Accountants Did Not Have Fiduciary Duty to Client

On June 18, 2020, Justice Borrok of the New York County Commercial Division issued a decision in Deane v. Brodman, 2020 NY Slip Op. 31880(U), holding that accountants did not have a fiduciary duty to their client, explaining:

To prevail on a cause of action for breach of fiduciary duty, a plaintiff must prove the existence of a fiduciary relationship, misconduct by the other party, and damages directly caused by that parties' misconduct. In general, an accountant does not owe a fiduciary duty to a client. The First Department has held that even where an accountant agrees to perform accounting and consulting services for a client, i.e., services beyond mere tax preparation, this still does not give rise to a fiduciary duty.

The Accountants argue that the evidence establishes that they were not in fiduciaries and that there was no misconduct by the Accountants that would constitute a breach of any purported fiduciary duty in any event.

In his opposition papers, Mr. Deane argues that that Mr. Brodman owed a fiduciary duty to the Company as he played an advisory role above and beyond mere tax preparation. He argues that even Mr. Brodman referred to himself as a trusted advisor to the Company. In support of his position, Mr. Deane adduces emails regarding the Company but unrelated to tax preparation on which Mr. Brodman was carbon copied. The argument, however, fails.

The uncontroverted evidence establishes that Mr. Brodman was retained to perform tax preparation services and nothing more. Accordingly, the Accountant's did not owe a fiduciary duty to Mr. Deane or the Company. There is no evidentiary basis to support a finding that Mr. Brodman's conduct or relationship with the Company warrant a deviation from the general rule. The emails submitted by Mr. Deane do not raise an issue of material fact as to whether Mr. Brodman's role with the Company gave rise to a fiduciary duty because it is undisputed that any vaguely-articulated plans for Mr. Brodman to play a larger role within the Company never came to fruition and his contractual relationship with the Company was limited to preparing its taxes. Accordingly, the motion for summary judgment is granted as it relates to the breach of fiduciary duty cause of action.

(Internal quotations and citations omitted).

Fiduciaries have special duties, but the questions of whether a defendant is a fiduciary and what acts breach a fiduciary duty are sometimes complicated ones. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding claims or appeals relating to a fiduciary.