Defendant EisnerAmper LLP (EisnerAmper) moves, pursuant to CPLR 3211, to dismiss the complaint. Defendant's motion is granted for the reasons that follow.

On April 11, 2014, plaintiff Israel Discount Bank of New York (IDB) commenced this action on its own behalf (and, purportedly, on behalf of three other banks) against EisnerAmper, an accounting firm, to hold EisnerAmper liable for its allegedly negligent auditing of non-party Oak Rock Financial, LLC (Oak Rock). IDB's complaint, filed on April 23, 2014 (Dkt. 9),^[FN1] does not indicate what causes of action are being asserted. However, IDB admitted in its opposition brief [IDB Br. at 3] and at oral argument [Dkt. 66 (9/30/14 Tr. at 3-4)] that it is only asserting a single cause of action for fraud and not asserting claims for negligence or professional malpractice.

Turning now to the allegations, as this is a motion to dismiss, the facts recited are taken from the complaint.

Oak Rock, founded in 2001 by non-party John Murphy, is "a specialty asset-based lending company." Complaint ¶¶ 12-13. Until the fraud at Oak Rock (discussed below) was discovered, Oak Rock was solely managed and controlled by Murphy. ¶ 12. Oak Rock makes "revolving asset-based loans" to installment financing dealers. ¶ 13. Simply put, Oak Rock [*2]funds the dealers' financing and collateralizes that funding with the receivables in which the dealers have a security interest. Id. Oak Rock, in turn, finances its lending with credit facilities with a lower cost of debt than Oak Rock charges the dealers. ¶ 15. Thus, Oak Rock leverages its ability to obtain relatively low-cost debt and creates credit lines for merchants via the dealers, with the dealers doing the actual merchant lending. The merchant lending is secured by the merchants' receivables, which is the collateral that flows upward to Oak Rock and its own financers, such as IDB, as the asset that backs this lending channel.

EisnerAmper issued unqualified Independent Auditors' Reports on Oak Rock's balance sheet and other financial statements for the years 2002 through 2011. ¶ 19. For 2002 through 2005, these audited reports were prepared by an EisnerAmper partner, Steve Singer. ¶ 20. Singer retired from EisnerAmper in 2006. ¶ 21. Thereafter, the audited repots were prepared by another partner, Steven Guzik. ¶ 22. Guzik, allegedly, "had virtually no experience in auditing asset based lenders." ¶ 23. According to the complaint, at least four other EisnerAmper employees [see ¶¶ 24-27] also worked on Oak Rock audited reports, "[s]ome or all" of whom "lacked appropriate experience in auditing asset based lenders." ¶ 28.

Each year, before EisnerAmper conducted its audit, Oak Rock signed substantially similar engagement letters. For instance, the engagement letter dated January 11, 2011 (for the 2010 audit) provided that "[t]he objective of [EisnerAmper's] audit is to express an opinion about whether [Oak Rock's] financial statements are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States [GAAP]." The engagement letter then explained that the audit would be conducted in accordance with generally accepted auditing standards (GAAS), which required that EisnerAmper "plan and perform the audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement whether caused by error or fraud. Accordingly, a material misstatement may remain undetected." The engagement letter further provided that "[t]he engagement is being undertaken solely for [Oak Rock's] benefit and the parties do not intend to provide contractual rights to any other person" [emphasis added]. The engagement letter also noted that "the financial statements are the responsibility of the management of [Oak Rock]" and that "[m]anagement is responsible for designing and implementing programs and controls to prevent and detect fraud."

At the beginning of each audit report, EisnerAmper attached virtually identical short letters describing the report. These letters form the basis for IDB's fraud claim. The letter preceding the reports for 2009 and 2010, dated April 12, 2011, began by reiterating, as set forth in the engagement letter, that "[t]hese financial statements are the responsibility of [Oak Rock's] management. [EisnerAmper's] responsibility is to express an opinion on these financial statements based on our audits." The letter continued by stating:

Oak Rock's balance sheets indicated that, for the years in question, its largest asset was its loan receivables (e.g., in 2010, Oak Rock's balance sheet indicates that it had approximately $145 million in outstanding loan receivables while it earned approximately $12.6 million of income). ¶¶ 30-31.

IDB began lending money to Oak Rock in July 2001 with a credit facility, whereby IDB obtained first priority security interests in Oak Rock's assets. ¶ 39. As a result, since 2001, IDB had a direct interest in Oak Rock's receivables. On May 9, 2006, IDB, as an agent for another lender bank (Bank Leumi USA), entered into an Amended and Restated Credit Agreement, under which Oak's Rock's credit facility was increased to $50 million. ¶ 40. Oak Rock and IDB further entered into an amended security agreement covering Oak Rock's collateral. ¶ 42.The credit agreement prohibited Oak Rock from borrowing "more than the greater of the Borrowing Base,' which was equal to 80% of the Borrower's Eligible Client/Dealer Loans, and the Maximum Revolving Credit Agreement.'" ¶ 41. Essentially, this borrowing cap was pegged to the value to Oak Rock's collateral, such that the amount borrowed would be tied to the value of its receivables.

In addition, the credit agreement obligated Oak Rock to deliver audited annual balance sheets and financial statements to IDB and its other lenders. ¶ 43. Over the following years, the credit and security agreements were amended numerous times, adding other lenders and altering the amount of the credit facility, but the financial statement reporting obligation remained. ¶¶ 44, 48, 52, 59, 67, 69. As noted earlier, throughout this time period, EisnerAmper issued audited financial statement reports vouching for Oak Rock's financials. IDB and Oak Rock's other lenders received these audit reports from Oak Rock before entering into each of the subsequent amended credit agreements and, allegedly, relied on their veracity in deciding to extend more credit to Oak Rock. ¶¶ 52, 61, 63, 68, 71.

