Coulter v. Thornton, 755 Ariz. Adv. Rep. 15 (App. Div. I, January 3, 2017) (J.Cattani)

DISCOVERY RULE APPLIES RE ACCRUAL OF STATUTE OF LIMITATIONS IN ACCOUNTANT MALPRACTICE AND WHERE ACCOUNTANT REPRESENTS PLAINTIFF BEFORE INTERNAL REVENUE SERVICE ACCRUAL DOESN'T OCCUR UNTIL IRS PROCEEDING RESOLVED

Plaintiffs followed defendant accountant's tax shelter advice to their peril. After disallowance, plaintiffs appealed to the Internal Revenue Service [IRS] where they were represented by defendant. Plaintiffs' alleged defendant assured them they would prevail before IRS. They did not.  Plaintiffs sued defendant for accountant malpractice on a variety of tort theories including breach of fiduciary duty, professional negligence, negligent misrepresentation, common law fraud, aiding and abetting, and racketeering.  All claims were dismissed under Arizona Rules of Civil Procedure 12(b)(6) or 56. The Arizona Court of Appeals affirmed in part and reversed in part.

A two-year limitations period applies to claims for breach of fiduciary duty, professional negligence, and negligent misrepresentation. See A.R.S. §12-542. The statute accrues when the plaintiff discovers or with reasonable diligence should have discovered the facts supporting the existence of a claim.

Where the defendant represents the plaintiffs before the IRS after disallowance of tax benefits, the plaintiffs' claims do not accrue until the matter is resolved before the IRS. Otherwise, the plaintiffs could be put in the untenable position of having to sue their accountant while still being represented by him.

Plaintiffs' non tort claims were properly dismissed on substantive grounds—plaintiffs did not present evidence to support each element of these additional claims.