Commercial Division Blog

Posted: January 21, 2015 / Categories Commercial, Accounting and Accountants

"But for" Standard for Legal Malpractice Applies Equally to Accountant Malpractice Claim

On January 8, 2015, Justice Friedman of the New York County Commercial Division issued a decision in Hamadeh v. Spaulding, 2015 NY Slip Op. 30027(U), examining the causation standard for an accounting malpractice claim.

In Hamadeh, the defendants moved to dismiss the accounting malpractice claims against them. In deciding that motion, the court reviewed the causation standard for such a claim:

Defendants do not cite any case law in the accountant malpractice context which holds that the malpractice must have been the sole proximate cause of the plaintiffs injury. As discussed above, cases in the accountant malpractice area have used the term "a proximate cause" in articulating the standard that the plaintiff must prove. In the legal malpractice context, an often-cited formulation of the standard of proof requires that three elements be established: "(I) the negligence of the attorney; (2) that the negligence was the proximate cause of the loss sustained; and (3) proof of actual damages. It requires the plaintiff to establish that counsel failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that 'but for' the attorney's negligence, the plaintiff would have prevailed in the matter or would have avoided damages." In other legal malpractice cases, however, the courts have held that the attorney's malpractice must have been "a" proximate cause of the plaintiffs injury. The Second Department has expressly held that these varying formulations of the proximate cause standard ("a" as opposed to "the" proximate cause) have "no substantive import," and that the "but for" standard for attorney malpractice cases does not require proof that the defendant attorney's negligence was the "sole proximate cause" of the plaintiffs losses.

The court assumes that the "but for" standard from the legal malpractice context applies equally to accountant malpractice claims.

(Internal quotations and citations omitted).