Verdict on Lehman Bros vs. Passarelli & Potts

[Joyce Potts]

If you roll up a firecracker in a Tootsie Roll wrapper and put some writing on it stating that it's only intended for use by Bobby (the bully down the street) but Timmy picks it up, unwraps it and blows off a couple of fingers and his lips I would think Timmy would have solid grounds for litigation.

In other words, intended use statements should only protect the appraiser from unusual and/or client specific peculularities. If a non-intended user is harmed by something pecular then the intended use statement should apply. If the appraisal is deficient in what a typical user group might expect and that is what harmed them then all the intended user statements in the world should have no bearing.

What kind of analogy is that? Go back to my post #5:

If I seek a legal opinion from an attorney and he writes me one that specifically states that his opinion is strictly for my benefit and no one else's, restricting any other third-party reliance and I go and hand it to my neighbor who runs with it and as a results suffers damage, does he have a right to sue that attorney?

If any appraisal for MARKET VALUE and within the context of the defined scope of work, can be relied on by ANYONE for any reason, then what's the purpose of USPAP? Let the lawsuits commence.

 

[PropertyEconomics]

What kind of analogy is that? Go back to my post #5:

If I seek a legal opinion from an attorney and he writes me one that specifically states that his opinion is strictly for my benefit and no one else's, restricting any other third-party reliance and I go and hand it to my neighbor who runs with it and as a results suffers damage, does he have a right to sue that attorney?

If any appraisal for MARKET VALUE and within the context of the defined scope of work, can be relied on by ANYONE for any reason, then what's the purpose of USPAP? Let the lawsuits commence.

Joyce .. I think the issue is should you have anticipated your neighbor using the opinion you have? As you know, I have long held that because we attempt to limit our liability by saying only so and so can use a report, I believe its simply not so, and in your instance the court has agreed.
What I think this has shown is that we must anticipate a number of users of our reports and we should anticipate that the secondary market may rely upon them as well. Unfortunately this case has tested and shown how courts will view our role and our liability within the lending transaction. Frankly, for us to have ever thought differently is really rather naive. In this instance, atleast your firm didnt realize a huge financial loss as a result of the lesson.
I think USPAP without specifically stating, has attempted to show us that there are intended users of our report but that we need to think a bit beyond the words on the written page. I think its a heads up to think outside the box. Unfortunately, this case is proof that such thinking must be contemplated and considered when signing our names.
A round about way would have been for Lehman to have sued the firms client who then would have sued the firm. The results are the same, and in that instance the stated intended user then would have been the plaintiff. Same result .. different direction of action through the courts.

 

[Ken B]

I would think that if "liability limitation" statements had any chance of being an effective defense, every single E&O insurer would require their use.

 

[DonRico]

"Clearly, especially if a jury trial, the writing is on the wall. If you appraised a property in 2003 - 06 then today that property, being worth less...makes every appraisal done in that timeframe "over-valued". This gun is pointed at us all."

Wait a minute.....is a judge saying that I am responsible for a downturn in value AFTER the effective date of my appraisal??

That having appraised a property based on conditions that existed at a specified date, I am now liable for it's value throughout time?!?!

No clear-thinking human can possibly support that position.

 

[Alison Swain]

No clear-thinking human can possibly support that position.

We're not talking about clear-thinking humans --- we're talking about trial lawyers and the people who hire them to sue anyone with a free-dangling E & O poloicy. :Eyecrazy:

 

[DonRico]

HA! Maybe my choice of adjectives was lacking!

But, seriously....that concept defies logic.

Can I apply that concept to the stock market? I bought some hi-tech stocks that flamed-out before I could sell them.....can I now sue the broker that sold them to me?

 

[Fred]

Again, what then is the purpose of identifying the intended user?

Answered in post 4.

And, where does the chain of liability stop, or does it?

In most states, at the end of reasonable forseeability. In other states, like Arizona, it stops with the lender.

 

[Fred]

I would think that if "liability limitation" statements had any chance of being an effective defense, every single E&O insurer would require their use.

Maybe the degree to which it exists has nothing to do with whether you write it.

 

[PropertyEconomics]

Maybe the degree to which it exists has nothing to do with whether you write it.

I would agree with you Steven. Liablity is what liablity is no matter what we put in the reports.

I am puzzled however as to why the court determined the amount of loss in property value based upon the value difference between the appraised value and the value of the property identified by another expert some year or just slightly more later. I am very curious as to why the court didnt require appraisal of the properties as of the date of the original appraisal report with the damages being anything different between those two valuations with each expert (appraiser and second appraiser) presenting their side to the court.
Removing all personalities here ... it appears the court has held the original appraiser liable for damages resulting from a loss in market value which is simply attributable to time and the amount of decline over that year or so, while at the same time specifically point out that the market had been in decline.

 

[Ken B]

The court did not say that. In fact, if one reads the information provided in the other thread, the court was very careful NOT to say that and to take time into consideration. Market change was not part of the defense. The defense tried to hang its hat on Intended User.