X hits on this document





25 / 90

and virtually, if not legally, fraudulent.(n262) The court's holding appears to reflect a conviction that it was dealing with the equivalent of an intentional tort for which neither contributory nor comparative negligence should be a defense.

In a later case, Garcia v. Superior Court,(n263) the dissent pointed out that, under California law, a misrepresentation made because of the defendants' failure to exercise due care, and which results in physical injury, is not to be treated as negligent misrepresentation, but rather as ordinary negligence.(n264) Presumably, in such an instance, comparative fault would be applicable. In Dhanda v. Tri M. Ltd.,(n265) a Massachusetts court pointed out that its state statute limited the application of comparative fault to "negligence resulting in death or injury to person or property."(n266) The court noted that comments to the Restatement considered it "debatable" whether comparative negligence should include pecuniary harm.(n267) But this court also noted that the authorities were divided on the issue.(n268)

In Florenzano v. Olsen,(n269) the Minnesota Supreme Court reversed a lower appeals court, which had relied on the reasoning of Carroll v. Gava. The supreme court observed that the "majority of other states considering the case disagree and have held principles of comparative responsibility applicable to cases of negligent misrepresentation."(n270) The court further noted that commentators agree with the majority rule, and "Professor Prosser states that there is 'no apparent reason for distinguishing negligent misrepresentation from any other negligence in [the application of contributory or comparative negligence concepts]."'(n271) The Carroll v. Gava holding reflects an understandable reluctance to expand the application of comparative fault concepts, except with great caution--especially when subtle distinctions must be drawn between intentional and negligent conduct. But clearly the majority rule favoring comparative fault application as articulated by the Minnesota Supreme Court is the better one: apportionment of responsibility is a principle that has been tested for the better part of a century and has met with wide approval. We would urge that the concept be applied with greater boldness, especially in the apportionment of culpability among joint tortfeasors, whether their acts are intentional, negligent, or something in between.

The Efficiency of the Joint and Several Rule

Landes and Posner(n272) define an efficient negligence rule as one that maximizes wealth(n273) by minimizing the sum of the expected cost of accidents and the cost of precautions exerted to prevent accidents.(n274) In the case of auditors and their clients' negligent misrepresentations, we can consider the "accident" to be the event of pecuniary loss proximately caused by the misrepresentations to creditors, investors, and guarantors, and its cost to be the dollar amount of the loss that is suffered.(n275) The cost of precautions is the quality control expenditure made by both auditors and their clients to avoid negligently caused loss. If either the client or the auditor could have prevented the accident by taking due care, and they both fail to do so, the case becomes what Landes and Posner call a simultaneous joint tort of the alternative care variety.(n276) In such an instance the optimum rule would be to assign liability only to the lesser-cost avoider.(n277) Presumably, this party would be the auditor's client, because the client can more easily evaluate its own assets and liabilities. Thus, a common law privily rule would accomplish the optimum result; third parties would be barred from suing the auditor for negligence, and only the lesser-cost avoider, the client, would be liable.


Document info
Document views342
Page views342
Page last viewedMon Jan 23 02:19:51 UTC 2017