New York Court Grants Summary Judgment to Tax Client on Accounting Malpractice Claim

On August 9, 2023, the Commercial Division of the New York Supreme Court for New York County granted summary judgment on liability in favor of television production company NFGTV, Inc. and its owners, who brought a malpractice action against their former tax preparer Lutz and Carr Certified Public Accountants, LLP.  The plaintiffs alleged that, despite advising the plaintiffs to change from cash to accrual accounting, the accounting firm failed to prepare the correct 2016 tax return forms reflecting the change, which resulted in plaintiffs overpaying $3.5 million in federal incomes taxes.  After the error was discovered by a different firm, which prepared tax returns for later years, and Lutz and Carr was unsuccessful in applying for a late change with the IRS, the plaintiffs filed suit.  On summary judgment, the court concluded that there was no dispute that Lutz and Carr had departed from accepted standards of practice and thereby damaged the plaintiffs.  The court also rejected the firm’s argument that subsequent tax preparers’ failure to find the error in the 2016 return was an intervening, superseding cause of the plaintiffs’ loss.

The case is NFGTV, Inc. v. Lutz & Carr Certified Public Accountants, LLP, No. 154545/2022 (N.Y. Sup. Ct. N.Y. Cnty. Aug. 9, 2023).  Plaintiffs are represented by Rosenberg, Giger & Perala P.C.  Lutz and Carr is represented by Abrams Garfinkel Margolis Bergson, LLP.  The order can be found here.