Opinion
January 30, 1996
Appeal from the Supreme Court, New York County (Harold Tompkins, J.).
The claim for punitive damages was properly dismissed in the absence of allegations of a public wrong ( see, Banque Indosuez v Barclays Bank, 181 A.D.2d 447), or of defendant's knowledge and concealment of illegal acts or failure to withdraw in the face of a conflict of interest ( see, Spingold Found. v Wallin, Simon, Black Co., 184 A.D.2d 464, 465-466). Plaintiffs' claims of fraud or recklessness were sufficiently particularized by allegations of, inter alia, the generally accepted auditing standards defendant departed from, how that departure rendered defendant's financial reports inaccurate, and why plaintiffs' reliance was reasonable ( see, Weinberger v Kendrick, 451 F. Supp. 79, 83-84 [SD NY]); how defendant recklessly failed to independently verify and investigate the documents of a corporation it knew had severe internal control and reporting problems ( see, Joel v Weber, 166 A.D.2d 130, 136); and how defendant failed to investigate the accusations of gross under-reporting of liabilities ( see, Curiale v Peat, Marwick, Mitchell Co., 214 A.D.2d 16, 19-22). However, plaintiffs' claims of negligence were not adequately supported by allegations of conduct on defendant's part creating a relationship between the parties approaching privity ( see, Security Pac. Bus. Credit v Peat Marwick Main Co., 79 N.Y.2d 695, 705). At most, plaintiffs' allegations show only that their reliance on defendant's financial reports was an "`indirect or collateral'" consequence of defendant's auditing work, and not "`the end and aim of the transaction'" ( Kidd v Havens, 171 A.D.2d 336, 339). Accordingly, we modify to dismiss the negligence claims.
Concur — Rosenberger, J.P., Rubin, Kupferman, Nardelli and Tom, JJ.