Brown V.the Board of Education

Brown v. The Board of Education

Abstract

This article will discuss the diversity suit governed by Illinois law, a bank complains that it lost money as a result of errors in an audit of one of its borrowers, Brandon Apparel Group, Inc., by the defendant, George Korbaken (GKCO). The bank contends both that it is a third-party beneficiary of the letter contract by which Brandon retained George Korbaken (GKCO) to conduct the audit and that George Korbaken (GKCO) committed the tort of negligent misrepresentation. The district judge rejected the bank's contract claim without much discussion but conducted a bench trial of the tort claim and afterwards entered judgment in George Korbaken's favor on both the contract and tort claims.

Introduction

Brandon made and sold clothing, although it also licensed the making and selling of much of its clothing in exchange for a percentage of the licensee's sales revenues. Brandon began borrowing money from Johnson Bank in 1997 and by the end of April 1999 owed the bank $10 million; and wanted more, and the bank lent it more, which the bank lost along with the $10 million when Brandon went broke the next year.

It was in late April of 1999, when Brandon was seeking the additional loan from the bank, that it instructed GKCO to give the bank the audit report that GKCO had just completed. The report summarized Brandon's financial results for 1998 and revealed that the firm had serious problems. But the report contained errors that the bank argues painted Brandon's situation in brighter hues than the audit justified and as a result induced the bank to keep lending to Brandon. Brandon did not repay Johnson Bank the new money it borrowed. Johnson Bank sued GKCO, alleging that GKCO Committed the tort of negligent misrepresentation and was therefore liable for the money lost by the bank as a result of the errors in the audit report prepared by GKCO. The U.S. District Court entered Judgment in GKCO's favor. Johnson Bank...