Scioto Memorial Hospital Ass'n v. Price Waterhouse

74 Ohio St. 3d 474
CourtOhio Supreme Court
DecidedFebruary 7, 1996
DocketNo. 94-409
StatusPublished
Cited by64 cases

This text of 74 Ohio St. 3d 474 (Scioto Memorial Hospital Ass'n v. Price Waterhouse) is published on Counsel Stack Legal Research, covering Ohio Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Scioto Memorial Hospital Ass'n v. Price Waterhouse, 74 Ohio St. 3d 474 (Ohio 1996).

Opinions

Francis E. Sweeney, Sr., J.

The main issue before this court is whether the comparative negligence defense is applicable to a professional negligence claim of a client against its accountant. For the following reasons, we find that the comparative negligence defense is applicable in accounting negligence cases. Accordingly, the trial court erred in granting the motion in limine and in not giving an instruction on the comparative negligence defense. Nevertheless, we affirm the court of appeals’ upholding of the jury’s verdict because the error was not prejudicial in this case.

The “audit interference” rule was set forth in Natl. Sur. Corp. v. Lybrand (1939), 256 A.D. 226, 9 N.Y.S.2d 554. At that time, New York recognized contributory negligence as a complete bar to recovery. In National Surety, the New York Supreme Court, Appellate Division, held that contributory negligence constituted an affirmative defense for accountants only if the client’s negligence contributed to the accountant’s failure to perform his contract and to report the truth. While this rule was adopted by a number of jurisdictions, a review of these cases shows that none discusses its applicability in a state recognizing comparative negligence, with the exception of Fullmer v. Wohlfeiler & Beck (C.A.10, 1990), 905 F.2d 1394 (applying Utah law). See Lincoln Grain v. Coopers & Lybrand (1984), 216 Neb. 433, 345 N.W.2d 300; Jewelcor Jewelers & Distrib., Inc. v. Corr (1988), 373 Pa.Super. 536, 542 A.2d 72; Cereal Byproducts Co. v. Hall [477]*477(1956), 8 Ill.App.2d 331, 132 N.E.2d 27; Greenstein, Logan & Co. v. Burgess Marketing, Inc. (Tex.App.1987), 744 S.W.2d 170. The audit interference rule was made to soften what was then the “harsh rule” of negligence law which barred recovery of damages if there was any contributory negligence on the part of the plaintiff. Note, The Peculiar Treatment of Contributory Negligence in Accountants’ Liability Cases (1990), 65 N.Y.U.L.Rev. 329, 354.

However, in light of Ohio’s comparative negligence statute enacted in 1980, R.C. 2315.19(A), there is no need for a special rule and, thus, we reject the application of the audit interference rule in Ohio. Hence, any negligence by a client, whether or not it directly interferes with the accountant’s performance of its duties, can reduce the client’s recovery. In so holding, we note that virtually all courts that have expressly considered the applicability of the audit interference rule to their comparative negligence states have agreed and rejected the rule. See Halla Nursery, Inc. v. Baumann-Furrie & Co. (Minn.1990), 454 N.W.2d 905, 909 (“Because we have broadly construed the comparative fault act and applied it to other professional malpractice actions, we * * * hold that the trial court did not err in applying the principles of comparative fault in this action by a client against an accountant for negligent failure to discover embezzlements in the client’s business.”); Fed. Deposit Ins. Corp. v. Deloitte & Touche (E.D.Ark. 1992), 834 F.Supp. 1129, 1144-1147 (applying Arkansas law); Devco Premium Fin. Co. v. N. River Ins. Co. (Fla.App.1984), 450 So.2d 1216 (declined to adopt the audit interference rule because it was based on principles of contributory negligence, which had been repudiated in Florida); Capital Mtge. Corp. v. Coopers & Lybrand (1985), 142 Mich.App. 531, 537, 369 N.W.2d 922, 925; Natl. Credit Union Adm. Bd. v. Aho, Henshue & Hall (Aug. 30, 1991), E.D.La. No. 90-4443, unreported, 1991 WL 174671 (applying Louisiana law).

Ohio has adopted comparative negligence for all negligence actions not covered by statute. R.C. 2315.19; Wilfong v. Batdorf (1983), 6 Ohio St.3d 100, 6 OBR 162, 451 N.E.2d 1185, overruled in part and modified in part on other grounds, Van Fossen v. Babcock & Wilcox Co. (1988), 36 Ohio St.3d 100, 522 N.E.2d 489. Thus, comparative negligence is the law of Ohio in negligence cases, including professional negligence cases, where appropriate. See Cincinnati Riverfront Coliseum, Inc. v. McNulty (1986), 28 Ohio St.3d 333, 28 OBR 400, 504 N.E.2d 415. As to the application of the comparative negligence defense in the present case, we note that while accountants should exercise ordinary care in conducting their accounting activities, the persons who hire accountants, usually businesspersons, should also be required to conduct their business activities in a reasonable and prudent manner. Halla Nursery, Inc. v. Baumann-Furrie, supra, 454 N.W.2d at 909.

[478]*478Based on the foregoing, we conclude that Ohio’s comparative negligence law is applicable to a client’s claim against its accountant for professional negligence. Accordingly, the trial court erred in granting the motion in limine as to PW’s comparative negligence defense and in failing to give an instruction on comparative negligence to the jury.

However, despite the trial court’s initial ruling granting the motion in limine, the record demonstrates that PW was not precluded from presenting extensive evidence tending to show that Scioto’s own conduct was a cause of its losses, in addition to the negligence of PW. As the trial court noted in its decision denying PWs motion for judgment notwithstanding the verdict, “Defendant properly developed an appreciable body of evidence on the alleged acts of Plaintiff which would comprise all such affirmative defenses. These were before the jury * * * to use in establishing proximate cause as defined for the jury.”

PW primarily argues about the trial court’s exclusion of evidence regarding Scioto’s failure to obtain business-interruption insurance. However, as the trial court noted, “the $4,000,000.00 hole in PlantifPs [sic ] protective coverage was clearly and repeatedly presented to the jury.” Moreover, failure to obtain such insurance constitutes comparative negligence only with regard to the damages attributable to the delays caused by the fire and not the other damages which the jury found Scioto to have sustained as a result of PW’s negligence and breach of contract. The court of appeals recognized that the jury award improperly included damages that resulted from the fire, and ordered a remittitur to cure the error.

Accordingly, we find that while the trial court should have allowed the comparative negligence defense, in this case the error was cured by the court of appeals’ remittitur and, therefore, did not constitute prejudicial error.

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Bluebook (online)
74 Ohio St. 3d 474, Counsel Stack Legal Research, https://law.counselstack.com/opinion/scioto-memorial-hospital-assn-v-price-waterhouse-ohio-1996.