Whether Plaintiff whose stock buy-back was set at a price determined by the Defendant satisfied the tripartite standard for privity necessary to establish a relationship with Defendant sufficient to support a claim for negligent misrepresentation.

No. Plaintiff did not prove facts sufficient to show a relationship establishing privity.

Plaintiff, while employed by Pasadena Capital Corp. ("Pasadena"), purchased over 40,000 shares of company stock in January of 1992. The purchase agreement provided that Pasadena would buy back the shares upon Plaintiff's termination. The price for the buy-back would be the ascertained fair market value, determined by Defendant, an independent third-party appraiser also employed by Pasadena. Defendant had for several years provided accounting services to Pasadena, including bi-annual reports determining stock value for the purposes of employee stock ownership purchases. Plaintiff was terminated in May 1996. In September of the same year, Pasadena notified Plaintiff that it was repurchasing the stock, at the price of $78.21 per share, as established by DefendantÁs report of June 30, 1996.

Plaintiff unsuccessfully challenged the stock repurchase, after attempting to obtain a preliminary injunction in federal court. Plaintiff then stipulated with Pasadena to a price of $3.9 million for the stock repurchase without prejudice to litigate for a higher price. The federal court called for arbitration according to the terms of the stock repurchase agreement. The final award valued the stock at $122.50 per share. Pasadena paid Plaintiff the difference between the stipulated award and the amount decided upon by arbitration plus interest, amounting to roughly $2.5 million.

Plaintiff then brought suit against Defendant on claims of professional negligence, negligent misrepresentation, and aiding and abetting PasadenaÁs breach of fiduciary duty. The Appellate Division reversed the Supreme CourtÁs denial of the motion for summary judgment and found no merit to the claim of aiding and abetting a breach of fiduciary duty. However, the Appellate Division divided on the privity issue. This was the issue that came to the Court of Appeals.

The Court of Appeals affirmed the lower courtÁs decision in dismissing the complaint. Liability for negligent misrepresentation arises only when there is a showing of privity. Under the tripartite standard necessary to establish privity, the facts must show that 1) the creator of the statement was aware that it would be used for a specific purpose; 2) there was reliance by the known party while in pursuit of that same specific purpose; and 3) there was evidence of some link between the creator of the statement and the relying party as well of an understanding of that reliance.

The Court of Appeals found the facts insufficient to prove privity. There were no facts suggesting Defendant knew its valuations would be used specifically to evaluate Plaintiffs stock repurchase plan. Plaintiff did not rely on DefendantÁs statements, nor is there evidence that Defendant knew of the PlaintiffÁs reliance. The Court of Appeals affirmed the order of the Appellate Division and did not answer the certified question on the ground that doing so was unnecessary.