Vitale v Koenig 2017 NY Slip Op 51557(U) [57 Misc 3d 1219(A)] Decided on October 12, 2017
Supreme Court, New York County St. George, J. gives a very nice analysis of how accounting malpractice is considered on a motion for summary judgment.
“The current lawsuit, which is joined for discovery purposes with Vitale v Sonzone, is against Mr. Koenig, who was Titan II’s accountant. Here, plaintiffs assert that in June 2007 Mr. Vitale asked defendant to perform an accounting of Titan II. Plaintiffs states that in response Mr. Vitale simply received a few pages of handwritten notes with the title “Audit.” Allegedly, Mr. Koenig conceded that he did not review the corporate American Express card bills, which would have shown whether Mr. Sonzone made personal charges or otherwise improper charges on his corporate card, along with other bills from the company. Instead, he stated that he relied entirely on the limited papers Mr. Sonzone had provided to him. Moreover, plaintiffs state, defendant refused to evaluate these other charges when Mr. Vitale provided him with the pertinent records. Plaintiffs claim that defendant received more than $7,000.00 for his improper tax and audit work. Justice Billings, who formerly presided over this case, issued an order in 2011 which dismissed plaintiffs’ second, third, and fourth causes of action. Thus, all that remains are the first cause of action, for professional negligence and accounting malpractice, and the third cause of action, for aiding and abetting Mr. Sonzone’s breach of fiduciary duty. Plaintiffs seek damages of at least $120,000.00.
In his motion to dismiss these remaining causes of action, defendant states there are no triable issues of fact. The first cause of action, he states, is based on the audit he performed on June 26, 2007 and the tax returns he prepared for 2005, 2006, and 2007. As for the June 26, 2007 audit, defendant points out that he performed the audit months after the dissolution of Titan II. As accounting malpractice requires proof of proximate cause, and as plaintiffs did not rely on this document to their detriment during the operation of Titan II, and they cannot show that damages flowed from it, the allegation has no merit.”
“In Schmidt v One New York Plaza (153 AD3d 427, 428 [1st Dept 2017]), the First Department reaffirmed the standard of review for a summary judgment motion:
On a motion for summary judgment, the moving party has the initial burden of establishing its entitlement to judgment as a matter of law with evidence sufficient to eliminate any material issue of fact (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1985]). The facts must be viewed “in the light most favorable to the non-moving party” (Ortiz v Varsity Holdings, LLC, 18 NY3d 335, 339 [2011]). Summary judgment should not be granted where there is any doubt as to the existence of triable issues or there are any issues of fact (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]; see Zuckerman v City of New York, 49 NY2d 557, 562 [1980]).
Utilizing this standard, the Court dismisses plaintiffs’ first cause of action. A claim of accounting malpractice or negligence not only “requires proof that there was a departure from accepted standards of practice” but requires a showing “that the departure was the proximate cause of the injury” (D.D. Hamilton Textiles, Inc. v Estate of Mate, 269 AD2d 214, 215 [1st Dept 2000]). Absent a showing of proximate cause, the case for professional negligence must be dismissed (See Charlap v BDO Seidman, 251 AD2d 146, 147 [1st Dept 1998]). Here, defendant [*4]persuasively argues that the claim relating to the 2007 “audit” occurred after the alleged misappropriations of funds and dissolution of the company. Thus, the Court need not reach the issue of defendant’s competence with respect to the 2007 audit.
As for the alleged malpractice relating to the tax returns, defendant was entitled to rely in good faith on the records his clients provided to him, without the need for verification (CFR § 10.34 [d]). Plaintiffs have not set forth facts that show defendant, who was hired by Titan II in a limited capacity, should not have trusted the Quickbooks which Mr. Sonzone provided. In fact, Mr. Vitale himself did not mistrust Mr. Sonzone initially.”