Newark Partner Meredith Kaplan Stoma and Associate Anthony Doss recently obtained a decision from the New Jersey Superior Court, Appellate Division that affirmed summary judgment for their accountant client on claims for breach of contract and malpractice.
The plaintiff in the case is a steel distributor. The litigation arose from a fraudulent scheme in which the plaintiff’s comptroller stole more than $1.7 million from the company over the span of five years.
After discovering the scheme in 2019, the plaintiff sued the comptroller and the bank where she maintained the account used in her scheme. The plaintiff also named as defendants its insurance broker and his company, alleging that they failed to advise the plaintiff of the need for additional insurance coverage due to the enhanced risk they faced when they hired a non-family member as their comptroller.
The insurance broker proceeded to file a third-party complaint against Lewis Brisbois’ clients, an accountant and his firm, asserting claims for indemnification and contribution. The clients had performed accounting services, including tax preparation, for the plaintiff between 2013 and 2017.
In April 2022, the broker filed an “affidavit of merit” in relation to their claims against Lewis Brisbois’ clients. In the affidavit, a CPA averred that there was a “reasonable probability” that Lewis Brisbois' clients failed to meet professional accounting standards in their work for the plaintiff steel distributor.
While plaintiff was finalizing a settlement directly with the bank and the insurance broker, in October 2023, following mediation, the plaintiff sought and was granted leave to file an amended complaint to assert direct claims against Lewis Brisbois’ clients. The plaintiff filed the amended complaint the following February, asserting claims for breach of contract, accountant malpractice, and breach of fiduciary duty based on the accountant's alleged failure to alert the plaintiff to indicia of fraud by the comptroller.
The Lewis Brisbois team filed a motion for summary judgment on their clients' behalf, asserting that the plaintiff’s claims were barred by the contractual one-year limitation period set out in the clients' engagement agreements with the plaintiff. The trial court agreed and granted the clients summary judgment.
On appeal, the plaintiff asserted that its claims were not in fact time-barred or, alternatively, that the limitation clause in the engagement agreements is void as against New Jersey public policy.
The trial court had noted that the plaintiff admitted that it did not become aware of its potential claims against Lewis Brisbois’ clients until its insurance broker filed the affidavit of merit in April 2022. Even giving the plaintiff “the benefit of this accrual date,” it would only have had until April 2023 to file its complaint against Lewis Brisbois’ clients. However, the plaintiff didn’t even move to amend its complaint to add claims against the accountant and her firm until October 2023 — six months after the one-year deadline elapsed — and it didn’t file the amended complaint until February 2024.
The plaintiff also argued that the one-year time limitation began only after mediation with Lewis Brisbois’ clients failed. But the trial court found, and the Appellate Division agreed, that there was nothing in the “plain language of” the engagement agreements to “support the notion that the time limitation provision is tolled by the mediation clause.”
The Appellate Division also rejected the plaintiff’s argument that the limitation clause in the accountant’s engagement agreements runs afoul of New Jersey public policy. The clause was conspicuously displayed in the agreements, and moreover, the plaintiff and accountant "knowingly and voluntarily agreed to shorten the time frame in which to bring an action arising from the" accountant's professional services.