by Broker’s alleged fraud and filtering of documents; clause shouldn’t shield intentional misrepresentations | Clause expressly disclaims reliance on broker; Ruf precedent bars reliance where clause exists | Vacated dismissal: clause does not automatically bar claims; fraud allegations could render the clause voidable or integral to a scheme to defraud, so claims survive pleading stage |
| Whether expert testimony was required to prove breach of fiduciary duty against Broker | No—Buyers argue alleged misrepresentations and omissions are within jurors’ common knowledge and don’t require experts | Yes—Broker contends industry-standard duties and breach require expert testimony to establish standard of care | Vacated summary judgment: court holds claims are not so complex as to require experts; jury can assess given alleged misrepresentations (e.g., inflated profits, commingling, licensing time, client bankruptcy) |
| Whether Accountant is liable on negligent misrepresentation and breach claims despite lack of privity under Utah Code §58‑26a‑602 | Buyers contend exceptions to the statute (fraud or writings showing intent to rely) apply because accountant provided documents and participated in due diligence | Accountant argues no privity and no writing identifying Buyers as intended rely-upon parties; statute shields accountants absent fraud or specified writings | Affirmed summary judgment for Accountant: fraud not established for these claims and the statutory writing exception fails because no writing identified the Buyers as intended beneficiaries |
| Whether district court erred by refusing jury instruction on fraudulent nondisclosure against Accountant | Buyers say due diligence meeting and document provision created a duty supporting fraudulent nondisclosure instruction | Accountant says no duty existed under the statute; negligent-misrepresentation dismissal negates duty element; Buyers didn’t plead that specific claim | Affirmed: no duty under the accountant-liability statute, so instruction properly refused |
Key Cases Cited
- Lamb v. Bangart, 525 P.2d 602 (Utah 1974) (contract limitations on liability are invalid where procured by fraud)
- Miller v. Celebration Mining Co., 29 P.3d 1231 (Utah 2001) (fraudulent inducement voids contract; reliance necessary element of fraud)
- Ong Int’l (USA) Inc. v. 11th Ave. Corp., 850 P.2d 447 (Utah 1993) (release voidable if integral to a scheme to defraud)
- Hermansen v. Tasulis, 48 P.3d 235 (Utah 2002) (broker duty: be honest, ethical, competent; disclose facts materially affecting value)
- Gilbert Dev. Corp. v. Wardley Corp., 246 P.3d 131 (Utah Ct. App. 2010) (agent may not misrepresent client’s financial condition by omission or affirmation)
- Posner v. Equity Title Ins. Agency, Inc., 222 P.3d 775 (Utah Ct. App. 2009) (complex transactions may require expert testimony to define fiduciary standard)
- White v. Jeppson, 325 P.3d 888 (Utah Ct. App. 2014) (courts must analyze expert-need claim-by-claim; some misrepresentations fall within jurors’ common knowledge)
- Reynolds v. Bickel, 307 P.3d 570 (Utah 2013) (accountant-liability statute: writings may be aggregated if a nexus shows accountant/client intended third‑party reliance)