June 4, 2013, Utah Supreme Court Case Summaries

Utah Supreme Court Case Summaries

June 4, 2013

Reynolds v. Bickel, 2013 UT 32, No. 20120396 (June 4, 2013)

Issue: U.C.A. section 58-26a-602(b)'s writing requirement concerning an accountant's professional liability to a third party.

The Court outlines the background of the case.  Importantly, (1) Reynolds solely owned three S corporations (“Altaview”), (2) Altaview hired Defendants to help him minimize his tax obligations during a sale of the Altaview, (3) Defendants quoted and estimated tax burden of $663,000 after the sale if restructured according to their specifications, (4) after completing the project, Reynolds’ tax liability was $1,513, 641 greater than estimated, (5) Altaview and Reynolds sued defendants for professional negligence, (6) Defendants argued that Reynolds’ claim must be dismissed because he was a third-party to the retainer agreement, and the retainer agreement did not identify in writing that their services intended to be relied upon by Reynolds, as required by Utah Code section 58-26a-602(2)(b), and (7) the trial court granted summary judgment for Defendants.

At ¶ 2-6.

The first prong of [Utah Code § 58-26a-602(2)] is satisfied by Defendants’ concession that they knew their client, Altaview Concrete, intended that Mr. Reynolds rely on their professional services. Thus, the only questions on appeal are (1) whether the writing requirement of [Utah Code § 58-26a-602(2)(b)] applies to Mr. Reynolds and (2) if so, whether the requirement was satisfied by the documents Mr. Reynolds presented to the district court. We answer both questions in the affirmative and accordingly reverse the district court’s grant of summary judgment.

At ¶ 8.

. . . The statutory language unambiguously sets forth a default rule with two exceptions: Accountants “are not liable to persons with whom they are not in privity of contract . . . except for” (1) cases of fraud or intentional misrepresentation or (2) cases where the accountant (a) knew the client intended the third party to rely and (b) the accountant “identified in writing to the client” an intent that the plaintiff rely. Because the requirements under subsection (2) are conjunctive, both the knowledge requirement of subsection (2)(a) and the writing requirement of subsection (2)(b) must be fulfilled before liability can run to a third party under this exception. We have no need to consider legislative history or other interpretive resources because the language is entirely clear on this point.

At ¶ 11.

The Court analyzes the parties’ e-mail communications and the retainer agreement and determines that they satisfy the writing requirement.

At ¶¶ 13-23.

Section 602(2)(b) is satisfied if the accountant has “identified in writing to the client that the professional services performed on behalf of the client were intended to be relied upon by the particular person seeking to establish liability.” Defendants contend that these writings are insufficient because no single writing explicitly states that “the [Defendants] intended for Reynolds to rely on the work that the [Defendants] were performing.”3 However, subsection (2)(b) does not require an explicit statement in a single writing; it requires an “identifi[cation] in writing” that a third party is intended to rely on the accountant’s services.

At ¶ 15.

. . . we hold that for purposes of Section 602(2)(b), one or more writings, not all of which are authored by the party to be charged, may be considered together as a memorandum if there is a nexus between them.

At ¶ 17.

. . . we hold that for purposes of Section 602(2)(b), a nexus may be indicated by express reference in a writing authored by the defendant to other writings, or by implied reference gleaned from the contents of the writings and the circumstances surrounding the transaction.

At ¶ 18.