Accountants secure summary disposition of malpractice claim and recover sanctions from client and its attorneys
Kallas Company sued Tom's Oyster Bar and its owners for fees owed. The principal of Tom's counter-sued for malpractice arguing that the accountants failed to alert him to unpaid taxes and the penalty consequences. The counter-suit was filed even though the owner, Thomas Brandel, admitted in a deposition that he received monthly reports confirming the accumulating tax debt and that he had no money to pay the bills. In later discovery, the in-house bookeeper also acknowledged these facts.
The trial judge granted summary disposition to the accountants, holding that "Tom's" knew it owed the taxes and that the penalties were the result of the fact that the firm simply lacked the resources to pay the taxes. The judge also hit Tom's and its attorneys with a very large sanction for attorney's fees at $300.00 per hour. Tom's and its attorneys appealed, however, the Court of Appeals upheld the summary disposition and the sanction award. The high court panel held that the deposition testimony by the owner and the bookkeeper was conclusive and rendered the counter-suit frivolous.