The Superior Court reasoned that the trial court construed the holding in Bilt-Rite too narrowly in dismissing Fulton Bank’s negligent misrepresentation claim against Spevak and his firm. The Superior Court held that any type of third-party professional service provider may be held liable under a theory of negligent misrepresentation, even if it is not in privity with the party ultimately relying on the provided information. The Superior Court agreed with Fulton Bank’s argument in its appellate brief that “the Bilt-Rite holding points to the architect or design professional example as an illustrative suggestion, but the Court’s wording does not impose a limitation on which kind of situation Section 552 [of the Restatement] can apply.” Id.

The Superior Court applied the reasoning in Bilt-Rite to reinstate Fulton Bank’s claim for negligent misrepresentation against the accountants who provided financial documents that contained alleged material misrepresentations as to a commercial loan applicant’s (“HiFi”) financial condition. The information in those documents was ultimately relied upon by Fulton Bank in makings its decision to extend financing to the applicant. HiFi subsequently ceased operations as of spring or summer 2014, and even though Fulton Bank liquidated the remaining inventory of HiFi, there were insufficient assets to repay Fulton Bank. Fulton Bank was damaged in the asserted amount of approximately $4 million because of the alleged misrepresentations in the financial information provided by Spevak and his firm. The Superior Court held that Fulton Bank had pled a viable cause of action, and reversed the trial court’s dismissal of the claim for negligent misrepresentation.

The Superior Court’s holding and language in Fulton Bank v. Sandquist is broad and appears to allow for claims of potential liability for negligent misrepresentation to any professional who provides information that is designed to be relied upon by a third party, regardless of privity. This case, which is likely to be appealed to the Pennsylvania Supreme Court in the coming months, may open the door for potential liability for negligent misrepresentation to all other licensed professionals in Pennsylvania who provide information intended to be relied upon by third parties.

1. Fulton Bank, N.A. v. Sandquist, No. 2306 EDA 2016, 2017 WL 4284923 (Pa. Super. Ct. Sept. 27, 2017)
2. Bilt-Rite Contractors, Inc. v. The Architectural Studio, 581 Pa. 454, 866 A.2d 270 (2005)

Client Alert 2017-244