In Mosier v. Stonefield Josephson, the Ninth Circuit Court of Appeals affirmed summary judgment in favor of our auditor client in a $950 million Ponzi scheme case brought by a federal receiver. We were pleased to have been selected to handle this case of industry-wide importance. The Court of Appeals’ decision is significant and breaks new ground in the law of California governing claims against professionals in four areas. First, it is now clear that actual and justifiable reliance are required in order to prove causation in tort claims, including negligence and aiding and abetting, and breach of contract claims against auditors and other suppliers of information. Second, a qualified opinion or other warnings contained in information supplied by an auditor preclude justifiable reliance, and therefore causation. Third, contractual provisions that prospectively release claims when there has been a misrepresentation to an auditor or other professional may be enforced. And fourth, those sorts of contractual provisions bar a claim for unjust enrichment, in that there is nothing just about enriching a party who has deceived an auditor: “Mosier admits PEMGroup deceived Stonefield and kept them in the dark about their scheme ... PEMGroup got what it deserved.”
In short, the Mosier opinion reflects both the multiple legal deficiencies in the claims of the receiver, and the facts and admissions of the receiver himself that left no doubt that his claims against the auditor were meritless. The Court made clear the responsibility that this and any plaintiff must be held to in litigation against an accountant, and the burden of proof the plaintiff must satisfy. Moreover, Mosier will have application in connection with defense of other suppliers of information, such as attorneys, appraisers, brokers, escrow companies, and title insurers, companies and agents, depending on the theories of liability asserted.
