Professional Negligence Law Reporter

Accounting

You must be a Professional Negligence Law Reporter subscriber to access this content.

If you are a member of AAJ's Professional Negligence Section or a subscriber, log in below. Not yet a Section member? Join today!

Join the Professional Negligence Section

Convicted client may not sue accountant for negligence

September/October 2024

A Kentucky appellate court held that a client who pleaded guilty to criminal charges may not sue an accountant for professional negligence arising out of the same underlying transactions.

Hatem Kaisi pleaded guilty to tax evasion and falsely claiming low-income eligibility for Medicaid coverage. He later sued his former accountant, alleging breach of contract, negligence, emotional distress, and loss of reputation, which, the plaintiff asserted, arose out of the defendant’s tax advice. The trial court dismissed the complaint for failure to state a claim.

Affirming dismissal, the appellate court noted that there was no published authority in Kentucky addressing how collateral estoppel from a criminal conviction might apply to an accountant negligence claim. Citing case law from other jurisdictions, the court reasoned that being found guilty of a criminal charge necessarily means that a client did not rely in good faith on the advice of tax professionals. Moreover, the court said, public policy prohibits claims against accountants by criminally convicted clients. A client’s guilt cannot be overcome when considering the actual cause of the alleged damages, the court reasoned, adding that public policy precludes anyone from obtaining damages when their own criminal conduct is a cause of those damages.

Applying these principles, the court concluded that the plaintiff here cannot maintain his lawsuit because his own criminal actions played a substantial part in the damages he claimed.

Citation: Kaisi v. Isaacs, 2024 WL 3075431 (Ky. Ct. App. June 21, 2024).