because no pleading at all would be sufficient. Since Tregenza involved a case where, as here, inquiry notice triggered the running of the limitations period, id. at *5-6, it would follow that facts establishing the date of inquiry notice would not have to be plead under the logic of Tregenza.
Defendants also argue, however, that plaintiff has pleaded itself out of court on the statute of limitations issue, which a plaintiff may do where it affirmatively pleads facts that establish the statute of limitations bars its claim. Tregenza, 12 F.3d 717, 1993 WL 529968, at *1; Early v. Bankers Life & Casualty Co., 959 F.2d 75, 79 (7th Cir. 1992). Here, defendants claim plaintiff has pleaded away its theory that the Illinois discovery rule saves the 1982 and 1983 allegations, by pleading facts that establish plaintiff was put on inquiry early enough that the period had run by the time the RTC succeeded to the claims asserted here. The court has examined the paragraphs of the Complaint defendants have marshalled in support of this theory, and concludes plaintiff has not pleaded itself out of court.
Defendants' first example of plaintiff having pleaded itself out of court is paragraphs 20 and 21 of the Complaint. Defendants claim that since paragraph 20 alleges that outside counsel for Horizon certified that a merger became effective November 15, 1982, and paragraph 21 alleges that based upon Peat Marwick's advice Horizon adopted a merger date of August 31, 1992, Horizon must have been on notice of any negligence related to this merger advice. Plaintiff's theory, allowing the plaintiff all reasonable inferences from the Complaint, is that Peat Marwick's advice to adopt the August 31 merger date despite the actual effective date of November 15 breached Peat Marwick's duties to Horizon. It is conceivable that inquiry notice that Horizon's injury was wrongfully caused could have come later than 1982. Peat Marwick offers another example, paragraphs 36 and 39 of the Complaint, where plaintiff alleges deficiencies in the work product of Peat Marwick. Defendants assert that Peat Marwick's financial statements should have put Horizon on notice of problems in Peat Marwick's 1982 advice. Perhaps so, but the Complaint does not compel that conclusion without reference to outside facts. Paragraph 56 is a closer call. In paragraph 56 plaintiff alleges that Peat Marwick made certain deletions to its 1983 draft management letter that described material weaknesses in internal controls of Horizon. These deletions, paragraph 56 alleges, "were made at the insistence of Horizon's management." (Complaint P 56) Defendants therefore raise a seemingly valid point: How could Horizon have failed to discover its injury or that it was wrongfully caused until 1988 or later under these circumstances? The answer to defendants' question for these purposes lies in recalling that this is a Rule 12(b)(6) motion to dismiss. Plaintiff is entitled to the reasonable inference that the interaction of Peat Marwick and Horizon during 1983 involved representations by Peat Marwick, and that any changes to a draft, even if initially suggested by Horizon's management, were agreed to and incorporated as part of the representations by Peat Marwick.
Here, plaintiff alleges a lapse by Peat Marwick in its examination of Horizon's internal controls. In short, while defendants' motion raises fact issues on which it could conceivably prevail, they have not satisfied their heavy burden of establishing that it is beyond doubt that the plaintiff is unable to prove any set of facts that would entitle it to relief.
As far as the contract claim is concerned, the issue the parties have focused on as dispositive is whether the Illinois ten-year statute of limitations for written contracts applies. 735 ILCS 5/13-206. Of course, on a motion to dismiss pursuant to Rule 12(b)(6), the relevant question is whether plaintiff has sufficiently alleged that the ten-year limitation would apply. Giving its pleadings the benefit of the doubt and all reasonable inferences, plaintiff has done so by alleging the agreements at issue were written. (Complaint PP 49, 88) Accordingly, defendants' argument in this regard fails as well.
Accordingly, as to the statute of limitations issue, defendants' motion to dismiss is denied.
III. MOORMAN DOCTRINE ATTACK ON THE FIRST CLAIM FOR RELIEF
Defendants attack plaintiff's first claim for relief in negligence by asserting the Illinois Moorman doctrine. That doctrine, enunciated by the Illinois Supreme Court in Moorman Manufacturing Corp. v. National Tank Co., 91 Ill. 2d 69, 435 N.E.2d 443, 61 Ill. Dec. 746 (1982), establishes that merely economic damages generally are not recoverable in tort. The Moorman case itself was a strict liability case, but the court's language broadly applied the doctrine to traditional negligence claims as well. Id. at 88, 435 N.E.2d at 451.
Since Moorman, it has become clear that the general rule is that the doctrine could apply to any negligence claim. See, e.g., Sporer v. DMJ Leasing & Trucking, Inc., 1994 U.S. Dist. LEXIS 515, No. 91 C 6833, 1994 WL 22319, at *4 (N.D. Ill. Jan. 24, 1994) ("The Moorman economic loss doctrine has been extended beyond the traditional products liability context . . . ."). However the Illinois Supreme Court has held that the Moorman doctrine will not bar economic recovery in an attorney malpractice case. Collins v. Reynard, 154 Ill. 2d 48, 607 N.E.2d 1185, 180 Ill. Dec. 672 (1992). The Collins court was careful, though, to limit the scope of its holding: "The ruling we announce today is limited to the specific field of lawyer malpractice as an exception to the so-called Moorman doctrine and to the distinctions separating contract from tort." Id. at 52, 607 N.E.2d at 1187. Thus, the Collins decision only goes so far, but surely the logic of Collins must be used in resolving other Moorman doctrine issues.
