Court Opinion

ID: 9741544
Source: CourtListenerOpinion
Date Created: 2023-08-26 20:57:47.494127+00
Date Added: 2024-06-11T07:24:24.660564
License: Public Domain

PRESIDING JUSTICE HOFFMAN, specially concurring: I agree with my colleagues and find that the plaintiffs pled legally sufficient causes of action against PriceWaterhouse Coopers, LLP (PWC), for accounting malpractice and negligent misrepresentation, and, as a consequence, the trial court’s order dismissing counts V and VI of their complaint must be reversed and the cause remanded for further proceedings. I write separately tq set forth my reasons for so concluding and to articulate what I believe is the proper way to raise section 30.1 of the Illinois Public Accounting Act (Act) (225 ILCS 450/ 30.1 (West 2002)) in defense of an action against an accountant brought by parties with whom the accountant is not in privity. PWC filed a section 2 — 615 (735 ILCS 5/2 — 615 (West 2002)) motion seeking the dismissal of counts V and VI of the plaintiffs’ complaint which asserted common law malpractice and negligent misrepresentation claims against it. As such, the only issue before the court was whether the factual allegations in the counts under attack, when considered in the light most favorable to the plaintiffs, were sufficient to state causes of action upon which relief can be granted. Vernon v. Schuster, 179 Ill. 2d 338, 344, 688 N.E.2d 1172 (1997). Both counts V and VI of the plaintiffs’ complaint are predicated on allegations of negligence on the part of PWC. To be legally sufficient, complaints alleging negligence-based torts must set out facts establishing a duty owed by the defendant to the plaintiff, a breach of that duty, and an injury proximately resulting from that breach. Gallagher Corp. v. Russ, 309 Ill. App. 3d 192, 197, 721 N.E.2d 605 (1999). The elements of breach of duty and damage are not at issue in this case. “The determination of the duty — whether the defendant and the plaintiffs stood in such a relationship to one another that the law imposed upon the defendant an obligation of reasonable conduct for the benefit of the plaintiffs — is an issue of law for the determination of the court.” Pelham v. Griesheimer, 92 Ill. 2d 13, 18-19, 440 N.E.2d 96 (1982). In Brumley v. Touche Ross & Co., 123 Ill. App. 3d 636, 642, 463 N.E.2d 195 (1984) (Brumley I), the court held that an accountant owed a duty to third parties who relied upon his reports or opinions if the accountant “was acting at the direction of or on behalf of his client to benefit or influence [the] third-party.” The issue was further clarified in a subsequent decision involving the same parties. See Brumley v. Touche, Ross & Co., 139 Ill. App. 3d 831, 487 N.E.2d 641 (1985) (Brumley IT). In Brumley II, the court determined that “to be sufficient plaintiffs complaint must allege facts showing that the purpose and intent of the accountant-client relationship was to benefit or influence the third-party plaintiff.” Brumley II, 139 Ill. App. 3d at 836. My reading of counts V and VI of the plaintiffs’ complaint leads me to conclude that they allege facts which, when considered in the light most favorable to the plaintiffs, are sufficient to satisfy the pleading requirements necessary to establish the element of duty in negligence-based claims against an accountant by a nonclient third-party as set out in Brumley 1 and Brumley II. The plaintiffs have alleged, inter alia, that: the Lipper Funds were required to have their annual financial statements audited by a public accounting firm and to certify the value of each partner’s capital account; PWC was engaged for the purpose of auditing the financial statements and certifying the value of the capital accounts; PWC addressed its opinions and sent them directly to each partner along with a schedule setting forth the value of the individual partner’s capital account; and PWC knew that the partners would rely upon the audited financial statements and related schedules, including the ones showing the value of their individual capital accounts, for the purpose of making investment decisions and paying income taxes. When these allegations are taken as true, and all reasonable inferences therefrom are drawn in favor of the plaintiffs (see Your Style Publications, Inc. v. Mid Town Bank & Trust Co. of Chicago, 150 Ill. App. 3d 421, 424, 501 N.E.2d 805 (1986)), they could support the conclusion that, in rendering its professional services, PWC was acting at the direction of the Lipper Funds for the purpose of benefitting or influencing the plaintiffs as partners in those funds. Further, the plaintiffs have alleged that they relied upon the financial statements audited by PWC and the schedules setting forth the value of their capital accounts. In moving to dismiss counts V and VI of the plaintiffs’ complaint, PWC relied exclusively upon the provision of section 30.1 of the Act which provides, in relevant part, that an accountant is not liable to a person not in privity of contract unless the accountant was aware that a primary intent of its client was for the accountant’s professional services to benefit or influence the particular person bringing the action. See 225 ILCS 450/30.1 (West 2002). PWC argued that counts V and VI of the plaintiffs’ complaint failed to contain allegations of fact satisfying the requirements of section 30.1 and, therefore, they were deficient as a matter of law. My colleagues find that the allegations in the plaintiffs’ complaint and the inferences which must be drawn therefrom do in fact support the conclusion that PWC knew that its audit reports and other financial statements were being prepared for the benefit of the partners of the Lipper Funds and that a primary intent of the Lipper Funds was for PWC’s professional services to benefit or influence the plaintiffs as partners. Based upon the reasons I have already set forth, I agree with that conclusion. However, I do not believe that the plaintiffs were required to allege knowledge on the part of PWC of the intent of the Lipper Funds in order to sufficiently plead actions for malpractice or negligent misrepresentation. Accounting malpractice and negligent misrepresentation are common law causes of action. In Brumley I and Brumley II, this court fixed the circumstances under which an accountant owes a duty to a nonclient third-party who relies upon the accountant’s reports or opinions. When the legislature enacted section 30.1 of the Act, it created no new duties on the part of accountants to persons with whom they are not in privity of contract. Rather, that section of the Act provides that an accountant will not be liable for acts under circumstances which otherwise would have fallen within their common law duty. As such, section 30.1 creates a defense to certain actions against accountants by persons with whom they are not in privity which, when properly pled by the accountant, may act to bar a plaintiffs right to recovery. My analysis in this regard is akin to the treatment accorded the provisions of the Local Governmental and Governmental Employees Tort Immunity Act (745 ILCS 10/1 — 101 et seq. (West 2002)). See Bubb v. Springfield School District 186, 167 Ill. 2d 372, 377-78, 657 N.E.2d 887 (1995); Ramirez v. Village of River Grove, 266 Ill. App. 3d 930, 932, 641 N.E.2d 7 (1994). The defense is affirmative in nature and, therefore, should be the defendant-accountant’s obligation to plead and prove. See Albers v. Breen, 346 Ill. App. 3d 799, 806, 806 N.E.2d 667 (2004). I believe that, in order to state a good and sufficient negligence-based action against an accountant, a nonclient third-party need only comply with the pleading requirements set forth in Brumley I and Brumley II. If the accountant-defendant wishes to rely upon the provisions of section 30.1 as a defense to liability and allege a lack of knowledge of a primary intent on the part of its client to benefit or influence the plaintiff, it can do so by means of an affirmative defense or a motion for involuntary dismissal pursuant to section 2 — 619(a) of the Code of Civil Procedure (735 ILCS 5/2 — 619(a)(9) (West 2002)) as was done in Builders Bank v. Barry Finkel & Associates, 339 Ill. Ápp. 3d 1, 790 N.E.2d 30 (2003). The distinction I have drawn might seem overly technical, but it is extremely important in determining who has the burden of proving whether the accountant did or did not know whether a primary intent of its client was for the accountant’s professional services to benefit or influence the nonclient plaintiff.