Opinion
01-02-2015
BOARD OF TRUSTEES OF IBEW LOCAL 43 ELECTRICAL CONTRACTORS HEALTH AND WELFARE, ANNUITY AND PENSION FUNDS, Plaintiff–Appellant, v. D'ARCANGELO & CO., LLP, Defendant–Respondent.
Smith, Sovik, Kendrick & Sugnet, P.C., Syracuse (Steven Ward Williams of Counsel), for Plaintiff–Appellant. Hurwitz & Fine, P.C., Buffalo (Andrea Schillaci of Counsel), for Defendant–Respondent.
Smith, Sovik, Kendrick & Sugnet, P.C., Syracuse (Steven Ward Williams of Counsel), for Plaintiff–Appellant.
Hurwitz & Fine, P.C., Buffalo (Andrea Schillaci of Counsel), for Defendant–Respondent.
PRESENT: CENTRA, J.P., FAHEY, VALENTINO, and WHALEN, JJ.
MEMORANDUM: Plaintiff commenced this action against defendant accounting firm seeking damages for money lost in investments maintained directly or indirectly by Bernard Madoff and/or Bernard L. Madoff Investment Securities, LLC. Plaintiff hired defendant to audit plaintiff's investment funds in 2007 and 2008. Supreme Court granted defendant's motion to dismiss the amended complaint on the ground that, inter alia, plaintiff could not sufficiently plead the existence of proximate cause because plaintiff's harm was too attenuated from defendant's actions.
We agree with plaintiff that the court erred in dismissing the first cause of action alleging professional malpractice, and we therefore modify the order accordingly. On a motion to dismiss a complaint for failure to state a cause of action, we must "accept the facts as alleged in the complaint as true, accord plaintiff[ ] the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory" ( Leon v. Martinez, 84 N.Y.2d 83, 87–88, 614 N.Y.S.2d 972, 638 N.E.2d 511 ; see 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 152, 746 N.Y.S.2d 131, 773 N.E.2d 496 ). In making that determination, a court may consider affidavits submitted by the parties (see Leon, 84 N.Y.2d at 88, 614 N.Y.S.2d 972, 638 N.E.2d 511 ; Chaikovska v. Ernst & Young, LLP, 21 A.D.3d 1324, 1325, 801 N.Y.S.2d 864 ), such as the expert affidavit that was submitted by plaintiff in this case.
"Accounting malpractice or professional negligence contemplates a failure to exercise due care and proof of a material deviation from the recognized and accepted professional standards for accountants and auditors, generally measured by [generally accepted accounting principles] and [generally accepted auditing standards (GAAS) ] promulgated by the American Institute of Certified Public Accountants, which proximately causes damage to plaintiff" ( Cumis Ins. Socy. v. Tooke, 293 A.D.2d 794, 797–798, 739 N.Y.S.2d 489 ; see Berg v. Eisner LLP, 94 A.D.3d 496, 496, 941 N.Y.S.2d 616 ). Here, plaintiff sufficiently alleged that defendant committed malpractice in not adhering to GAAS by, inter alia, failing to obtain a SAS 70 report, and that defendant's negligence proximately caused plaintiff to sustain damages (see Sacher v. Beacon Assoc. Mgt. Corp., 114 A.D.3d 655, 657, 980 N.Y.S.2d 121 ). Although defendant contends that GAAS did not require it to obtain a SAS 70 report, it did not submit any evidence establishing that fact in support of its motion (see generally C.P. Ward, Inc. v. Deloitte & Touche LLP, 74 A.D.3d 1828, 1829–1830, 904 N.Y.S.2d 842 ; Cumis Ins. Socy., 293 A.D.2d at 798, 739 N.Y.S.2d 489 ), and we disagree with the court that such a determination could be made as a matter of law in the absence of such evidence (see Berg, 94 A.D.3d at 496, 941 N.Y.S.2d 616 ). With respect to proximate cause, "[a]s a general rule, issues of proximate cause[, including superceding cause,] are for the trier of fact" ( Hahn v. Tops Mkts., LLC, 94 A.D.3d 1546, 1548, 943 N.Y.S.2d 361 [internal quotation marks omitted], citing Derdiarian v. Felix Contr. Corp., 51 N.Y.2d 308, 312, 434 N.Y.S.2d 166, 414 N.E.2d 666, rearg. denied 52 N.Y.2d 784, 436 N.Y.S.2d 622, 417 N.E.2d 1010 ; see Bachmann, Schwartz & Abramson v. Advance Intl., 251 A.D.2d 252, 253, 675 N.Y.S.2d 531 ), and we see no basis to depart from that general rule in this case (see Sacher, 114 A.D.3d at 657, 980 N.Y.S.2d 121 ). Plaintiff alleged that defendant should have obtained the SAS 70 report to confirm the existence and valuation of the funds' investments. Plaintiff further alleged that, had defendant done so, it would have discovered that it could not confirm the existence of those securities, and plaintiff could have redeemed its investments.
As an alternative ground for affirmance (see generally Parochial Bus. Sys. v. Board of Educ. of City of N.Y., 60 N.Y.2d 539, 545–546, 470 N.Y.S.2d 564, 458 N.E.2d 1241 ; Hyatt v. Young, 117 A.D.3d 1420, 1421, 984 N.Y.S.2d 533 ; Summers v. City of Rochester, 60 A.D.3d 1271, 1273, 875 N.Y.S.2d 658 ), we agree with defendant that the third through sixth causes of action should be dismissed as duplicative of the professional malpractice cause of action, including the causes of action for fraud (see Long v. Cellino & Barnes, P.C., 59 A.D.3d 1062, 1062, 873 N.Y.S.2d 805 ), and breach of fiduciary duty (see Matter of HSBC Bank U.S.A. [Littleton], 70 A.D.3d 1324, 1325, 895 N.Y.S.2d 615, lv. denied 14 N.Y.3d 710, 2010 WL 1795377 ; Dischiavi v. Calli [Appeal No. 2], 68 A.D.3d 1691, 1693, 892 N.Y.S.2d 700 ). Those causes of action make the same allegations of wrongdoing as the professional malpractice cause of action and do not seek any different damages. The second cause of action for breach of contract was already dismissed by a federal court as duplicative of the professional malpractice cause of action, and plaintiff does not dispute that collateral estoppel bars that cause of action. We reject defendant's contention, however, that the professional malpractice cause of action, to the extent that it relies on the 2007 audit report, should be dismissed as time-barred. We conclude that plaintiff sufficiently pleaded that the continuous representation doctrine applies to toll the statute of limitations with respect to the 2007 audit report (see Symbol Tech., Inc. v. Deloitte & Touche, LLP, 69 A.D.3d 191, 195–196, 888 N.Y.S.2d 538 ).
It is hereby ORDERED that the order so appealed from is unanimously modified on the law by denying the motion in part and reinstating the first cause of action, and as modified the order is affirmed without costs.