Thanks for visiting! Welcome to a new way to research case law. You are viewing a free summary from Descrybe.ai. For citation and good law / bad law checking, legal issue analysis, and other advanced tools, explore our Legal Research Toolkit — not free, but close.
BDO Seidman, LLP v. British Car Auctions, Inc.
Citations: 745 So. 2d 1082; 1999 Fla. App. LEXIS 15644; 1999 WL 1062462Docket: Nos. 98-3467, 98-3939 and 98-4036
Court: District Court of Appeal of Florida; November 23, 1999; Florida; State Appellate Court
BDO Seidman, an accounting firm, successfully appeals a negligent tax advice verdict against it in favor of British Car Auctions (BCA). The court determines that the statute of limitations under Tennessee law, which applies to the case, had expired. Tennessee's law provides a one-year statute of limitations for accounting malpractice, and a cause of action accrues when the plaintiff suffers damage and knows or should know it was caused by the defendant's negligence. In the 1980s, Seidman advised BCA that selling a subsidiary would yield favorable tax treatment regarding investment tax credits. After executing the sale based on this advice, BCA later learned from the IRS in early 1992 that the investment tax credits were under scrutiny during an audit. Following this, BCA sought Seidman's assistance, and the firm continued to represent them until the IRS issued an unfavorable final report in April 1994. BCA filed the malpractice lawsuit on September 19, 1994. Seidman argues that the cause of action accrued with the 1992 letter from BCA outlining the IRS's position, thus making the lawsuit untimely under the statute of limitations. Conversely, BCA contends that the cause of action did not accrue until the IRS's final report in April 1994, which would render the suit timely. The court references the Kohl decision, which clarifies the accrual of professional malpractice claims in Tennessee. In September 1988, the clients received notice from the IRS questioning their 1986 tax return, leading their accountant to write to the IRS on October 19, 1988, in an attempt to resolve the issue. The Tennessee Supreme Court ruled that the statute of limitations began on October 24, 1988, when the clients incurred expenses due to the defendants’ negligent advice. The court clarified that actual injury, for the purposes of the discovery rule, occurred as soon as the clients had to take action in response to the IRS's inquiry, regardless of whether formal actions had been initiated by the IRS. BCA contended that if the October 19 letter triggered the statute of limitations for the Kohls, then a similar threshold should apply to them with a 1992 letter sent to Seidman. However, BCA acknowledged that its letter was merely a prompt for Seidman to take the IRS issue seriously and that they had not yet suffered damages since Seidman had proposed alternative tax reduction strategies. Nonetheless, BCA had already engaged outside counsel, Harry Shapiro, for assistance with the IRS audit, incurring legal fees prior to the 1992 letter. The court equated BCA's expenses for legal representation to the clients' situation in the Kohls case. The Tennessee Supreme Court's decision in Carvell v. Bottoms was referenced to emphasize that the statute of limitations begins when a party is aware of potential liability due to negligent actions, regardless of the perceived severity of damages at that time. The court determined that BCA was aware of a potential problem when it sent the 1992 letter and had incurred damages by hiring outside counsel prior to that date. Consequently, the court reversed the decision in favor of BCA, ruling that Seidman should prevail.