The opinion of the court was delivered by: CHIN
The Resolution Trust Corporation (the "RTC") brings this action seeking more than $ 112 million in damages for the alleged negligence of Coopers & Lybrand ("C&L") in auditing the December 31, 1987 financial statements of Caprock Savings and Loan Association ("Caprock"). According to the RTC, if C&L had performed the audit with the requisite professional care, it would have discovered Caprock's true financial condition and would have alerted the regulators and Caprock's board. Steps then would have been taken to stop further lending, averting the tremendous losses that followed. (See Compl. at PP 35-37).
The RTC brings this action both as receiver for Caprock and on its own behalf. C&L now moves to dismiss the RTC's complaint for failure to state a claim upon which relief may be granted. It argues that the RTC as receiver cannot state a claim, because Caprock's management did not rely on the allegedly negligent audit. It further argues that the RTC cannot state a claim on its own behalf, because the RTC has no standing to bring an action on its own behalf, and, even if the RTC has standing, the RTC did not rely on C&L's audit in making any payments. Because I hold that the RTC has adequately pled reliance and that it has standing to bring a tort action on its own behalf, C&L's motion to dismiss is denied in all respects.
A. C&L's Audit of Caprock
Defendant C&L is a partnership of certified public accountants doing business nationwide, with its principal place of business in New York. (Compl. at P 11). C&L issued audit reports and opinions on Caprock's consolidated financial statements for the last three months of 1985 and the years 1986 and 1987. (Compl. at P 15).
For the 1987 audit, C&L and Caprock entered into a written engagement agreement whereby C&L agreed to examine and report upon Caprock's consolidated financial statements for that year and to conduct its examination in accordance with the Generally Accepted Auditing Standards ("GAAS"). (Compl. at P 21). As part of that agreement, C&L acknowledged the duties imposed on auditors by the Federal Home Loan Bank Board (the "FHLBB"), including its obligation to file the audit with the FHLBB. (Compl. at P 22). C&L performed the audit on Caprock's 1987 consolidated financial statements and certified that they were fairly and accurately presented on the basis of Generally Accepted Accounting Practices ("GAAP"). (Compl. at P 16).
Caprock's 1987 consolidated financial statements, as certified by C&L, showed that it had a positive "GAAP capital" of $ 10.1 million and regulatory capital" of $ 11.5 million. (Compl. at P 17). The true financial picture, however, was starkly different. In fact, Caprock was insolvent because: (i) its loan loss reserves were understated by over $ 10 million; (ii) it had improperly recognized a $ 1.8 million dollar gain from a year-end real estate transaction; and (iii) it had inaccurately accounted for an acquisition and thus inappropriately added $ 5.4 million to its capital. (Compl. at P 17).
B. The Regulators Take Over
On or about July 31, 1989, the FHLBB declared Caprock insolvent, appointed the FSLIC as receiver, and authorized the creation of a new federal mutual association, Caprock Federal Savings and Loan Association ("Caprock Federal"). (Compl. at P 8). Substantially all the assets and certain liabilities of Caprock were transferred to Caprock Federal, and the FHLBB appointed the FSLIC as conservator of Caprock Federal. (Compl. at P 8).
On August 9, 1989, the FSLIC was abolished. Sixty days later, the FHLBB was dissolved. See Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), Pub. L. No. 101-73, 103 Stat. 183, Aug. 9, 1989, at §§ 401 (a)(1) and (2) (codified at 12 U.S.C § 1437 (repealed 1992)). Pursuant to FIRREA, the Office of Thrift Supervision (the "OTS") was created essentially to assume the enforcement functions of the FHLBB. See 12 U.S.C. §§ 1463-64. The RTC was created primarily to manage and to resolve all cases involving depository institutions that the FSLIC insured before FIRREA. 12 U.S.C. § 1441a(b)(3)(A)(i). Thus, the RTC assumed the role of receiver for both Caprock and Caprock Federal. (Compl. at P 8). As required by law, when Caprock was declared insolvent and put into receivership in July 1989 and ...