Articles Tagged with Chicago breach of fiduciary duty lawyer near me

When a corporation hires an independent auditor to inspect its financials does that auditor owe fiduciary duties to its client? If no fiduciary duties exist as a matter of law, do they arise by virtue of a “special relationship” between the parties? In a matter of first impression, an Illinois appellate court wrestled with these questions and answered both in the negative.

Asian Human Services, Inc. (“AHS”) is a non-profit organization dedicated to helping lower income immigrants obtain health, dental, and employment assistance. After AHS was sued by another non-profit organization, AHS brought a third-party claim for breach of fiduciary duty against its long-time independent auditor, James Wong.

AHS alleged that Wong owed fiduciary duties to the non-profit by virtue of the special circumstances of the parties’ relationship. The complaint alleged that Wong had served as the independent auditor of AHS for more than a decade during which time he became an important advisor to the organization. Additionally, the complaint alleged that AHS relied heavily on Wong and that he even served an integral role in AHS’s hiring process for four separate Chief Financial Officers.

Wong filed a section 2-619 motion to dismiss AHS’s claim arguing that: (1) independent auditors do not stand in a fiduciary relationship with their clients, and (2) there were no special circumstances that created a fiduciary relationship. After briefing and oral argument on the motion, the trial court granted appellee’s motion to dismiss, with prejudice, and included Supreme Court Rule 304(a) language.

AHS appealed and argued that the trial court erred in relying on a federal case, Resolution Trust Corp. v. KPMG Peat Marwick, 844 F. Supp. 431 (N.D. Ill. 1994), which held, as a matter of law, that generally, an independent auditor does not owe a fiduciary duty to its client. Instead, the non-profit argued that the trial court should have relied on case law from various other state courts which have found that independent auditors owe fiduciary duties to their clients.

The appellate court acknowledged that no Illinois case law addressed the issue of whether independent auditors owe fiduciary duties to their clients. But ultimately the appellate court found that AHS waived the argument. In the trial court, AHS expressly stated that it was “not arguing that Mr. Wong became a fiduciary to AHS because he acted as an auditor.” AHS’s attorney in the trial court told the trial judge at oral arguments on the motion to dismiss: “One thing I want to make clear is that we’re not arguing that Mr. Wong became a fiduciary to AHS because he acted as an auditor. Now, clearly that would be the antecedent relationship and it makes his actions that much more strange, but that’s not the basis.” Continue reading ›