Court Opinion

ID: 9521067
Source: CourtListenerOpinion
Date Created: 2023-08-07 01:56:19.084058+00
Date Added: 2024-06-11T12:47:35.724069
License: Public Domain

JUSTICE GARMAN, concurring in part and dissenting in part: I concur with the majority’s finding that defendant is entitled to a setoff against the judgment in the amount of plaintiff’s settlement with Arthur Andersen. I write separately because I conclude that the audit interference doctrine is inconsistent with Illinois’ system of comparative fault. In addition, there is no reasonable basis on which to justify limiting the comparative negligence defense for accountants but not for other service providers. I would find admissible the defendant’s offered evidence of plaintiff’s negligent conduct that was a proximate cause of the alleged injury. Thus, I dissent from the majority’s affirmance of the application of the doctrine in this case. The majority concludes that section 30.2 of the Accounting Act does not abrogate the common law audit interference doctrine. The majority correctly notes that legislation abrogates the common law only if legislative intent to do so is plainly expressed. Maksimovic v. Tsogalis, 177 Ill. 2d 511, 518 (1997). Whether or not legislative abrogation was effectuated in this case, the courts also have the power to alter or replace judicially created doctrines under rare appropriate circumstances. See Alvis v. Ribar, 85 Ill. 2d 1, 21 (1981). We have explained: “When *** the legislature has, for whatever reason, failed to act to remedy a gap in the common law that results in injustice, it is the imperative duty of the court to repair that injustice and reform the law to be responsive to the demands of society.” Alvis, 85 Ill. 2d at 23-24. In Alvis, we acted on this duty by abrogating the common law doctrine of contributory negligence and replacing it with a pure form of comparative negligence. Alvis, 85 Ill. 2d at 25, 28. I would judicially abrogate the audit interference doctrine in the present case because I conclude that our comparative fault system is inconsistent with the doctrine and because its continued application causes an unjust allocation of fault in accountant malpractice cases. The General Assembly has explained the purpose of our current modified comparative fault system, first enacted in 1986: “The purpose of this Section is to allocate the responsibility of bearing or paying damages *** according to the proportionate fault of the persons who proximately caused the damage.” 735 ILCS 5/2— 1116(a) (West 2002). The alleged damage sought in this case was the economic loss suffered as a result of “a series of illegal, inappropriate, and highly risky investments” made by Luhmann, which violated plaintiff’s investment policy. Pursuant to a pretrial ruling, defendant was barred from offering evidence of plaintiff’s oversight of Luhmann’s investment choices and its knowledge of his violations of the investment policy because of the audit interference doctrine. As explained by the majority, under the doctrine the defendant can only offer evidence that the plaintiff’s negligent conduct was a proximate cause of the alleged injury if the plaintiff impeded the defendant’s provision of services. 208 Ill. 2d at 270-71. The defendant’s comparative negligence affirmative defense is limited. This case serves as a perfect example of how the continued application of the audit interference doctrine prevents a complete evaluation of the relative proportion of fault of all parties for the alleged injury. Plaintiff requested compensation for economic loss while defendant was barred by the doctrine from showing the extent that plaintiff’s negligence proximately caused this economic loss. Applying the doctrine is inconsistent with our comparative fault system because it frustrates the veiy purpose comparative fault is intended to serve. See Standard Chartered PLC v. Price Waterhouse, 190 Ariz. 6, 41, 945 P.2d 317, 352 (App. 1996) (“We find, however, that the rationale of National Surety [establishing the doctrine] is incompatible with Arizona law,” because of its comparative fault system); Resolution Trust Corp. v. Deloitte & Touche, 818 F. Supp. 1406, 1408 (D. Colo. 1993) (applying Colorado law) (continued application of the doctrine “would effectively abrogate this clear statement by Colorado’s legislature as to how liability should be apportioned,” when it adopted a comparative fault system). The majority does not recognize that the audit interference doctrine is inconsistent with comparative negligence. Instead, the majority asserts that continued application of the audit interference doctrine is consistent with “general tort principles” as applied in the context of service providers, which bar allocation of fault to the plaintiff unless the plaintiff’s negligence impeded the defendant’s provision of services. The majority provides nothing more than a nonbinding comment from the Restatement of Torts and a misinterpretation of a single dental malpractice case for its broad assertion that the comparative fault defense is restricted not only for accountants under the audit interference doctrine but also for all other service providers. 