NFGTV, Inc. v Lutz & Carr Certified Pub. Accountants, LLP 2023 NY Slip Op 50849(U) [79 Misc 3d 1241(A)] Decided on August 9, 2023 Supreme Court, New York County
Borrok, J. is the rare summary judgment win by a plaintiff. In this case, defendants’ own application to the IRS doomed the defense.
“NFGTV’s motion (Mtn. Seq. No. 001) for summary judgment is granted because it is undisputed that L&C advised both Two Franks and NFGTV that it was necessary to file an IRS Form 3115 and then filed it for Two Franks but failed to file it for NFGTV. Subsequently, when L&C acknowledged their mistake, they themselves told the IRS that the individual plaintiffs would be entitled to a refund and the amount of such proposed refund (i.e., that there was sufficient basis for such refund). Lastly, to the extent that L&C argues that this should have been picked up by the accountants doing the taxes for tax years following the 2016 tax year, it was L&C who completed the tax returns for the 2017 tax year and they did not in fact pick up the 2016 error that they had made. As such, L&C does not raise an issue of fact warranting denial of the motion or a trial on the issue of their liability (Alvarez v Prospect Hosp., 68 NY2d 320, 324 ). Damages are referred to a JHO/Special Referee to hear and determine.”
“In their opposition papers, L&C argues that there are material issues of fact as to whether (i) whether their failure to prepare and file the IRS Form 3115 for NFGTV was a departure from the accepted standards of accounting practice such that it can constitute malpractice, (ii) whether Messrs. Barraud and Springman would have been able to deduct flow-through losses from NFGTV to their individual tax returns to offset their taxable income, such that they were damaged, and (iii) whether the accountants that were hired by the plaintiffs after L&C was terminated failed to correct the 2016 tax returns before the statute of limitations closed, such that their actions constitute an intervening cause. The arguments fail.
A court can find malpractice absent expert testimony where the ordinary experience of the fact finder provides a sufficient basis for judging the adequacy of the professional service (Estate of Nevelson v Carro, Spanbock, Kaster & Cuiffo, 259 AD2d 282, 283 [1st Dept 1999]; cf. Gertler v Sol Masch & Co., 40 AD2d 282, 282 [1st Dept 2007]).
As discussed above, it is undisputed that L&C both advised that filing the IRS Form 3115 was required and they did in fact file it for one of the plaintiffs’ companies (Two Franks) but not for the other (NFGTV) for the 2016 tax year. Stated differently, L&C established the standard of [*3]care required and their own breach by advising that the Form 3115 was required and by admitting that they had made a mistake in not filing it (NYSCEF Doc. No. 71, at 2-3). Additionally, L&C themselves submitted papers to the IRS indicating that as a result of their mistake, the plaintiffs were damaged and that the plaintiffs substantially overpaid their taxes and the individual plaintiffs were entitled to take these deductions on their individual tax returns (NYSCEF Doc. Nos. 71-73). This isn’t a question of the plaintiffs’ word against the defendant’s, it is a question of the defendant’s word against the defendant. As such, there are no material issues of fact for trial that the defendant committed professional malpractice.[FN1] Finally the Court notes that the work done by other accounting firms for subsequent years does not constitute an intervening superseding cause to the work done by L&C for the 2016 tax year because it was L&C that completed the tax returns for the 2017 tax year (Bachmann, Schwartz & Abramson v Advance Intl., 251 AD2d 252, 253 [1st Dept 1998]; cf. Pyne v Block & Assoc., 305 AD2d 213 [1st Dept 2003] and Golden v Cascione, Chechanover & Purcigliotti, 286 AD2d 281 [1st Dept 2001]).”