Western Security Bank v. Eide Bailly LLP
359 Mont. 34
| Mont. | 2010Background
- Glacier sought to acquire CDC; Glacier reviewed IMC’s audited statements by Eide prior to merger with CDC; Eide issued unqualified opinions despite IMC’s fraudulent manipulation by Hakala; Hakala’s scheme concealed about $7.2 million impacting IMC’s assets and Glacier/Western’s positions; Glacier and Western sued Eide for professional negligence, later Western added negligent and fraudulent misrepresentation claims; district court granted summary judgment to Eide on Glacier’s claims and dismissed Western’s fraudulent and negligent misrepresentation claims; trial later proceeded focusing on Eide’s duty to Western under Thayer near privity, with a special verdict finding Eide owed a duty to Western and allocating fault; on appeal, the Montana Supreme Court affirmed in part, reversed in part, and remanded for new trial on Western’s negligent misrepresentation claim, while affirming summary judgment against Glacier and dismissing Glacier’s fraud claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty of care owed by accountant to nonclients | Glacier asserted a third‑party negligent misrepresentation/duty claim. | Eide argued no duty to Glacier under near privity or §552. | Glacier’s duty claim dismissed; no duty to Glacier under applicable standards. |
| Fraud pleading sufficiency | Glacier claimed fraud by Eide and argued 9(b) pleadings were sufficient. | Eide argued failure to plead fraud with particularity. | Glacier’s fraud claim insufficiently pleaded; dismissed. |
| Western’s claims—d negligent misrepresentation and fraudulent misrepresentation | Western alleged misrepresentations and reliance affecting its credit decisions and damages. | Eide contends wrong duty standard and pleadings. | Court reversed as to Western’s negligent misrepresentation and fraudulent misrepresentation; remanded for new trial on §552 claim. |
Key Cases Cited
- Thayer v. Hicks, 243 Mont. 138 (1990) (near privity and duty standards for accountants to nonclients)
- Jim’s Excavating Service v. HKM Associates, 265 Mont. 494 (1994) (Restatement §552 applied to professional liability; foreseeability to identifiable class)
- St. Bank of Townsend v. Maryann’s, Inc., 204 Mont. 21 (1983) (application of Restatement §552 in professional contexts)
- Durbin v. Ross, 276 Mont. 463 (1996) (Restatement §552 approach to negligent misrepresentation in professional services)
- May v. ERA Landmark Real Est, 2000 MT 299 (2000) (recognition of elements of negligent misrepresentation in professional context)
- Hawthorne v. Kober Const. Co., 196 Mont. 519 (1982) (privity concerns and duty concepts in torts against professionals)
- Turner v. Kerin & Assocs., 283 Mont. 117 (1997) (Prosser and §552 standards in professional liability)