Industrial Indemnity Co. v. Touche Ross & Co.

Touche Ross & Co. (Touche) appeals from an order granting the motion of plaintiff and cross-appellant Industrial Indemnity Co. (Industrial) for a new trial on the issue of damages. It contends that the trial court abused its discretion in granting the motion. Applying the Supreme Court’s recent decision in Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370 [ 11 Cal.Rptr.2d 51 , 834 P.2d 745 ], we agree. Therefore, we reverse the new trial order. We also reject Industrial’s cross-appeal from the judgment.

Factual and Procedural Background

Buttes Gas and Oil Co. (Buttes) was a publicly traded company which leased drilling rigs to major oil companies, drilled for oil and gas, and owned oil and gas, agricultural and mineral properties. For many years, Touche conducted annual audits of Buttes’s general purpose financial statements and prepared standard audit opinions for Buttes. In March 1984, Touche issued an unqualified or “clean” audit opinion with respect to Buttes’s 1983 financial statements.

Dimensional Credit Corporation (DCC) was organized to make short-term, unsecured loans at a reasonable cost to small- and medium-sized, publicly held companies like Buttes. DCC…