Thursday, October 16, 2014

CPAs and tax preparers do not normally owe a fiduciary duty to their clients

Plaintiff sued his accountant for negligence and was trying to get around the 3-year statute of limitations of 52-577.  In opposition to the defendant’s summary judgment, the plaintiff alleged the accountant owed him a fiduciary duty to disclose his mistake and this tolled the statute of limitation.  The majority of the Supreme Court affirmed the recent Appellate Court decision in this dispute that CPAs and tax preparers do not normally owe a fiduciary duty to their clients absent more involvement in their client’s affairs, such as: representing them in tax disputes with the IRS; providing investment advice; handling their finances; or recommending financial transactions they might participate in.  The dissent objected to such a bright line rule for CPAs and would have left the issue to the jury to decide.  The majority responded in a footnote that their decision was consistent with the majority of states and was not a bright line rule.  They said the plaintiff here simply failed to put forth any evidence of anything more by the CPA other than preparing tax returns.  The plaintiff’s opposition to summary judgment was full of conclusory statements like “he trusted them,” “he relied upon them,” “they had superior knowledge,” etc.  But such generic statements are not enough.

The decision also looked to when fiduciary roles can toll the statute of limitations.  Tolling due to fraudulent concealment under CGS 52-595 require three elements: [1] knowledge of the mistake; [2] intentional concealment; and [3] for the purpose of delaying the claim.  The federal rule allows concealment element #2 to be satisfied by showing a fiduciary relationship.   [The Court said it did not need to decide in this case whether CT would adopt the federal rule but it looks to me like they would if presented with the correct fact pattern.]

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