The Georgia Supreme Court has overturned the Georgia Court of Appeals and struck down a $44 million damages award against BDO Seidman filed by Mindis Acquisition Corp.
According to court documents, Mindis Acquisition, was created to purchase Mindis Corp., a Georgia-based scrap metal recycling facility. After the purchase was complete MAC discovered that the inventory value of Mindis was less than what appeared on Mindis’s financial statements. MAC then sued Mindis’s accountants, BDO Seidman, LLP, for negligent misrepresentation, contending that BDO was negligent in its audit of Mindis’s financial statements.
The trial court instructed the jury that damages were to be determined by the standard used in fraud and deceit cases, a benefit-of-the-bargain standard.
The jury found in favor of MAC and awarded $44 million. The company had paid $40 million to acquire the scrap metal firm.
The Court of Appeals rejected BDO’s contention that the jury was charged on an improper fraud standard of damages and affirmed the jury’s verdict.
The Supreme Court ruled unanimously that the trial court erred in its instructions to the jury, resulting in an inappropriate award. It ordered a new trial to determine proper damages, if any, in Mindis Acquisition Corporation v. BDO Seidman.
In its ruling, the Supreme Court found that the measure of damages used in the trial, the "benefit-of-the-bargain" standard, was not correct for a negligence case where no fraud or deliberate misconduct on the part of the auditor was alleged. Instead, the trial judge should have instructed the jury to apply the "out-of-pocket" loss standard--the difference, if any, between what was paid and the value received.Latest from Recycling Today
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