The opinion of the court was delivered by: CASTILLO
Maureen Dougherty brings this diversity action against Albert Zimbler for fraud and negligent misrepresentation by an accountant. Dougherty claims that Zimbler, an accountant, made false statements of fact to her and omitted material facts in his representations to her in order to convince her to purchase a business from Zimbler's client, Tad Bero. Presently pending before the Court is Zimbler's motion for summary judgment.
The facts in this case have been gleaned from the parties' Local Rule 12(M) and 12(N) statements.
Zimbler has been the accountant for Bero since 1979, and also performed accounting services for Bero's two businesses, Kitchens By Bero, Inc., and Tad Bero Kitchens and Bath, Inc. (collectively, "the business"). By 1991, Zimbler was aware that the business had accumulated liabilities and liens against it for failing to pay state sales taxes and state and federal payroll taxes. Bero's corporations also owed Zimbler approximately $ 20,000. Dougherty claims that Zimbler also knew, or should have known, that the Internal Revenue Service had issued liens on Bero's corporate bank accounts and that Bero was attempting to run the finances of the business through other checking accounts; Zimbler was a payee on a check drawn on one of those "special accounts." Zimbler was aware that Bero had decided to sell the business before the close of fiscal year 1991.
In the fall of 1991, Dougherty entered negotiations to purchase the assets of the business. Dougherty avers that she met with Bero and Zimbler over dinner on November 7, 1991 to discuss buying the business, and met again in Bero's office the next day, where Zimbler gave her an income statement reflecting the business' income and expenses for the 12-month period ending March 31, 1991. Dougherty claims that Zimbler assisted in the negotiations, orally representing that the business had been around for 17 years, that it was very successful and stable, and that it had profit margins of 35% to 40%.
Gilbert advised Dougherty that if the numbers she had been given originally were accurate, she would have a reasonable chance to make a profit if she were able to keep costs at the level he estimated and she made sales of $ 850,000. Dougherty then arranged to purchase the business from Bero in early 1992. Zimbler denies that he met with Dougherty on any occasion before the closing or provided her with any information.
Dougherty operated the business through August of 1993. As part of the purchase of the business, Dougherty gave two promissory notes to corporate entities controlled by Bero. In August of 1993, Bero sued Dougherty for debts that Dougherty allegedly owed under the promissory notes. Dougherty counterclaimed that she was defrauded and sought, inter alia, rescission of the notes. The court found that Dougherty had been defrauded by Bero when she bought the business and granted her request for rescission.
On December 16, 1993, while Dougherty's fraud counterclaim against Bero was pending, Bero filed for bankruptcy and obtained an automatic stay of Dougherty's claim. Dougherty filed an adversary complaint against Bero in bankruptcy court. That court also concluded that Dougherty was defrauded, and found that Bero's liability for his fraudulent misrepresentations was non-dischargeable under the Bankruptcy Act.
Dougherty then brought this action for fraud and negligent misrepresentation against Zimbler, claiming that he orally misrepresented the profitability of the business, provided her with selective financial reports that did not disclose the true financial health of the business, and failed to inform her of the various negative facts he knew. Zimbler has moved for summary judgment, arguing that Dougherty cannot meet her burden to prove fraud by clear and convincing evidence, and that the claim for negligent misrepresentation fails to meet the requirements of § 30.1 of the Illinois Public Accounting Act, 225 ILCS 450/30.1. For the following reasons, Zimbler's motion is denied in part, and granted in part.
Summary judgment is proper only if the record shows "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). A genuine issue for trial exists only when the evidence could allow a reasonable jury to return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). The court must view all evidence in a light most favorable to the nonmoving party, Valley Liquors, Inc. v. Renfield Importers, Ltd., 822 F.2d 656, 659 (7th Cir.), cert. denied, 484 U.S. 977, 98 L. Ed. 2d 486, 108 S. Ct. 488 (1987), and draw all inferences in the nonmovant's favor. Santiago v. Lane, 894 F.2d 218, 221 (7th Cir. 1990). However, if the evidence is merely colorable, or is not significantly probative, summary judgment may be granted. Anderson, 477 U.S. at 249-50; Flip Side Prods., Ltd. v. Jam Prods., Ltd., 843 F.2d 1024, 1032 (7th Cir.), cert. denied, 488 U.S. 909, 102 L. Ed. 2d 249, 109 S. Ct. 261 (1988). In determining whether a genuine issue exists, the court "must view the evidence presented through the prism of the substantive evidentiary burden." Anderson, 477 U.S. at 254. In making its determination, the court's sole function is to determine whether sufficient evidence exists to support a verdict in the nonmovant's favor. Id. at 255. Credibility determinations, weighing evidence, and drawing reasonable inferences are jury functions, not those of a judge deciding a motion for summary judgment. Id.