## Facts

- John W. Cromeans, Jr. bought municipal bonds issued to finance a manufacturing project for Mamtek in Missouri.
- Morgan Keegan & Company, Inc. served as underwriter and retained Armstrong Teasdale, LLP to help prepare the bonds’ Official Statement (offering statement).
- The Official Statement described Mamtek’s existing plant in China as “operational” and included an assurance from Armstrong Teasdale that it was not aware of any facts that would cause it to believe the Official Statement contained a material misstatement or omitted a material fact.
- Separately from its bond work, Armstrong Teasdale had a contract with the Missouri Department of Economic Development (DED) to assist in attracting Chinese businesses to Missouri.
- Under that DED engagement, Armstrong Teasdale’s agent, Edward Li, investigated Mamtek in China and reported to Armstrong Teasdale and DED that Mamtek’s Chinese plant had not begun manufacturing and could not do so because it was unable to satisfy zoning requirements.
- After the Mamtek project failed and the bonds declined in value, Cromeans alleged he relied on the Official Statement’s representations and sued (among others) Armstrong Teasdale for legal malpractice and negligent misrepresentation.
- The district court previously granted summary judgment to Armstrong Teasdale on both claims. Cromeans moved to vacate that order; the court initially denied vacatur but then reconsidered whether summary judgment was proper on the negligent-misrepresentation claim.

## Issues

1. Whether, under Missouri law, a non-client bond purchaser may sue bond counsel for legal malpractice without proof that the client specifically intended the legal services to benefit the purchaser.
2. Whether the evidence (including Li’s reports) created a genuine dispute of material fact on negligent misrepresentation based on Armstrong Teasdale’s Official Statement assurance and the statement that Mamtek’s Chinese plant was operational.

## Decision

- The court granted the motion to vacate in part.
- The court left summary judgment in place for Armstrong Teasdale on Cromeans’s legal-malpractice claim.
- The court vacated the earlier grant of summary judgment on negligent misrepresentation, allowing that claim to proceed.

## Legal Principles

- Missouri legal-malpractice claims ordinarily require an attorney-client relationship.
- A non-client may pursue legal malpractice only if the plaintiff shows the lawyer performed services that the client specifically intended to benefit the plaintiff; if that showing is made, Missouri courts apply an additional multi-factor duty analysis (as described in Donahue v. Shughart, Thomson & Kilroy, P.C.).
- The fact that third parties are expected to read and rely on an offering document does not, by itself, satisfy Missouri’s “specific intent to benefit” requirement for non-client legal-malpractice liability.
- Negligent misrepresentation is a separate tort from legal malpractice and can apply when a defendant, in the course of its business or profession, supplies information for the guidance of others, fails to use reasonable care in obtaining or communicating it, the plaintiff justifiably relies, and the plaintiff suffers pecuniary loss.
- For negligent misrepresentation, Missouri follows a limited-recipient approach (consistent with Restatement (Second) of Torts § 552): liability may extend to a limited group of persons whom the defendant intends, or knows its recipient intends, to reach and influence with the information.
- Where a defendant states it is unaware of facts indicating misstatements or omissions, and there is evidence the defendant possessed contrary information, a factfinder may be able to determine the statement was false or made without reasonable care, making summary judgment inappropriate.

## Conclusion

The court held that Cromeans, as a non-client bond purchaser, could not proceed on legal malpractice against Armstrong Teasdale because the record did not show Morgan Keegan specifically intended Armstrong Teasdale’s services to benefit bond purchasers, but the court reopened the negligent-misrepresentation claim because evidence that Armstrong Teasdale had contrary information about Mamtek’s Chinese operations created a triable dispute over whether Armstrong Teasdale negligently supplied misleading information in the Official Statement on which purchasers could rely.


Cromeans v. Morgan Keegan & Co., Inc., 69 F. Supp. 3d 934 (2014)