Just because I have an affection to someone, does not mean they have a duty to me. Absent some sort of evidence that there is reliance by the plaintiff on the defendant for guidance on legal, financial or accounting matters – particularly business matters, (investment advice) <- then fiduciary duty. But preparing tax returns and being friends is NOT ENOUGH!DDRA Capital, Inc v KPMG (book says Baldwin)No fid. Duty! Trying to figure out how to shelter huge profits -> carl from KPMG says illegal way of tax deductions. Basically made artificial losses. DDRA is pissed cuz got caught and said that they relied on KPMG. Court says well yall r sophisticated ppl, yall should’ve known better – so you cant sue for fid. Duty.If DDRA were not versed in biznus, then KPMG could’ve been fids. Claim for Breach of Fiduciary Duty:Plaintiff must prove: <- but if P proves D is a fiduciary, D has the burden of proof in establishing that any transactions between P and D were fair1)D owed P a fiduciary duty2)D breached the duty3)D’s breach of the duty was the proximate cause ofa.“But for” causation (cause in fact)b.Reasonable foreseeability4)P’s damagesAiding & Abetting – Some jurisdictions recognize a cause of action for aid&abet another’s breach of fiduciary duty. Elements:1)another person breached a fiduciary duty to P2)Accountant knew of the breach3)Accountant gave substantial assistance or encouragement to the breaching partyWitzman v Lehrman & FlomTrustee commits several torts against the beneficiary of the trust, his sister. When she finds out that the brother just spent all the money, she sues. Plaintiff did not show that the accounting firm knew they did some things wrong. The accounting firm did some things in reliance on the bad brother trustees direction “do this, do that” and to them, this does not look like fraud. Def isn’t obvious. So accounting firm is not liable for aiding and abetting because they didn’t know that what was being done was a breach of fiduciary duty. Theres no duty to speak AT ALL between accounting firm and beneficiaries of the trust. Chapter 10 – Breach of ContractSuits against accountants are usually based on breach of contract and/or negligence.
Breach of K are only successful if the engagement letter or oral engagement imposes some duty on you as an accountant to do something other than comply with professional standards to do your job. So moststates – if u mess up, they require you to bring the claim against you as a negligence claim. You cant be sued for both negligence and breach of contract, even if the contract says basically “we’ll do our work in accordance w professional standards”. Unless in certain states like New Jersey!So in summary, the only way to bring a contract claim against an accountant in most states is if the accountant promises to do something in addition to or different from what is required by normal professional standards.