As a court of this district applying Illinois law observed, how far the Collins exception to the Moorman doctrine will go depends upon how one key phrase of the Collins opinion is applied. FDIC v. Miller, 781 F. Supp. 1271, 1277 (N.D. Ill. 1991). "Tort law," the Collins court emphasized, "applies in situations where society recognizes a duty to exist wholly apart from any contractual undertaking." Collins, 154 Ill. 2d at 51, 607 N.E.2d at 1186. In FDIC v. Miller, Judge Holderman held that the FDIC's claim of breach of fiduciary duty and negligence by the directors of a savings and loan would survive the Moorman doctrine because the claim sprang out of extra-contractual, fiduciary duties. 781 F. Supp. at 1277 (applying 2314 Lincoln Park West Condominium Assoc. v. Mann, Gin, Ebel & Frazier, Ltd., 136 Ill. 2d 302, 555 N.E.2d 346, 144 Ill. Dec. 227 (1990)). By the logic of Miller, whether to apply the Moorman doctrine here would turn on whether the relationship between Peat Marwick and Horizon Federal entailed duties outside of the contractual relationship.
Here, however, plaintiff's first claim for relief sounds in professional negligence related to duties undertaken by contract. To apply the Miller analysis here to save the negligence claim the court would have to turn its back on Moorman and its progeny. The allegation of fiduciary responsibility does not appear in the first claim for relief, and the relationship between Horizon and Peat Marwick arose out of a contract. Furthermore, the court's disposition as to the fourth claim (for breach of fiduciary duty) makes clear no fiduciary relationship can be alleged here. Thus, to allow a claim for purely economic damages to proceed on the first claim would be to allow such a claim on economic damages from simple professional negligence where a contractual relationship existed and no exception to the Moorman doctrine can be found in Illinois law.
Accordingly, defendants' motion is granted to the extent it seeks dismissal of plaintiff's first claim for relief.
IV. COUNT IV AND THE QUESTION OF FIDUCIARY DUTY
The fourth claim alleges breach of fiduciary duty by defendants. Defendant's motion to dismiss as to the fourth claim for relief raises the question whether an independent auditor can be a fiduciary to the financial institution it is auditing.
As the parties acknowledge, there is not much applicable Illinois or Seventh Circuit precedent here. The parties have fought over a few paragraphs in Congregation of the Passion v. Touche Ross & Co., 224 Ill. App. 3d 559, 590, 586 N.E.2d 600, 621, 166 Ill. Dec. 642 (1991), appeal allowed, 144 Ill. 2d 632, 591 N.E.2d 20, 169 Ill. Dec. 140 (1992). But this opinion does not resolve the issue. In Congregation of the Passion the broad fiduciary duty question was not squarely before the court, and the comments the court made cannot be extrapolated to a clear holding of law on this point.
The parties have turned to cases from outside the jurisdiction. An examination of those cases reveals that many courts squarely reaching the question have held that an independent auditor generally is not in a fiduciary relationship with its client. Some courts have gone as far as to observe that the nature of the independent auditor precludes a finding of fiduciary duty. The duty of a traditional fiduciary is to act "in a representative capacity for another in dealing with the property of the other," whereas an auditor acts "independently, objectively and impartially, and with the skills which it represented to its clients that it possessed." Franklin Supply Co. v. Tolman, 454 F.2d 1059, 1065 (9th Cir. 1971). A persuasive treatment of the issue is found in FDIC v. Schoenberger, 781 F. Supp. 1155, 1157-58 (E.D. La. 1992). Applying Louisiana law, the Schoenberger court agreed that "accountants do not owe a fiduciary duty to their clients when providing services as auditor; rather the nature of an independent auditor is that it will perform the services objectively and impartially." Id. at 1157 (citing cases); see also Mishkin v. Peat, Marwick, Mitchell & Co., 744 F. Supp. 531, 552 (S.D.N.Y. 1990) ("'Courts do not generally regard the accountant-client relationship as a fiduciary one.'" (citation omitted)); cf. Painters Dist. Council No. 21 Welfare Fund v. Price Waterhouse, 879 F.2d 1146, 1149-50 (3d Cir. 1989) (independent accountant not an ERISA fiduciary). Contra In re Investors Funding Corp., 523 F. Supp. 533, 542 n.4 (S.D.N.Y. 1980). None of this is to suggest that the auditor is free of duties, just that "they are not duties as a fiduciary." FDIC v. Schoenberger, 781 F. Supp. at 1158. The United States Supreme Court has agreed at least to the bedrock thesis under this legal conclusion. See United States v. Arthur Young & Co., 465 U.S. 805, 818, 104 S. Ct. 1495, 1503, 79 L. Ed. 2d 826 (1984) ("The independent auditor assumes a public responsibility transcending any employment relationship with the client. . . . This 'public watchdog' function demands that the accountant maintain total independence from the client at all times and requires complete fidelity to the public trust."). The reasoning of the above cases persuades the court that this view of the relationship between independent auditor and client comports with Illinois law.
Perhaps in some instances the function of an independent auditor could overlap into areas in which it would hold a fiduciary duty to its client. But in general that is not the case, and nothing in plaintiff's allegations raises any special instance here. All of plaintiff's allegations relate to Peat Marwick's alleged mishandling of its role as independent auditor. Often, in fact, plaintiff complains of derogation of the duties imposed on Peat Marwick because of its independence. (E.g. Complaint PP 2(a)(4), 52, 65) Nor does plaintiff assert any special circumstances in its briefs, choosing instead to challenge the basic legal conclusion the court has reached.
Accordingly, defendants' motion to dismiss is granted to the extent it seeks dismissal of plaintiff's fourth claim for relief.
Defendants' Motion to Dismiss portions of the Complaint is granted in part and denied in part. Counts I and IV of the Complaint are dismissed.
Date: FEB 17 1994
JAMES H. ALESIA
United States District Judge