Magazine article The CPA Journal

To Sue or Not to Sue - That Is the Question

Magazine article The CPA Journal

To Sue or Not to Sue - That Is the Question

Article excerpt

I am a dual practitioner--an attorney with a concentration in taxation and a partner, with another, in a small CPA firm. Almost five years ago, the accounting practice acquired an attorney as a client on a contingency basis. Basically the issue involved penalties for late filing.

After achieving an abatement of these penalties, the client refused to pay the fee under the contingency retainer agreement, which amounted to approximately $14,000. He completely ignored our telephone calls and letters. Had he approached us, we would have made a sizable reduction in fees for expediency. Angered by his ignoring us, we began a lawsuit.

The client counter-claimed for $3 million, alleging malpractice. This elevated the case to the Supreme Court. He alleged that he, not us, had accomplished the penalty abatement and that, among other things, his sex life was destroyed.

Of course the malpractice suit brought both the accounting and legal insurance carriers into the picture. Initially the insurance lawyers sounded us out on the possibility of their paying the client a nuisance settlement of about $5,000 to resolve the entire case. We declined to drop our suit, knowing that we had done nothing wrong and there was absolutely no evidence to support those malpractice charges. Our reputation was important. We estimate the insurance companies expended approximately $75,000 in legal fees. We devoted days to examinations before trial and related conferences. On the eve of trial, the client dropped all of his malpractice claims. …

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