208 Ill. 2d at 270-72. Contrary to the majority’s assertion, however, Illinois courts consistently allow the typical, unrestricted comparative fault defense in nonaccountant malpractice cases. In a medical malpractice case, the court will give a comparative negligence instruction if the plaintiff patient’s negligence was prior to or was contemporaneous with the defendant physician’s negligence, for example by delaying the pursuit of treatment despite symptoms. Malanowski v. Jabamoni, 332 Ill. App. 3d 8, 15 (2002). We explained in a dental malpractice case: “In order to reduce the award of damages the negligence of the plaintiff must have been a proximate cause of the injuries.” Owens v. Stokoe, 115 Ill. 2d 177, 183 (1986). More recently we stated, “a patient’s failure to exercise ordinary care *** does not absolve the physician’s negligence; it only absolves the physician from damages caused by the patient’s failure to exercise ordinary care.” McDonnell v. McPartlin, 192 Ill. 2d 505, 532 (2000); see also Illinois Pattern Jury Instructions, Civil, No. 105.08 (2000). Illinois case law similarly provides that comparative negligence can be a defense in legal malpractice cases. See Nika v. Danz, 199 Ill. App. 3d 296, 311-12 (1990). The majority misconstrues Owens in an attempt to conjure a de facto audit interference doctrine in the context of all service providers. In Owens, plaintiff brought a dental malpractice claim against defendant because, following oral surgery conducted by defendant, Owens suffered from paraesthesia, a lack of sensation in the lower left portion of his face. Owens, 115 Ill. 2d at 180-81. Specifically, the paraesthesia was caused by damage to the left inferior alveolar nerve that occurred during surgery. Owens, 115 Ill. 2d at 183. The jury reduced the award of $40,000 by 75% because of plaintiff’s comparative fault; the appellate court reinstated the full award, finding insufficient evidence of comparative negligence. Owens, 115 Ill. 2d at 179. The majority quotes the very section of the opinion that best illustrates my position. 208 Ill. 2d at 271. We affirmed the appellate court, explaining: “In order to reduce the award of damages the negligence of the plaintiff must have been a proximate cause of the injuries. Here, paraesthesia was proximately caused by damage to the left inferior alveolar nerve during surgery. Performance of the surgery caused the injury. Obviously it was not the failure of the plaintiff to obtain a second opinion, or his prior poor oral hygiene, or his refusal, if true, to permit X rays to be taken of his teeth that damaged the nerve. It is undisputed that the paraesthesia resulted from the surgery, and it cannot be said that conduct of the plaintiff prevented Stokoe from properly performing the surgery.” (Emphases added.) Owens, 115 Ill. 2d at 183-84. Perhaps the majority interpreted the last sentence of this quote out of context as showing that there is a sort of audit interference doctrine applicable in dental malpractice cases. However, the first sentence of this quote did not say, “In order to reduce the award of damages the negligence of plaintiff must have impeded defendant’s provision of services.” Instead, we were applying general comparative negligence principles. As we explained in this quote, the sole proximate cause of Owens’s paraesthesia was damage to the nerve during surgery. Because none of plaintiffs negligent conduct proximately caused the damage to the nerve, evidence about this conduct should not have been considered by the jury. Owens teaches us that in analyzing malpractice cases, courts must carefully identify the injury for which the plaintiff seeks recovery and must admit evidence only about negligent conduct that is a proximate cause of that injury, whether by plaintiff or defendant. Thus, in nonaccountant malpractice cases, Illinois courts apply comparative negligence principles, admitting evidence of negligent conduct by plaintiff or defendant that proximately caused the alleged injury. The comparative negligence affirmative defense is not limited to evidence that plaintiffs negligent conduct impeded defendant’s provision of services. Given this