Reliance on Environmental Consultants' Reports–Privity

In what serves more as a reminder than as groundbreaking new law, a recent decision of the Court of Appeals of California, Sixth Appellate District, held that a borrower was not entitled to rely on Phase I and Phase II environmental site assessment reports prepared by a consultant to the borrower's lender, and therefore had no claim against the consulting firm that was allegedly negligent in its preparation of the reports. 

In Mao v. Piers Environmental Services, Inc. coo(H041214, February 8, 2017), the court cited uncontroverted evidence that the consultant's contract to perform the site assessments was with the lender, not the borrower; that the reports were provided to the lender for purposes of its due diligence; and that the borrower hired the consultant for the first time only after the site assessment reports had been prepared for the lender. In short, the court found that the evidence established no privity of contract between the consultant and the borrower