It takes a lawyer and an accountant to make a mess that basically stupefies the mind and court. Attorney agrees to defend an accountant in a malpractice setting and barters the fees for accounting work. (Red flag?) Later, the accountant, who works for a big firm takes on the attorney as a “private client” in violation of the partnership agreement. Bad so far? It gets far worse. Accountant fills out income tax returns for the attorney and tells it to wire the tax payments to the accountant’s account. Does the money go to the firm, and then to the IRS? No. Close to $1 Million goes to the accountant and is stolen. Is there a malpractice claim against the accounting firm?
Targum v Citrin Cooperman & Co., LLP 2016 NY Slip Op 31628(U) August 25, 2016 Supreme Court, New York County Docket Number: 650665/2014 Judge: Saliann Scarpulla starts to move toward decision and then backs off.
“It is well established that before a defendant may be held liable for negligence it must be shown that the defendant owes a duty to the plaintiff. In the absence of duty, there is no breach and without a breach there is no liability.” See Pulka v Edelman, 40 NY2d 781, 782 (1976) (internal citations omitted). An accountant owes a duty “to the party contracting for the accountant’s services,” see William Jselin & Co., Inc. v Landau, 71 NY2d 420, 425 (1988),4 but “accountants do not have a duty to the public at large.” Parrot v Coopers & Lybrand, L.L.P., 263 AD2d 316, 319 (1st Dept 2000), aff’d 95 NY2d 479 (2000). Similarly, an accountant-client relationship is a necessary element to the Targum plaintiffs’ fiduciary duty claim. See Tai v Superior Vending, LLC, 20 AD3d 520, 521 (2d Dept 2005). Thus, the Targum plaintiffs’ negligence claims, as well as its claim for breach of fiduciary duty, depend entirely upon a finding that the Targum plaintiffs were Citrin clients.
Citrin has submitted substantial evidence to show that it did not have an accountant-client relationship with the Targum plaintiffs. Unlike other Citrin clients, Citrin did not have an engagement agreement with the Targum plaintiffs. No invoices were ever issued by Citrin to the Targum plaintiffs,5 and Targum never paid Citrin for any of Weber’s accounting services.6 Further, it is undisputed that the Targum/Weber barter agreement was solely between Targum and Weber. Weber himself states that Citrin had nothing at all to do with his barter agreement with Targum, and that Targum knew that Weber was working individually for the Targum plaintiffs, not in his capacity as a partner of Citrin. Finally, the only person who worked on the Targum plaintiffs tax returns was Weber. In opposition, the Targum plaintiffs submit the generic Citrin memos they allegedly received, which were addressed to “Our Clients.”7 The Targum plaintiffs also submit some of the tax returns Weber prepared for the Targum plaintiffs which contain Citrin’s name on them, as well as a screen shot showing that Lester reviewed the returns for a length of time of 0:00. 8 Finally, the Targum plaintiffs’ note that their tax notices were mailed to Citrin. This evidence, though underwhelming, at best, is sufficient to warrant an exchange of discovery as to whether there was an accountant-client relationship between Citrin and the Targum plaintiffs. Accordingly, although I originally determined to convert this motion to a summary judgment motion, I decline at this time to dismiss the Targum plaintiffs’ negligence, breach of fiduciary duty, professional negligence, and negligent supervision claims. Instead, I direct the parties to exchange discovery related to whether or not the Targum plaintiffs were clients of Citrin, and invite the parties to remake their summary judgment motions at the close of discovery. “