FKB’s Rachel Aghassi and Andrew R. Jones successfully obtained a pre-note of issue CPLR § 3212 summary judgment dismissal in the Supreme Court, New York County of negligence and breach of contract counterclaims asserted against FKB’s law firm client.

This matter stems from FKB’s client’s representation of the executors of an decedent estate (“Estate”) with respect to the administration of the Estate, including obtaining the services of an accountant to prepare any necessary individual income tax returns of the decedent.  FKB’s client retained an accounting firm to prepare the decedent’s 2007 individual federal income tax return in 2010.  Although the statutory deadline to filing the 2007 tax return in order to obtain a refund was April 15, 2011, the accounting firm did not provide a draft of the 2007 return until April 2012.    On November 30, 2012, the IRS disallowed the Estate’s claim for a refund of $198,931 on the 2007 return because it was filed more than three (3) years after the due date.

In 2014, FKB’s client and the Estate brought an action sounding in accounting malpractice against the accounting firm for its failure to timely prepare the 2007 tax return.  The accounting firm asserted counterclaims against FKB’s client for negligence and breach of contract, alleging that FKB’s client failed to provide the accounting firm with the documents and information necessary to prepare the tax return. 

After some document discovery, FKB moved for summary judgment dismissal of the counterclaims arguing that FKB’s client cannot be held liable to the accounting firm for negligence because New York requires strict privity to establish an attorney-client relationship. FKB pointed out, that in its counterclaim, the accounting firm does not allege that it had an attorney-client relationship with FKB’s client to invoke privity; rather merely alleges that FKB’s client was somehow contributorily negligent in preparing the tax return. Even more so, documentary evidence shows that even if FKB’s client did have some sort of obligation to the accounting firm, which it did not, there were no outstanding requests directed at FKB’s client when the deadline to file the 2007 tax return expired. FKB further argued that the claim for breach of contract is similarly subject to dismissal, as it is contradicted by record evidence.  According to the retainer agreement between the accounting firm and FKB’s client, the accounting firm agreed to “timely” provide “effective tax services” to FKB’s client.   Conversely, FKB’s client was not required to perform any services pursuant to this agreement other than payment of fees and, as such, the accounting firm cannot now argue that FKB’s client somehow breached the retainer agreement by allegedly failing to provide necessary information.

On June 18, 2019, Justice Kathryn E. Freed granted summary judgment dismissal of the counterclaims against FKB’s client.  The Court agreed that FKB’s client did not breach its contract with the accounting firm because the contract does not impose a duty on FKB’s client to “review question and discuss issues” with the accounting firm and even if there were such a duty, the “duty clearly depended on the ‘timely completion’ of [the accounting firm’s] services.” The Court further granted dismissal of the negligence claim against FKB’s client because C&S did not suffer damages based on MCR’s alleged negligence.

If you have any questions about this decision, or the defense of attorneys in general, please contact Andrew R. Jones or Rachel Aghassi.