Caprer vs. Nussbaum

Malpractice threats to accountants are getting worse and worse as time goes on. A recent case, Caprer vs. Nussbaum, increases the risk that CPA’s face.

• Historically, in order to sue an accountant, you need privity; a relationship with the accountant
• Privity is based on the 3 prong test:
  • You must be aware, as the accountant, that your financial reports will be used for a particular purpose
  • The plaintiff must be a client, and it must be known that he/she is going to use the reports for a specific purpose
  • The accountant showed, through his or her conduct the understanding that these records would be used for that reason (i.e. a meeting, a delivery, etc.).
• If no privity can be established, one can only sue under a stronger standard of proof for fraud.
• The Caprer vs. Nussbaum case brings a new way that an accountant can be sued:
  • If your client agreed to give the financial records to a third party (bank, credit agency, etc.), that agreement works as evidence that the third party can sue the accountant on a breach of contract for failing to perform properly
  • This can make the privity test irrelevant.

Disclaimer: Law Made Easy Press® provides practical and legal, tax, estate and financial information for educational purposes only. The goal is to help you best work with your professionals to save costs, and to obtain better service and results as an informed consumer. There is no assurance that the laws or sample documents are current, that the forms will achieve the desired goal in all circumstances. Laws change frequently and vary from location. Therefore, you should always consult with a local attorney, accountant, or other expert.