| Buying and Selling Automobile Dealerships
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| | there must have been some conduct on the
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| - Duties Negotiating the ContractDuties
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| | part of the accountants linking to that
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| of and to ShareholdersThe sale of control
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| | party or parties, which evidences the
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| of a corporation at a premium is not in
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| | accountants' understanding of that party
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| and of itself a breach of duty. A
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| | or parties' reliance. See: Ultramares v.
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| "premium" is that amount an investor is
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| | Touche and Credit Alliance Corp v. Arthur
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| willing to pay to gain control of a
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| | Anderson and Co.2) The Foreseeability
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| corporation.But, a sale of control under
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| | Approach holds that an accountant is
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| the following circumstances may be
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| | liable to a third party whose reliance on
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| actionable:1. The sale of control is in
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| | the accountant's services was reasonably
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| effect a disposition of control over a
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| | foreseeable to the accountant.
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| business asset which the corporation may
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| | Accordingly, an accountant who prepares
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| not use to the corporation's advantage.
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| | an audit report is liable to a third
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| Example: if a majority shareholder sells
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| | party for negligent misrepresentation if
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| his shares to a party that is paying a
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| | it is reasonably foreseeable that such
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| premium for control over certain
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| | third party might obtain, and rely on,
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| transactions, but who otherwise would not
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| | the audit report. This is an expansive
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| pay a premium for the corporation itself.
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| | view of accountant liability and even a
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|
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| | number of the small group of states that
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| 2. The majority shareholder failed to
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| | adopted it, have retreated from it. New
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| disclose receipt of a premium when a
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| | Jersey, for example, passed a more
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| purchaser attempted to acquire the
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| | restrictive statute: N.J. Stat. Section
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| minority's share;
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| | 2A: 53A-25 (L. 1995, 2000).3) The
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| 3. The majority shareholder failed to
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| | Restatement Approach adopted over half
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| disclose favorable employment contracts,
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| | the states that holds an accountant is
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| profit sharing agreements and the like.
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| | liable to third party if he supplies
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| 4. If the offer is to purchase all
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| | information to a third parties that is
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| shares at the same price, but the
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| | actually foreseen as a user of the
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| majority first buys-out the minority at a
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| | information for a particular purpose. In
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| lower price, without disclosing the
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| | other words, for liability to attach the
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| higher offer the minority
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| | plaintiff must be a member of a limited
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| shareholder.Although the law is still
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| | class to whom the accountant intends to
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| developing it appears the minority may be
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| | supply the information, or to whom the
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| eliminated at a lower price, if there is
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| | accountant knows the recipient intends to
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| a legitimate business purpose.State case
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| | supply it, and who suffers a loss through
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| and statutory law is diverse on the
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| | reliance on the information for
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| question of minority shareholder rights.
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| | substantially the same purposes as the
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| Given two identical fact situations, a
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| | bona fide client. For example, the
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| sale by majority shareholder could, for
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| | accountant may be held liable to a third
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| example, give rise to a cause of action
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| | party lender if the accountant is
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| in California, while conforming to
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| | informed by the client that the audit
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| Delaware law. In sales involving several
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| | report would be used to obtain a loan,
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| shareholders, the attorneys for each
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| | even if the specific lender remains
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| shareholder should research the question
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| | unidentified or the client names one
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| of "premiums", with respect to both the
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| | lender and then borrows from
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| state of incorporation and the state
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| | another.Libel and SlanderEvery
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| wherein the company's principal place of
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| | jurisdiction has statutory definitions
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| business is located.Duties to Other
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| | for libel and slander, the elements of
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| PurchasersProbably the biggest case in
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| | which include a false and unprivileged
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| this area was a Houston jury's award of
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| | publication by writing or orally, which
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| $7.53 billion in actual damages and $3
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| | has a tendency to injury a person with
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| billion in punitive damages to Penzoil
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| | respect to his office, trade, or
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| Co. In 1984, Penzoil was negotiating a
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| | business. Included are statements
