We have discussed Island Consol. v Grassi & Co., Certified Public Accountants PC 2025 NY Slip Op 30094(U) January 7, 2025 Supreme Court, New York County Docket Number: Index No. 451469/2023 Judge: Margaret A. Chan twice now. It’s very unusual to see a “gross negligence” claim make and rarer still to see it upheld.
“In this professional malpractice action, plaintiffs Island Consolidated, Eastern Materials Corp., Island International Exterior Fabricators Del LLC, and Island Exterior Fabricators LLC (hereinafter collectively referred to as “Island” or “Plaintiffs”) allege professional malpractice and gross negligence against their accountant, defendant Grassi & Co., Certified Public Accountants PC for the sales tax advice it gave plaintiffs in 2015. In reliance on defendant’s 2015 sales tax advice, plaintiffs sustained monetary damages through tax penalties and interests on repayment costs to the New York State Department of Taxation and Finance, costs, and lost profits. Defendant moves to dismiss plaintiffs’ Amended Complaint for failure to: (1) comply with the condition precedent before bringing a suit against defendant; (2) timely bring their claims within the three-year statute of limitations; and (3) state a cause of action with sufficiency. Alternatively, defendant urges dismissal of damages on the grounds that they are not recoverable and is limited by the parties’ agreement. Plaintiffs oppose the motion. For the reasons stated below, defendant’s motion is denied.”
“Gross Negligence Defendant argues that because gross negligence is different from ordinary negligence in that it is conduct that ‘smacks of intentional wrongdoing’, plaintiffs have failed to plead any facts that would arise to the level of gross negligence as a matter of law. It is true that in the context of liability, “‘gross negligence’ differs in kind, not only degree, from claims of ordinary negligence [and] evinces a reckless disregard for the rights of others” (see Colnaghi, U.S.A. v Jewelers Protection Servs, 81 NY2d 821, 824 [1993]). Where a plaintiffs cause of action merely repeats the allegations for a negligence cause of action and simply adds a claim that the defendant recklessly disregarded facts, this allegation will be insufficient to meet any special pleading standards that may be required (see Credit Alliance Corp. v Arthur Andersen & Co, 65 NY2d 536, 554 [1985] [holding that where a cause of action for fraud repeats the allegations for negligence and merely adds a claim that defendant recklessly disregarded facts which would have apprised it that its reports were misleading, this allegation was insufficient under the special pleading standards required under CPLR 3016[b] and the case should have been dismissed]). Claims of gross negligence and recklessness have been found to be sufficiently particularized under CPLR 3016(b) where the complaint alleges that the defendant failed to independently verify provided information, despite having notice of particular circumstances raising doubts as to the verity of such information (see Foothill Capital Corp. v Grant Thornton LLP, 276 AD2d 437 [1st Dept 2000]). Plaintiffs here have sufficiently pleaded their claim of gross negligence with sufficient particularity so as to survive the motion to dismiss. In their complaint, plaintiffs specifically allege that defendant acted with not just reckless disregard but that defendant provided different and correct sales tax advice and guidance to other similarly situated clients, while failing to notify plaintiffs of its error or take any remedial steps to mitigate the damage. Plaintiffs further allege that defendant took steps to intentionally conceal any such negligence by falsely representing to plaintiffs in 2020 that their newfound conclusions were a result of a change in law. Thus, plaintiffs have gone beyond merely adding a claim that defendant acted with a reckless disregard for plaintiffs’ right and have specifically enumerated factual allegations, which if taken as true as the court must do at the pleading stage, could reasonably be found by a fact-finder to evince an utter indifference to plaintiffs’ rights. Plaintiffs’ claim for gross negligence withstands defendant’s motion to dismiss.”