In 1997, the Louisiana Legislature adopted a claims review panel procedure involving “claims” against certified public accountants and firms. “Claims” as contemplated by the Act are broadly defined as:
(1) "Claim" means any cause of action against a certified public accountant or firm, regardless of the legal basis of the claim, including but not limited to tort, fraud, breach of contract, or any other legal basis, arising out of any engagement to provide professional services, including but not limited to the following:
(a) The providing of attest services as defined in R.S. 37:73(1)(a).
(b) The providing of business or financial advice.
(c) Advice relative to plans or actions to qualify for tax benefits or otherwise reduce the amounts of
(d) Advice relative to the structuring of pension or retirement or insurance plans or other employee
(e) The provision, including design, of computer software for accounting or bookkeeping functions.
(f) Any other advice relative to the conduct of any business whether conducted for profit or not.
Unlike the matters within the jurisdiction of the State Board of Certified Public Accountants of Louisiana regarding licensing and enforcement, there are no supplemental administrative rules governing the conduct of the review panels. The review panel law provides that all claims, except those validly agreed for submission to lawfully binding arbitration or in the absence of an express waiver, shall be submitted to a review panel administered under the auspices of the Society of Louisiana Certified Public Accountants prior to a suit prior to a suit being commenced.
The request for review by a claimant shall be in writing and must contain a short concise statement of the material facts that give rise to the dispute. The Society is empowered to dismiss the claim if the claimant fails to take the necessary timely steps to secure the appointment of the attorney chairman of the panel and in the event that the parties are unable to agree on an attorney chairman, the law provides for the involvement of the Louisiana Supreme Court in the selection process.
The panel is composed of three CPAs, who have practiced in Louisiana for more than ten years, with the claimant and the respondent each having the right to chose one CPA panelist, and one attorney. There are provisions in the law for the qualifications and duties of the panelists. The attorney member of the panel acts in an advisory capacity and administrative capacities and has no vote.
Although there is an opportunity for certain pre-hearing discovery, the panel may only consider written evidence. The panel has the authority to request and procure “all necessary information” in making its decision. The panel’s sole duty is to express its opinion as to whether or not the evidence supports the conclusion that the defendant or defendants acted or failed to act within the appropriate standard or care or whether there is a material issue of fact, not requiring expert opinion, bearing on liability for consideration by the court.
The role of the panel does not include the factual determination of whether damages were sustained and, if so, the amount of the damages, as those are issues for a subsequent judge or jury to decide. The panel’s opinion is admissible, but not conclusive, in any subsequent court proceeding.
The “Standard of Care” and Other Issues Involved in Claims Against Accounts
As noted, in exercising its’ function, a review panel determines whether the accountant met the “applicable standard of care.” That conduct is generally contrasted to “malpractice”, which is defined as:
“Malpractice. Professional misconduct or unreasonable lack of skill. This term is usually applied to such conduct by doctors, lawyers and accountants. Failure of one rendering professional services to exercise that degree of skill and learning commonly applied under all the circumstances in the community by the average prudent reputable member of the profession with the result of injury, loss or damage to the recipient of those services or to those entitled to rely upon them. It is any professional misconduct, unreasonable lack of skill or fidelity in professional or fiduciary duties, evil practice, or illegal or immoral conduct."
Under this standard, the accountant is not required to exercise perfect judgment in every instance. However, it recognizes that the accountant’s license to practice and contract for employment holds out to the client that the accountant possesses certain minimal skills, knowledge and abilities.
A related state law issue involves who has a right to make a claim against an accountant for alleged malpractice. In the limited number of cases applying Louisiana law, it appears that with regard to malpractice the courts limit such malpractice liability to clients and nonclients whom the attorneys know will rely upon their legal work product.
The time within which to bring a claim against an accountant has also been subject to legislation and judicial discussion. The time periods that govern actions for professional accountant liability are set forth in Louisiana Revised Statute 9:5604, which generally provides that no action for damages against any accountant duly licensed under the laws of this state, whether based upon tort, or breach of contract, or otherwise, arising out of an engagement to provide professional accounting service shall be brought unless filed in a court of competent jurisdiction and proper venue within one year from the date of the alleged act, omission, or neglect, or within one year from the date that the alleged act, omission, or neglect is discovered or should have been discovered; however, even as to actions filed within one year from the date of such discovery, in all events such actions shall be filed at the latest within three years from the date of the alleged act, omission, or neglect. There are exceptions for cases of fraud and proceedings initiated by the State Board of Certified Public Accountants of Louisiana.
Accountants, like physicians and lawyers, owe a duty to perform their services with a degree of skill and competence reasonably expected of persons in their profession in the community. Hence, the Louisiana legislature has enacted a comprehensive regulatory scheme governing both practice requirements as well as the consequences of falling below the standard of care expected. It is suggested that both the State Board of Certified Accountants of Louisiana and the Society of Louisiana Certified Public Accountants have performed commendably in carrying out their responsibilities under the Louisiana Accountancy Law.
This is the third, and final part, of a series of articles discussing the regulation and liability of accountants pursuant to Louisiana law. This part focuses on the standards adopted by the Louisiana Legislature and courts involving claims of substandard performance. A complete version of the article, including relevant references, is available on the LCPA’s website, www.lcpa.org. The first two portions of the article can also be found on the Louisiana Law Blog here: Part 1, Part 2.