While Oak Rock's audits indicated that Oak Rock was financially stable, it was not. Murphy was falsifying the age of the receivables, making Oak Rock appear to be eligible for further credit under its facility when it was actually in dire financial straits. Consequently, although much of the receivables were so long overdue as not be deemed collectible and, hence, not eligible under the credit agreements to permit increased lending, Murphy falsified the age of the receivables to keep its credit facility open. Murphy's actions gave Oak Rock continued access to its lender's money.

Murphy's fraud was eventually discovered by Thomas Stevens, the president of one of Oak Rock's minority equity investors, Oasis Capital Magement LLC. ¶¶ 16, 73. In mid-April 2013, during a visit to Oak Rock's offices, Stevens noticed unusual collection activity from one of Oak Rock's customers. ¶ 73. After investigating further, Stevens discovered that Oak Rock's collateral records did not match the records Murphy produced to Stevens. Id.Stevens confronted Murphy about this discrepancy, and, in response, Murphy confessed his fraud. ¶ 74. Murphy admitted he was creating false records to keep Oak Rock's credit facility open. Id. For instance, as of February 28, 2013, Oak Rock's records indicated that it had $2.5 million of borrowing availability when, in fact, it had none. Id. Indeed, based on Oak Rock's actual collateral value, it was over-advanced by $47 million. Id. Stevens demanded that Murphy [*4]resign, which he did on April 17, 2013. ¶ 75. Stevens immediately replaced Murphy as Oak Rock's manager. ¶ 73. The following day, on April 18, 2013, Stevens notified IDB of Oak Rock's fraud. ¶ 79. As of that date, Oak Rock owed its lenders approximately $90 million, about $33 million of which was owed to IDB. Id.

The lenders declared Oak Rock in default on April 23, 2013 and accelerated the debt. ¶¶ 80-81. On April 29, 2013, the lenders commenced an involuntary Chapter 7 proceeding in the United States Bankruptcy Court for the Eastern District of New York (In re: Oak Rock Financial LLC, Case No. 8-13-72251). ¶ 82. In an order dated May 6, 2013, the bankruptcy court converted the case to a Chapter 11 proceeding and, to date, Oak Rock continues to operate as a debtor-in-possession. ¶ 84.^[FN2] On December 20, 2013, Murphy pled guilty to bank fraud and conspiracy to commit bank fraud, committed between January 2009 and April 2013. ¶ 85.

In this action, IDB seeks to hold EisnerAmper liable for the false information in Oak Rock's financial statements that IDB allegedly relied on in lending money to Oak Rock. It is undisputed that, each year, Oak Rock's financial statements contained myriad inaccuracies, which are set forth extensively in the complaint. See, e.g., ¶ 90 (false statements in 2010 financial statements). However, as noted earlier, in a highly unusual (and possibly intentional) decision, the complaint does not identify the cause or causes of action being asserted against EisnerAmper. Rather, a long, detailed narrative is presented, spanning 96 pages. When the court first read the complaint, it was unsure what claims were being asserted, and assumed that, based on the nature of the accusations, IDB was attempting to assert a malpractice claim against EisnerAmper. EisnerAmper's counsel, understandably, thought so as well, and devoted a significant portion of its moving brief to explain, quite correctly, why such a claim fails as a matter of law. In opposition, IDB claimed its complaint was misunderstood, and, in reality, was only a claim for fraud. Specifically, IDB alleges that EisnerAmper's false statements in its audit reports about Oak Rock's financials, which IDB claims were the result of a grossly negligent audit process, amount to actionable fraud.

Nonetheless, "even where the law does not permit a claim of negligence to be brought against a professional by a person not in privity with the professional, this rule does not emancipate accountants from the consequences of fraud.'" Houbigant, Inc. v Deloitte & Touche LLP, 303 AD2d 92, 95 (1st Dept 2003), quoting Ultramares, 255 NY at 189. To state a claim for auditor fraud, the usual fraud elements — "a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages" — must be pled with the specificity required by CPLR 3016(b). Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 559 (2009); see Pludeman v Northern Leasing Sys., Inc., 10 NY3d 486, 491 (2008).

IDB correctly observes that many of the New York state and federal auditor fraud cases arise in the securities context, where an investment decision was made in reliance on audited financial statements. However, contrary to IDB's contentions, the legal standards set forth in those cases govern. An auditor fraud claim is a cause of action for common law fraud, and it is well settled that securities fraud claims are subject to the usual New York common law fraud elements. See Abu Dhabi Commercial Bank v Morgan Stanley & Co., 888 FSupp2d 431, 456 n.136 (SDNY 2012) (Scheindlin, J.), citing Marcus v AT & T Corp., 138 F3d 46, 57 n.2 (2d Cir 1998) and In re Merrill Lynch Auction Rate Secs. Lit., 2012 WL 1994707, at *3 (SDNY 2012) (Preska, C.J.) ("The parties agree that the elements of common law fraud essentially mirror those involved in the section 10(b) claims"); see also People v Bank of NY Mellon Corp., 40 Misc 3d 1232(A), at *13 (Sup Ct, NY County 2013) (Friedman, J.) (citing examples of New York's common law standard mirroring federal securities law). Moreover, it is well established that the scienter element of a New York common law fraud claim "is essentially the same as that under federal securities laws." Saltz v First Frontier, LP, 782 FSupp2d 61, 75 (SDNY 2010).

J.S.C.