News & Insights

Auditor Liability Bulletin

February 2, 2024

Delaware Superior Court Dismisses Professional Malpractice Claim Against Accounting Firm

On January 29, 2024, the Superior Court of Delaware, New Castel County, dismissed a professional malpractice claim against the accounting firm CFGI, LLC brought by CFGI’s former client Common C Holdings LP, a cannabis producer and distributor.  In March 2023, CFGI sued Common C for failure to pay over $2 million in invoices for financial, accounting, and tax services provided by CFGI.  Common C then filed counterclaims against CFGI, including a negligence-based counterclaim asserting that CFGI “had no right to payment for work that was unnecessary, duplicative, unproductive, inefficient, faulty, or of no value.” 

CFGI moved to dismiss Common C’s negligence-based counterclaim on the basis that the claim was for negligent misrepresentation and thus fell outside the court’s subject matter jurisdiction.  The court disagreed, holding that Common C had pleaded a claim for professional malpractice challenging “CFGI’s work product itself as negligently performed.”  Nonetheless, the court dismissed Common C’s malpractice claim on the basis that Common C had failed to plead a professional standard of care.  The court explained that “Delaware courts usually require professional malpractice claims to be supported by expert testimony” unless “the professional's mistake is so apparent that a layman, exercising his common sense, is perfectly competent to determine whether there was negligence."  The court held that Common C failed to provide expert testimony establishing the relevant standard of care and failed to allege that CFGI’s performance was “so deficient that it would be clear to a reasonable layperson.”  The Court, however, did provide Common C the opportunity "to amend its pleading to the extent, if it can, that CFGI's alleged insufficient performance is so deficient that it would be clear to a reasonable layperson."

The case is CFGI, LLC v. Common C Holdings LP, C.A. No. N23C-03-032, (Del. Sup. Ct. Jan. 29, 2024).  CFGI is represented by Morris, Nichols, Arsht, and Tunnell LLP.  Common C is represented by Cooch and Taylor P.A.  The order is available here.