Commercial Division Blog

Posted: July 30, 2016 / Categories Commercial, Statute of Limitations/Laches

Continuous Representation Doctrine Saves Claims Against Auditor from Dismissal

On July 25, 2016, Justice Ritholtz of the Queens County Commercial Division issued a decision in Jefferson Apartments, Inc. v. Mauceri, 2016 NY Slip Op. 26230, applying the continuous representation doctrine to preserve some claims against an auditor.

As Justice Ritholtz explained in the opening of his opinion,

The "continuous treatment" doctrine originated in medical malpractice cases to toll the running of the statute of limitations. This judicial exception was first encountered in 1902 in Gillette v. Tucker, 65 N.E. 865 (Ohio 1902). The Gillette court held that using the surgery date as the starting point for calculating the statute of limitations would improperly burden the victim by forcing her to sue the surgeon while her treatment continued or forego her cause of action. Id. at 871. Over 100 years later, the "continuous treatment" doctrine, adopted by the New York courts, has evolved to cover not only medical malpractice, but, under the name of the "continuous representation" doctrine, has been extended to other professions and occupations, such as accountants.

Proper analysis and application of the "continuous representation" doctrine tend to produce just results, as opposed to mindless invocation of a limitations defense. The instant motion deals, inter alia, with the application of the "continuous representation" doctrine as it relates to the tolling of the statute of limitations in an action alleging accountant or auditor malpractice.

In Jefferson Apartments, the plaintiff asserted claims relating to "the alleged mismanagement of and unauthorized withdrawal of plaintiff's funds by defendants." Among the grounds on which defendants moved to dismiss was that the plaintiff's claims were time-barred. The court granted the motion only in part, explaining:

The continuous representation doctrine tolls the running of the statute of limitations on a claim arising from the rendition of professional services only so long as the defendant continues to advise the client in connection with the particular transaction which is the subject of the action and not merely during the continuation of a general professional relationship. Thus, unless services relating to the particular transaction sued upon were rendered within the limitation period, even the defendant's general and unfettered control of the plaintiff's financial, tax and investment affairs is insufficient to sustain the timeliness of the action. Stated otherwise, where a professional advises a client in a series of discrete and severable transactions, the performance of services in each successive transaction does not serve to toll the running of the statute of limitations on any claim arising from the prior transaction.

. . .

The branch of the motion seeking dismissal of the professional malpractice claims based upon the audit performed on the 2011 financials by Mauceri is, [] denied. Plaintiff raised a question of fact as to whether the statute of limitations with regards to these transactions was tolled by the doctrine of continuous representation. At a minimum there is an issue of fact as to whether Mauceri's representation of plaintiff and the certification/recertification of the financial statement for the 2011 audit reflected a course of continuous representation intended to rectify or mitigate the initial act of alleged malpractice which occurred in connection with the preparation of the financials.

(Internal quotations and citations omitted)