The opinion of the court was delivered by: GOETTEL
Two identical third-party complaints have been filed in this action, one by Washington Druker ("Druker") and the other by Brancorp Factors, Inc. and Jack Lindner (collectively "Brancorp"). Each third-party complaint purports to state two causes of action against Chaim Herbert Leshkowitz ("Leshkowitz"), Carla Leather, Inc.'s ("Carla") former accountant. Leshkowitz now moves pursuant to Rules 9(b), 14(a), 12(b)(2), and 12(b)(6) of the Federal Rules of Civil Procedure for an order dismissing both third-party complaints. He also moves pursuant to Fed. R. Civ. P. 11 for sanctions against the third-party plaintiffs. For the reasons stated below, the third-party complaints are dismissed and the motions for sanctions are denied.
In March 1985, Druker and Brancorp applied to and received this Court's permission to file third-party complaints against Leshkowitz. The third-party plaintiffs have yet to answer the amended complaint in the main action. The details of the amended complaint are spelled out in a separate opinion issued today in this case, familiarity with which is assumed. The two third-party complaints and the affidavits and memoranda that accompany them add the following allegations, which, together with the allegations in the main complaint, we deem true for purposes of evaluating the motions before us: Leshkowitz prepared certain financial statements and reports and performed other unspecified services for Carla prior to its dissolution. Those statements overstated Carla's inventory and assets and allegedly caused Carla's debt to Meritum Corporation ("Meritum") to be greatly inflated.
The third-party plaintiffs assert that any liability that they accrue in the main action will be reduced as a result of Leshkowitz's conduct.
Each third-party complaint states the same two claims. The first claim alleges that Leshkowitz negligently and recklessly prepared financial statements and related documents that Meritum, Carla, and others later relied on. Leshkowitz is thereby alleged to be liable to the third-party plaintiffs for any judgment accruing against them in the main action. The second claim alleges that Leshkowitz aided and abetted Meritum in some unspecified, presumably improper conduct.
The third-party defendant moves to dismiss the first claim in both complaints for failure to comply with the requirements of Fed. R. Civ. P. 14(a).
Rule 14(a) provides, in pertinent part:
At any time after commencement of the action a defending party, as a third-party plaintiff, may cause a summons and complaint to be served upon a person not a party to the action who is or may be liable to him for all or part of the plaintiff's claim against him.
Fed. R. Civ. P. 14(a). "Rule 14 requires that a defendant have a substantive basis for a claim against the third party and that the claim of liability to the defendant and third-party plaintiff accrue only upon a finding of defendant's liability to the plaintiff on the main claim." Index Fund, Inc. v. Hagopian, 417 F. Supp. 738, 744 (S.D.N.Y. 1976). Because there is no substantive basis for the first or second claims in either third-party complaint, both complaints must be dismissed pursuant to Rule 14(a) and pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim on which relief can be granted.
The first claims of the two third-party complaints seek to hold Leshkowitz liable for the negligent preparation of financial statements upon which parties with whom he was not in privity relied.
The New York Court of Appeals recently delineated the circumstances in which "accountants may be held liable in negligence to noncontractual parties who rely to their detriment on inaccurate financial reports." Credit Alliance Corp. v. Arthur Anderson & Co., 65 N.Y.2d 536, 551, 483 N.E.2d 110, 493 N.P.S.2d 435 (N.Y. 1985) [hereinafter "Credit Alliance "]. Before such liability may accrue,
certain prerequisites must be satisfied: (1) the accountants must have been aware that the financial reports were to be used for a particular purpose or purposes; (2) in the furtherance of which a known party or parties was intended to rely; and (3) some conduct on the part of the accountants linking them to that party or ...