## Facts

- Blue Bell, a clothing manufacturer, extended trade credit to Myers Department Stores’ Texas operations.
- After a corporate acquisition, Myers engaged Peat, Marwick, Mitchell & Co. (PMM) to audit financial statements for the fiscal year ending February 1, 1981.
- PMM delivered to Myers audited combined financial statements for operating entities and a consolidated balance sheet for the parent and subsidiaries, with accountants’ reports.
- PMM later made a minor revision to the combined financial statements and, at Myers’ request, provided additional copies; Myers provided the statements and report to Blue Bell.
- Blue Bell alleged it relied on the audited materials in continuing and increasing credit to Myers.
- Myers filed for bankruptcy in November 1982; Blue Bell, as an unsecured creditor, recovered only part of what it was owed.
- Blue Bell sued PMM for negligent misrepresentation, fraud, breach of warranty, and breach of fiduciary duty based on alleged wrongful audit misstatements.
- The trial court granted summary judgment for PMM on all claims; Blue Bell appealed.

## Issues

1. Whether an accountant may owe a duty to a nonclient trade creditor for negligent misrepresentation under Restatement (Second) of Torts § 552, including whether the creditor falls within a “limited group” and justifiably relied.
2. Whether Blue Bell produced evidence that PMM intended to induce Blue Bell (or a specifically intended group including Blue Bell) to rely on the audit reports, as required for fraud liability to a nonclient.
3. Whether a nonclient may pursue a contract-based breach of warranty theory based on audit opinions absent privity or intended third-party beneficiary status.
4. Whether an independent auditor owes a fiduciary duty to a nonclient creditor who receives audited financial statements.

## Decision

- The court adopted Restatement (Second) of Torts § 552 as the governing standard for negligent misrepresentation claims against professionals supplying business information.
- The court reversed summary judgment on negligent misrepresentation and remanded, holding fact issues existed on duty to a limited group, falsity, lack of reasonable care, and justifiable reliance.
- The court affirmed summary judgment on fraud because the evidence did not raise a fact issue that PMM intended to induce Blue Bell’s reliance (foreseeability was insufficient).
- The court affirmed summary judgment on breach of warranty because Blue Bell lacked privity and did not establish intended third-party beneficiary status under the audit engagement.
- The court affirmed summary judgment on breach of fiduciary duty because no fiduciary relationship existed between PMM and Blue Bell.

## Legal Principles

- A professional who supplies information for others’ business guidance may be liable for negligent misrepresentation under Restatement (Second) of Torts § 552 when the professional fails to use reasonable care and the information is supplied for the benefit of a limited group the professional intends, or knows the client intends, to influence in a limited type of transaction.
- § 552 does not impose liability to all foreseeable users; the duty is confined to a limited class and a limited set of transactions.
- Fraud liability to nonclients requires proof that the accountant intended to induce reliance by the particular plaintiff or a specifically intended group; mere knowledge that creditors may rely is insufficient.
- Absent privity or intended third-party beneficiary status, a nonclient cannot reframe audit-opinion disputes as contract-based warranty claims.
- An independent audit does not, by itself, create a fiduciary duty to third-party creditors who receive or rely on audited statements.

## Conclusion

The court permitted Blue Bell to proceed only on a negligent misrepresentation theory under Restatement § 552 because the summary-judgment record raised fact issues on whether PMM supplied audit information for the guidance of a limited group of trade creditors in extending credit and whether Blue Bell justifiably relied, while rejecting fraud, warranty, and fiduciary-duty claims for lack of specific intent, contractual standing, and any fiduciary relationship.


Blue Bell, Inc. v. Peat, Marwick, Mitchell & Co., 715 S.W.2d 408 (Tex. App.—Dallas 1986)