Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Coulter v. Grant Thornton, LLP

Court of Appeals of Arizona, First Division

January 3, 2017

WILLIAM R. COULTER; MARK TKACH; and MILLS A. BROWN, Plaintiffs/Appellants,
v.
GRANT THORNTON, LLP, Defendant/Appellee.

         Appeal from the Superior Court in Maricopa County No. CV2011-020270 The Honorable J. Richard Gama, Judge Retired

         AFFIRMED IN PART, REVERSED IN PART, AND REMANDED

          Aiken, Schenk, Hawkins & Ricciardi, PC, Phoenix By Joseph A. Schenk, J. Tyrrell Taber, Michael R. Devitt Counsel for Plaintiffs/Appellants.

          Bryan Cave LLP, Phoenix and Kansas City, MO By Lawrence G. Scarborough, James D. Smith, Craig S. O'Dear, Fred L. Sgroi Counsel for Defendant/Appellee.

          Judge Kent E. Cattani delivered the opinion of the Court, in which Presiding Judge Diane M. Johnsen and Judge John C. Gemmill (retired) joined.

          OPINION

          CATTANI, Judge.

         ¶1 William R. Coulter, Mark Tkach, and Mills A. Brown (collectively, "Appellants") raise an issue of first impression relating to when accountant malpractice claims accrue for purposes of the statute of limitations. Consistent with the discovery rule, we hold that determining the accrual date is a fact-based inquiry that turns on when a party knew or reasonably should have known of facts establishing a basis for the claim. Accordingly, and for reasons that follow, we reverse the superior court's ruling dismissing Appellants' claims against the accounting and tax advisory firm Grant Thornton, LLP for breach of fiduciary duty, professional negligence, negligent misrepresentation, common law fraud, aiding and abetting, and racketeering. We affirm the merits-based dismissal of Appellants' breach of contract and breach of the implied covenant of good faith claims, and we remand for further proceedings.

         FACTS AND PROCEDURAL BACKGROUND

         ¶2 In 2000, Appellants hired Grant Thornton to implement strategies intended to reduce their income tax liability arising from their financial interests in automobile and motorcycle dealerships in Arizona. Upon the recommendation of Blair Stover, a principal with Grant Thornton, Appellants each established an "ESOP/S" structure, which involved the creation of a single-owner employee stock ownership plan ("ESOP") holding the stock of a related S corporation.[1] Appellants each used the ESOP/S structure in the 2002 tax year.

         ¶3 The IRS disapproved of the ESOP/S structure and issued a "Notice of Deficiency" to Coulter and Tkach in 2006 and 2007. The notices reflected millions of dollars in tax deficiencies and "accuracy related" penalties under Internal Revenue Code ("I.R.C.") § 6662. 26 U.S.C. § 6662.[2] Stover assured Appellants that they would ultimately prevail against the IRS, and Coulter and Tkach challenged the deficiency determinations and penalties in United States Tax Court. Following lengthy litigation, they settled with the IRS in 2011, agreeing to pay taxes on the income that had been shielded from taxation by the ESOP/S structure.

         ¶4 Brown did not receive a notice of deficiency with respect to the ESOP/S structure, but he received a notice of deficiency with respect to a Roth/S structure that he had likewise implemented on Stover's recommendation. Brown entered into a "Closing Agreement" with the IRS in July 2011, under which he agreed to pay additional excise taxes in the amount of $254, 938.20 as a result of his use of the Roth/S structure and to have all the monies used to fund his Roth IRA between 2002 and 2008 taxed as ordinary income.

         ¶5 In November 2011, Appellants filed a complaint in superior court against Grant Thornton and other defendants.[3] Grant Thornton moved to dismiss several of Appellants' claims as barred by applicable statutes of limitations. The superior court granted the motion and dismissed those claims. Grant Thornton then filed a motion for partial summary judgment on Coulter and Tkach's breach of contract claim, which the court also granted. Finally, Grant Thornton filed a motion to dismiss or, in the alternative, for summary judgment on Appellants' remaining claims for fraudulent concealment and contractual bad faith. The superior court similarly granted this motion.

         ¶6 The court then entered final judgment under Arizona Rule of Civil Procedure ("Rule") 54(b) and awarded Grant Thornton $495, 231.60 in attorney's fees. This timely appeal followed.

         DISCUSSION

         I. Dismissal Based on the Statute of Limitations.

         ¶7 We review de novo a dismissal under Rule 12(b)(6) for failure to state a claim. Coleman v. City of Mesa, 230 Ariz. 352, 355, ¶ 7 (2012). Dismissal under Rule 12(b)(6) is only appropriate if, assuming the truth of all well-pleaded factual allegations, "as a matter of law [ ] plaintiffs would not be entitled to relief under any interpretation of the facts susceptible of proof." Id. at 356, ¶¶ 8-9 (alteration in original) (citation omitted). Given our preference to resolve claims on their merits, "the statute of limitations defense is not favored." CDT, Inc. v. Addison, Roberts & Ludwig, C.P.A., P.C., 198 Ariz. 173, 175, ¶ 5 (App. 2000) (quoting Logerquist v. Danforth, 188 Ariz. 16, 22 (App. 1996)). Nevertheless, "claims that are clearly brought outside the relevant limitations period are conclusively barred." Montaño v. Browning, 202 Ariz. 544, 546, ¶ 4 (App. 2002).

         A. First Order of Dismissal.

         ¶8 Appellants argue that the superior court erroneously dismissed on limitations grounds their claims for breach of fiduciary duty, professional negligence, negligent misrepresentation, common law fraud, aiding and abetting, and racketeering. Because there is a question of fact as to when Appellants discovered or should have discovered that they ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.