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| takeover deal with Getty Oil Co., which
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| | impugning the competency of a dealer to
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| Texaco eventually purchased for $10.2
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| | manage the affairs of a dealership.During
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| billion. Penzoil then sued Texaco for $14
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| | the course of negotiations, a buyer
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| billion, charging that Texaco coaxed
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| | sometimes become frustrated with a
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| Getty into jilting Penzoil takeover
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| | seller's actions and expresses those
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| deal.Intentional interference with
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| | frustrations by impugning the seller's
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| contractual relations, intentional
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| | ability to operate a dealership. Such
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| interference with prospective business
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| | statements, while generally harmless,
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| advantages and related torts are "hot
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| | assume a magnified significance, when the
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| ticket items" and general and punitive
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| | purchaser is negotiating to acquire a
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| damages are almost unlimited. This
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| | financially troubled dealership. At best,
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| exposure provides another reason both
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| | under such circumstances, lenders are
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| buyer and seller should involve their
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| | apprehensive; at worst, they are
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| attorneys to a greater extent than just
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| | neurotic. Invariably, at some point
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| having them review the Buy-Sell
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| | during the negotiations, a purchaser will
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| Agreement.Opinions as to
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| | meet the seller's lender and at that
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| PerformanceSellers inevitably opine how
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| | point in time -- more than any other --
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| well a dealership will do with additional
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| | the prospective purchaser must realize
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| capital or a new owner and the courts
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| | that he has the ability to damage the
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| have generally supported the adage "No
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| | seller and must be disciplined enough to
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| one can predict the future" and refused
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| | be discreet when commenting upon the
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| to recognize a cause of action based upon
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| | seller's status, or abilities, regardless
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| one party's predictions, to the other
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| | of how determined a lender's inquires may
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| regarding future events, performance,
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| | appear.Interference with a Contract or
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| opinions, or intentions.Statements such
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| | Prospective ContractWhether or not a
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| as "there are no bad franchises -- only
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| | prospective buyer becomes the ultimate
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| bad operators"; the store was "a gold
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| | purchaser, the prospect has a duty not to
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| mine"; or that the buyer would make more
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| | intentionally or negligently interfere
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| money than before have been held "purely
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| | with a contract, or, in many states, a
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| opinion, puffing, or conjecture as to
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| | prospective business advantage, of the
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| future events" and as a matter of law not
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| | seller. Again, during the course of
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| actionable.Automobile dealerships are
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| | negotiations, there are occasions when a
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| anomalies in the field of buying and
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| | purchaser is tempted to say or do
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| selling businesses because by the very
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| | something in order to frighten a
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| nature of the business both parties must
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| | competitive bidder and preserve an
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| be amongst the most knowledgeable people
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| | exclusive business opportunity. Such
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| in the field, as the seller has already
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| | actions are proscribed and when called
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| been qualified by both the factory and a
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| | upon to determine the legitimacy of the
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| financial institution as having that
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| | purchaser's actions the courts will
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| special knowledge and extra skill
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| | generally consider the following factors:
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| necessary to be approved as a dealer; and
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| | (a) the conduct (b) the motive; (c) the
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| the buyer by virtue of the fact that the
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| | interests of the other with which the
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| buyer intends to purchase the dealership
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| | actor's conduct interferes; (d) the
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| has represented that he possessions the
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| | interests sought to be advanced by the
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| knowledge and skill necessary to obtain
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| | actor: (e) the social interest in
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| factory and finance approval, or that
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| | protecting the freedom of action of the
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| someone on his team possesses the
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| | actor and the contractual interests of
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| necessary qualifications.In Denison State
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| | the other; (f) the proximity or
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| Bank v. Madeira the defendant purchased
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| | remoteness of the actor's conduct to the
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| an automobile dealership and in addition
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| | interference, and (g) the relationship
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| to refusing to pay his loan, he
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| | between the parties. See Second
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| cross-complained against the bank
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| | Restatement of Torts and Buckaloo v.
