Court Grants In Part Motion To Dismiss Against Accounting And Auditing Firm Based On Engagement Letter Clause Permitting Firm To Resign At Any Time

Posted: August 13, 2025 / Written by: Jeffrey M. Eilender, Thomas A. Kissane, Samuel L. Butt, Joshua Wurtzel, Channing J. Turner / Categories Commercial, Motion to Dismiss, Breach of Contract

Court Grants In Part Motion To Dismiss Against Accounting And Auditing Firm Based On Engagement Letter Clause Permitting Firm To Resign At Any Time

On July 3, 2025, Justice Andrea Masley granted, in part, Defendant Marcum, LLP’s motion to dismiss the complaint in Hyros, Inc. v. Marcum, LLP, Index No. 653718/2023. Plaintiff asserted a claim for breach of contract against Marcum based on Marcum’s resignation from the engagement prior to completion, claiming Marcum failed to provide a valid explanation as to why, in its professional judgment, the circumstances required March to resign. Marcum argued it had the right to resign at any time without limitation. The Court agreed with Marcum on this claim, explaining:

As previously stated, the Engagement Letter contains two sentences regarding resignation – (1) “[i]f, in [Marcum’s] professional judgment, the circumstances require [Marcum] to do so, [Marcum] may resign from the engagement prior to completion” and (2) “[Marcum] acknowledge[s] [Hyros’] right to terminate [Marcum’s] services at any time, and [Hyros] acknowledge[s] [Marcum’s] right to resign at any time (including instances where in [Marcum’s] judgment, [Marcum’s] independence has been impaired or [Marcum] can no longer rely on the integrity of management) … .” (NYSCEF 31, Engagement Letter at 3, 11.)

The first sentence permits Marcum to resign prior to completion if, in its professional judgment, the circumstances require Marcum to do so. The second sentence is an acknowledgement by Hyros that Marcum has a right to resign at “any time.” The use of the word “may” in the first sentence provides Marcum with an option to resign if its professional judgment requires; it does not create a requirement that Marcum can only resign when its professional judgment requires. This sentence does not mandate that Marcum provide an explanation as to why, in its professional judgment, the circumstances required it to resign. The Engagement Letter clearly bestows a right to Marcum to resign at any time, and in turn, also bestows a right to Hyros to terminate the agreement at any time. While the second sentence provides examples of instances that could trigger a resignation, it does not create a requirement that Marcum only resign when its judgment requires. The court “will not necessarily imply a term since courts may not by construction add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing.” (Reiss v Fin. Performance Corp., 97 NY2d 195, 199 [2001] [internal quotation marks and citation omitted].) Thus, the breach of contract claim based on the allegation that Marcum failed to provide a valid explanation cannot be sustained.

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning motions to dismiss or breach of contract.