fact, the audit interference doctrine should survive only if there is a reasonable basis on which to distinguish accountants from other types of service providers. The majority concludes that the application of the doctrine in accountant malpractice cases is consistent with the analysis applied in other types of malpractice cases (208 Ill. 2d at 270-71), so it does not attempt to distinguish accountants from other types of service providers. Similarly, defendant’s brief suggests reasons for holding accountants accountable independent from a comparison to malpractice by other service providers. I can think of nothing about the nature of the work done by an accountant that merits greater restrictions on his or her potential affirmative defense. In fact, the work of an accountant, though surely important, influences property alone. It would be difficult, if not impossible, to reasonably argue that purely financial loss is more egregious than the loss of life or liberty that can accompany medical or legal malpractice cases so that restricting only an accountant’s affirmative defense is appropriate. In the present case, the injury for which plaintiff seeks recovery is, according to the complaint, the economic loss suffered as a result of “a series of illegal, inappropriate, and highly risky investments” made by Luhmann, which violated plaintiffs investment policy. The complaint further alleges that defendant proximately caused these damages through the auditors’ failure to report these violations by Luhmann. In effect, plaintiff alleges that plaintiff could have avoided suffering economic loss if defendant had not failed to report Luhmann’s investment violations. Defendant sought to admit evidence of plaintiffs comparative negligence, specifically about plaintiffs knowledge of Luhmann’s activities and its failure to supervise those activities. Defendant alleges that plaintiff could have avoided suffering that economic loss if plaintiff had properly supervised or acted upon its knowledge of Luhmann’s investment violations. It is hard to imagine how plaintiff could reasonably argue that defendant’s failure to detect and report the violations was a proximate cause of the claimed injury but that plaintiffs failure to supervise and act upon its knowledge of the violations was not a proximate cause because both involve an identical type of omission. If comparative negligence principles applied, as they do in nonaccountant malpractice cases, defendant’s evidence would have been admitted. Nonetheless, this negligent conduct by plaintiff did not impede defendant’s audit, so it is not the narrow type of evidence of comparative fault that the audit interference doctrine allows to be admitted. The present case clearly illustrates the conflict between the audit interference doctrine and principles of comparative fault. Thus, I disagree with the majority’s opposite conclusion. 208 Ill. 2d at 272. The majority mischaracterizes the evidence defendant sought to admit. The majority attempts to analogize this case to Owens: “Just as the patient’s poor dental hygiene could not be asserted as a defense to the negligent infliction of a surgical injury, a client’s poor business practices cannot be asserted as a defense to the auditor’s negligent failure to discover and report the client’s noncompliance with investment policy and legal requirements.” 208 Ill. 2d at 271. Defendant did not simply try to admit evidence of any and all examples of “poor business practices.” Defendant offered evidence of a proximate cause of the alleged injury, in accord with comparative fault principles. In contrast, the evidence the defendant offered in Owens concerned conduct that was not a proximate cause of the injury, so we concluded it should not have been considered by the jury. In sum, evidence concerning a plaintiffs negligence that is a proximate cause of the alleged injury generally is admissible under Illinois’ system of comparative fault, which is applied in nonaccountant malpractice cases. I can think of no reason why an accountant’s comparative negligence affirmative defense should be more restricted than that of other service providers. Thus, I would abrogate the audit interference doctrine because it can bar the admission of evidence that the plaintiffs negligence was a proximate cause of the alleged injury, as it did in the present case. The majority notes that jurisdictions are split about the viability of the audit interference doctrine in light of subsequent adoption of comparative fault schemes, accurately noting that Ohio and Minnesota have rejected the doctrine because of comparative fault rules. 