Scioto Memorial Hospital Ass'n v. Price Waterhouse

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] (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] Based 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. Likewise, the trial court’s failure to give an instruction on comparative negligence was not prejudicial error in this case as Scioto’s alleged negligence pertained mainly to the damages caused by the fire which, as we stated above, does not constitute comparative negligence. The court of appeals’ remittitur properly reduced the jury award by the amount of damages attributable to the fire. Furthermore, evidence pertaining to the negligent acts of Scioto was presented to the jury during the trial. The jury was instructed that it should not award any damages to Scioto which were not caused by PW. The jury was instructed that if Scioto failed to act reasonably to avoid or reduce its losses, it could not recover any such damages. Despite these instructions, the jury still awarded Scioto all of its damages, indicating that the jury found PW the sole cause of the failure of Richmond Place. Thus, we find that even if the jury had been required to apportion the fault between the parties in this case, the outcome would have been the same. The jury found that PW was solely liable for Scioto’s [479] loss. Accordingly, since there was no prejudicial error, a new trial is not warranted. As to Scioto’s Cross-Proposition of Law I, in which Scioto attacks the trial court’s denial of prejudgment interest, we find that the trial court’s order was within its discretion and will not be reversed absent an abuse of discretion. Kalain v. Smith (1986), 25 Ohio St.3d 157, 159, 25 OBR 201, 203, 495 N.E.2d 572, 574. The trial court did not abuse its discretion by denying prejudgment interest in the present case as the court found that PW had an objectively reasonable belief that it had no liability. In Cross-Proposition of Law II, Scioto urges that the remittitur ordered by the appellate court be modified. However, where a party voluntarily chooses to accept a remittitur, rather than a new trial, it cannot challenge that remittitur on appeal. Iron RR. Co. v. Mowery (1881), 36 Ohio St. 418, paragraph three of the syllabus. This rule is fundamentally fair, as it simply binds a party to its election. Id. Finally, we do find merit in Scioto’s third Cross-Proposition of Law, which contends that the court of appeals erred when it ordered post-judgment interest on Scioto’s verdict to run from September 1, 1988. This was the date the nunc pro tunc entry was filed, which corrected a typographical error in the case number of the original judgment entry filed on August 4, 1988. Since post-judgment interest should run from the date of the original August 4, 1988 judgment entry, we reverse the court of appeals’ finding on this issue and order post-judgment interest to run beginning August 4, 1988. See R.C. 1343.03(B); In re Petition for Inquiry into Certain Practices (1948), 150 Ohio St. 393, 38 O.O. 258, 83 N.E.2d 58, paragraph two of the syllabus. Judgment affirmed in part and reversed in part. Resnick and Pfeifer, JJ., concur. Cook, J., concurs separately. Moyer, C.J., Douglas and Wright, JJ., concur in part and dissent in part.