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| alleging the bank misrepresented and
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| | Johnson.SummationThe increased dollar
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| omitted material facts about the
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| | value, of dealerships, combined with the
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| dealership when he purchased it. In
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| | higher level of sophistication of today's
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| reversing a jury verdict against the bank
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| | automobile dealer, versus the automobile
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| the appellate court stated the defendant
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| | dealer of twenty years ago, has led to
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| was a knowledgeable car man and although
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| | more dealers being willing to litigate,
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| he testified he trusted and relied upon
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| | when they have been damaged. Recently,
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| the Bank to furnish him complete, honest
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| | that litigation has expanded from dealers
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| information, he could not abandon all
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| | suing manufacturers, to dealers suing
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| caution and responsibility for his own
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| | dealers. If one had to predict the area
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| protection and unilaterally impose a
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| | in which litigation will expand, in the
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| fiduciary relationship on the bank
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| | next ten years, one would have to include
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| without a conscious assumption of such
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| | in that prediction the area surrounding
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| duties by the bank. See too: Kruse v.
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| | buy-sell negotiations.The courts have
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| Bank of America where the court stated
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| | held, time and again, that hard
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| the plaintiffs could not have reasonably
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| | bargaining is part of the American system
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| expected what they said they expected
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| | [Sheehan v. Atlantic International
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| from the bank's promises and
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| | Insurance Co., but they have also noted,
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| assurances.But Beware: In Martens
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| | that the notions of fair play and a sense
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| Chevrolet, Inc. the owner of the
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| | of propriety are also a part of that
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| dealership was negotiating with the
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| | system. [Rich Whillock, Inc. v. Ashton
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| plaintiffs to sell his dealership and in
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| | Development, Inc.] And, while many
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| response to plaintiff's inquires as to
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| | scholars agree that the most successful
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| the profitability of the dealership the
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| | negotiations result in solutions where
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| owner indicated that it was "mildly
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| | both parties, to one degree or another,
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| profitable" and offered produced a
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| | win, the courts recognize that each party
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| handwritten trend sheet prepared by his
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| | not only has a duty to protect their own
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| accountants supporting the statement and
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| | interests and that of their shareholders
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| stating that the audited statements of
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| | [Cosoff v. Rodman (In re W.T. Grant Co.],
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| the dealership's operations were not
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| | but that people who do not affirmatively
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| complete or available.After the purchase,
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| | perform that duty [due diligence], have
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| the buyer learned that the dealership was
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| | no cause of action against their
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| operated at a loss as reflected in
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| | opponents, because the opponents did not
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| audited statements prepared prior to the
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| | perform the duty for them. [See: Dennison
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| negotiations and sale sued alleging
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| | State Bank v. Madeira, 230 Kan. and
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| breach of contract, deceit and negligent
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| | Macon County Livestock Market, Inc. v.
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| misrepresentation against the former
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| | Kentucky State Bank, Inc.].In summation,
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| owner. The Court assumed a duty existed
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| | the negotiation table is a business
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| between the former owner and the buyer
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| | table, at which, both parties are
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| and reaffirmed the tort of negligent
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| | expected to be at their best with respect
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| misrepresentation against the
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| | to preparation, presentation and
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| dealer.Special Rules for AccountantsThere
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| | determination. If one party is lacking in
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| are three different tests employed by
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| | one of the categories, it is not the
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| other courts to determine what, if any,
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| | responsibility of the other party to
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| duty an accountant has to a third party,
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| | supplement the deficiency. To the
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| in preparing a financial statement for
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| | contrary, the participants have a duty to
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| his own client. These tests were:1) The
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| | themselves, their families and to their
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| Traditional (Ultramares) Approach holds
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| | shareholders to obtain the best possible
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| that before a plaintiff could sue an
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| | terms, without unjustly fettering the
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| accountant he had to have privity, or a
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| | opposing party's ability to respond.John
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| relationship equivalent to privity. The
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| | Pico is a vice president of Automotive
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| Plaintiff must establish (a) the
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| | Advisors. He has completed over 1,000
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| accountants must have been aware that the
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| | dealership transactions, and published
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| financial reports were to be used for a
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| | the first books copyrighted in the
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| particular purpose or purposes; (b) in
| |
| | Library of Congress on Buying and Selling
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| the furtherance of which a know party or
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| | Automobile dealerships.
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| parties was intended to rely; and (c)
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| |
|