208 Ill. 2d at 269-70; Scioto Memorial Hospital Ass’n v. Price Waterhouse, 74 Ohio St. 3d 474, 477, 659 N.E.2d 1268, 1272 (1996); Halla Nursery, Inc. v. Baumann-Furrie & Co., 454 N.W.2d 905, 909 (Minn. 1990). The majority fails to note, however, that five additional states have explicitly rejected the doctrine for this reason: Michigan (Capital Mortgage Corp. v. Coopers & Lybrand, 142 Mich. App. 531, 537, 369 N.W.2d 922, 925 (1985)), Arkansas (Federal Deposit Insurance Corp. v. Deloitte & Touche, 834 F. Supp. 1129, 1146 (E.D. Ark. 1992) (applying Arkansas law)), Arizona (Standard Chartered, 190 Ariz. at 42, 945 P.2d at 353), Colorado (Resolution Trust, 818 F. Supp. at 1408 (applying Colorado law)), and Florida (Devco Premium Finance Co. v. North River Insurance Co., 450 So. 2d 1216, 1220 (Fla. App. 1984)). In addition, six other jurisdictions have implicitly rejected the doctrine. Wegad v. Howard Street Jewelers, Inc., 326 Md. 409, 417, 605 A.2d 123, 128 (1992); American Trust & Savings Bank v. United States Fidelity & Guaranty Co., 439 N.W.2d 188, 189-90 (Iowa 1989); Maduff Mortgage Corp. v. Deloitte Haskins & Sells, 98 Or. App. 497, 503, 779 P.2d 1083, 1087 (1989); H. Rosenblum, Inc. v. Adler, 93 N.J. 324, 350-51, 461 A.2d 138, 152 (1983); see also ESCA Corp. v. KPMG Peat Marwick, 135 Wash. 2d 820, 828-30, 959 P.2d 651, 655-56 (1998); Comeau v. Rupp, 810 F. Supp. 1172, 1182 n.6 (D. Kan. 1992). Thus, the majority’s analysis, relying on four cases from three jurisdictions, does not represent the majority position nationwide. Scioto Memorial Hospital Ass’n, 74 Ohio St. 3d at 477, 659 N.E.2d at 1272. In addition, the cases cited by the majority are based on a mistaken principle. The Fullmer case, on which the majority heavily relies, explains its continued application of the doctrine by stating: “We agree *** that accountants are not to be rendered immune from the consequences of their own negligence merely because those who employ them may have conducted their own business negligently.” (Emphasis added.) Fullmer v. Wohlfeiler & Beck, 905 P.2d 1394, 1398 (10th Cir. 1990). However, rejection of the doctrine and application of comparative negligence would not render accountants immune. Instead, the damages paid by the accountant would not include the client’s portion of fault in proximately causing the total economic loss. See McDonnell, 192 Ill. 2d at 532. Finally, I disagree with the majority’s assertion that it is a better policy to continue to apply the audit interference doctrine. 208 Ill. 2d at 272. As explained by the majority, the doctrine was established by the National Surety case to soften the harshness of contributory negligence rules, which completely barred recovery by the client if the client was at all negligent. 208 Ill. 2d at 266-67; see also Scioto Memorial Hospital Ass’n, 74 Ohio St. 3d at 476, 659 N.E.2d at 1272. Such concern is unnecessary under a comparative fault scheme because slight negligence by the client will not act as a complete bar to recovery. We have abolished other doctrines created in response to harsh consequences of the contributory negligence rule in the wake of the adoption of our comparative fault system. See, e.g., Alois, 85 Ill. 2d at 28 (eliminating the “last clear chance” doctrine). By applying comparative negligence principles, neither the accountant nor the client is absolved of fault because of the other’s negligence, so both parties have an incentive to use due care. Capital Mortgage, 142 Mich. App. at 537, 369 N.W.2d at 925. While the majority cites “other incentives” such as income and civil lawsuits as deterrents of a client’s negligent behavior (208 Ill. 2d at 273), these incentives are diminished by potentially allowing a client to recover damages for the entire economic loss caused at least in part by its own negligence. The client should not be able to recover damages it could have avoided itself through acting with reasonable care. Devco Premium Finance, 450 So. 2d at 1220. Even if other incentives exist, considerations of fairness require damages to be allocated according to the parties’ degree of fault in causing the alleged injury. 735 ILCS 5/2 — 1116(a) (West 2002). No argument by the majority has persuaded me that this statement by the legislature of the purpose of the comparative fault system is inappropriate in accountant malpractice cases. For the reasons herein, I dissent from the majority’s conclusion that the audit interference doctrine is still in force in Illinois. I would abrogate the audit interference doctrine, reverse the trial court’s rulings about the doctrine and the damages setoff, and remand the cause for a new trial. JUSTICE THOMAS joins in this partial concurrence and partial dissent.