The opinion of the court was delivered by: Robert P. Patterson, Jr., District Judge.
This an action for malpractice against a Virginia accountant
and his accounting firm. Defendants move pursuant to Rule
12(b)(2) of the Federal Rules of Civil Procedure to dismiss the
action for lack of personal jurisdiction. For the reasons set
forth below, defendants' motion is granted.
The facts underlying this motion are not in dispute.
Defendant James M. Bridges ("Bridges") is a certified public
accountant who resides in the state of Virginia and is the
general partner of James M. Bridges, Ltd., a five-person
accounting firm with its only office in Dale City, Virginia.
On June 29, 1988 Bridges signed a letter of engagement with
Southern Atlantic Mortgage, Inc. ("Southern Atlantic"), a
Virginia mortgage broker, under which Bridges was to conduct an
audit of Southern Atlantic for the fiscal years ending June 30,
1987 and June 30, 1988. Bridges Aff., Exh. A. The letter of
engagement, entered into in Virginia, does not mention the
purpose of the audit but Bridges testified that the audit was
completed to show compliance with Housing and Urban Development
("HUD") regulations and for internal management purposes.
Id.¶ 18; Defendants' Memorandum of Law and Supporting Exhibits
(hereinafter "Def. Mem. of Law"), Exh. 2 at 123. Bridges
performed all work necessary to complete the audit in the state
of Virginia and on August 30, 1988 sent the certified financial
statements to Southern Atlantic in Woodbridge, Virginia.
Bridges Aff. ¶ 17; Def. Mem. of Law., Exh. 5.
Plaintiff United Bank of Kuwait, PLC ("UBK") is a British
bank having offices in New York City. In October 1987, Southern
Atlantic and UBK had entered into a Mortgage Warehousing Loan
and Security Agreement ("the Security Agreement") under which
UBK was to extend a $10 million revolving line of credit to
Southern Atlantic to allow Southern Atlantic to finance and
resell residential mortgage loans. Berrio Aff., Exh. A. The
Security Agreement required Southern Atlantic to provide UBK
within 120 days of the end of each fiscal year annual financial
statements certified without qualification.
PLEASE USE THIS COPY FOR ALL YOUR PURPOSES.
THE STATEMENTS YOU SENT US WERE NOT WHAT WE HAD
ISSUED TO SOUTHERN ATLANTIC.
JAMES M. BRIDGES, LTD.
UBK renewed its Security Agreement with Southern Atlantic.
However, on June 30, 1989, UBK declared Southern Atlantic in
default under the Security Agreement and demanded immediate
repayment. Southern Atlantic failed to repay its indebtedness
resulting in a loss to UBK in excess of $2 million. Berrio Aff.
The financial statements prepared by Bridges reflect that UBK
was Southern Atlantic's largest lender. During the course of
the audit, Bridges sent UBK a "Standard Bank Confirmation
Inquiry" dated July 1, 1988 requesting information about
Southern Atlantic's indebtedness under the line of credit.
Berrio Aff., Exh. B. UBK returned the signed statement to
Bridges on July 6, 1988. Bridges acknowledged at his deposition
that he or his ...