Mosier v. Stonefield Josephson, Inc., No. 13-56453 (9th Cir. 2016)
Annotate this CasePlaintiff, the court appointed receiver for PEMGroup, filed suit against Stonefield, the CPAs who audited the financial statements for six of PEMGroup's fraudulent offerings, contending that Stonefield’s reports and related conduct materially misrepresented PEMGroup’s financial condition, allowing PEMGroup’s management to prolong the life of their scheme and to loot and to dissipate assets from PEMGroup. The district court dismissed plaintiff's claims of professional negligence and aiding and abetting the wrongful conversion of PEMGroup's assets. The court concluded that the district court properly concluded that to survive summary judgment, plaintiff would have to offer substantial evidence – meaning sufficient evidence to justify a verdict in his favor – that investors reasonably relied on Stonefield’s audits in order to show causation. In this case, before the district court and at oral argument, plaintiff admitted he did not submit direct evidence that investors relied on Stonefield’s audit reports or how PEMGroup used them. Further, the court concluded that the district court did not err in sua sponte dismissing plaintiff’s unjust enrichment claim. Accordingly, the court affirmed the judgment.
Court Description: California Tort Law. The panel affirmed the district court’s summary judgment in favor of accountants on tort claims brought by a court appointed receiver against the accountants who audited the financial statements for fraudulent offerings of the companies for which the receiver was appointed. The panel affirmed the district court’s grant of summary judgment on the receiver’s claims for professional negligence and aiding and abetting the wrongful conversion of the companies’ assets under California law. The panel held that the receiver did not raise a genuine issue as to causation because he did not show that either the companies or its investors relied on the audits. The panel also affirmed the district court’s grant of summary judgment on a claim of unjust enrichment.
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