§55.2 Professionals and Business Persons

The Case: Robinson v. Omer , 952 S.W.2d 423 (Tenn. 1997).

The Basic Facts: Robinson accused Omer, a lawyer, of giving him improper advice that resulted in Robinson having to pay damages to others. Omer denied giving the advice and denied that the tort of negligent misrepresentation was applicable under the facts.

The Bottom Line:

• "This Court has recognized three distinct actions in tort based upon misrepresentation: fraud or deceit; strict liability under [Section 402B of the Restatement (Second) of Torts (1965)]; and negligent misrepresentation under [Section 552 of the Restatement (Second) of Torts (1977)]. Ritter v. Custom Chemicides, Inc., [912 S.W.2d 128, 130 (Tenn. 1995)]; see also John Martin Co. v. Morse/Diesel, Inc., [819 S.W.2d 428 (Tenn. 1991)]; Jasper Aviation, Inc. v. McCollum Aviation, Inc., [497 S.W.2d 240, 242-43 (Tenn. 1972)]." 952 S.W.2d at 426-27.
• "This case concerns the third cause of action, negligent misrepresentation. Tennessee has adopted [Section 552 of the Restatement (Second) of Torts] 'as the guiding principle in negligent misrepresentation actions against other professionals and business persons.' Bethlehem Steel Corp. v. Ernst & Whinney, [822 S.W.2d 592, 595 (Tenn. 1991)]. Section 552 provides, in pertinent part, as follows:

  (1) One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
  
  (2) Except as stated in Subsection (3), the liability stated in Subsection (1) is limited to loss suffered
  
  (a) by the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and
  
  (b) through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction.

  [RESTATEMENT (SECOND) OF TORTS, § 552 (1977) (emphasis added)]." Id. at 427.
• "In discussing the requirements for recovery under Section 552, this Court has stated that liability in tort will result, despite the lack of contractual privity between the plaintiff and defendant, when,

  (1) the defendant is acting in the course of his business, profession, or employment, or in a transaction in which he has a pecuniary (as opposed to gratuitous) interest; and
  
  (2) the defendant supplies faulty information meant to guide others in their business transactions; and
  
  (3) the defendant fails to exercise reasonable care in obtaining or communicating the information; and
  
  (4) the plaintiff justifiably relies upon the information.

  John Martin Co. , 819 S.W.2d at 431 (emphasis added); accord Ritter, 912 S.W.2d at 130." Id.
• "Applying this formulation of the rule, this Court has allowed non-clients to recover from attorneys under Section 552. See Collins v. Binkley, [750 S.W.2d 737 (Tenn. 1988)]; Stinson v. Brand, [738 S.W.2d 186 (Tenn. 1987)]. In these cases, the lawyers had negligently provided erroneous information in the course of real estate transactions which was relied upon by nonclient participants to the transactions. This Court held recovery was appropriate, even though the plaintiffs were not clients, because the advice was given for the guidance of the plaintiffs in the course of the real estate transaction and reliance upon that advice was justifiable and foreseeable." Id.
• "Likewise, in the non-lawyer cases involving application of Section 552, recovery has been allowed only when the advice or information negligently supplied was given in the course of a commercial or business transaction for guidance of others in their business transactions. See e.g. Bethlehem Steel Corp., 822 S.W.2d at 592 (national accounting firm which negligently prepared an audit report regarding customer of manufacturer held liable to manufacturer which relied upon the audit report to its detriment in extending credit to customer); John Martin Co. , 819 S.W.2d at 429 (construction manager who negligently supplied information regarding the construction project held liable to subcontractor who relied upon the information in performing work at the site); Tartera v. Palumbo, [453 S.W.2d 780 (Tenn. 1970)] (land surveyor who negligently prepared a plat for the purchaser of property held liable to sellers because he had full knowledge that the survey was to be used for describing the property in the warranty deed upon which both the sellers and buyers would rely); Shelby v. Delta Air Lines, Inc., [842 F.Supp. 999, 1015 (M.D. Tenn. 1993)] ('The Tennessee cases involving negligent misrepresentation all involve commercial transactions.')." Id. at 427-28.
• "[The Court reviewed certain facts from the record and concluded that] assuming, as we must, that defendant Omer advised Lineberry that secretly videotaping his sexual encounters, without the consent of the women involved, was legally permissible, Robinson's negligent misrepresentation claim must fail because that advice was not given for the guidance of Lineberry or Robinson in their business transactions. See Shelby, 842 F.Supp. at 1015 ('[T]he language of Section 552 expressly refers to the negligent supplying of false information 'for the guidance of others in their business transactions.'') (emphasis in original) (applying Tennessee law); Pickering v. Pickering, 434 N.W.2d 758, 762 (S.D.1989) (husband's claim of negligent misrepresentation against wife for misleading him about the paternity of a child born during their marriage failed because it did not arise from a commercial or business transaction)." Id. at 428.
• "Robinson videotaped Lineberry's sexual activities solely as a favor to his good friend. Lineberry never paid Robinson for his efforts, and Robinson testified that when he decided to act as cameraman, business interests did not 'cross[ ] his mind.' Therefore, the evidence in this record, viewed in the light most favorable to Robinson, fails to establish an essential element of the claim for negligent misrepresentation--that the allegedly negligent advice given by Omer was meant to guide others in their business transactions." Id.

Other Sources of Note: Bennett v. Trevecca Nazarene University , 216 S.W.3d 293 (Tenn. 2006) (Section 552 applied in case where representative of property owner made statements to independent contractor employed to perform electrical work); Ritter v. Custom Chemicides, Inc., 912 S.W.2d 128 (Tenn. 1995) (Section 552 D is not limited to cases involving professionals but does not apply to products liability actions); Bethlehem Steel Co. v,. Ernst & Whinney, 822 S.W.2d 592 (Tenn. 1991) (Section 552 applies in actions by third parties against accountants); John Martin Co. v. Morse/Diesel, 819 S.W.2d 428 (Tenn. 1991) (privity is not required under Section 552); Homestead Group, LLC. v. Bank of Tennessee, 2009 WL 482714 (Tenn. Ct. App. Feb. 26, 2009) (affirming trial court's ruling in favor of defendant on negligent misrepresentation claim on same grounds as fraud claim finding no evidence in the record that the representation was false and finding plaintiff's reliance on the representation unreasonable); Akins v. Edmonson, 207 S.W.3d 300 (Tenn. Ct. App. 2006) (non-client could assert claim against attorney under Section 552, although claim was without merit under the facts); Staggs v. Sells, 86 S.W.3d 219 (Tenn. Ct. App. 2001) (comparative fault and vicarious liability applies to negligent misrepresentation cases).