Watson v. Dimke

Watson v. Dimke (2004-226); 178 Vt. 504; 872 A.2d 337

2005 VT 29

[Filed 03-Mar-2005]

                                 ENTRY ORDER

                                 2005 VT 29

                      SUPREME COURT DOCKET NO. 2004-226

                             DECEMBER TERM, 2004


  Gerald Watson, Kay Watson,  	        }	APPEALED FROM:
  New England Graphic Machine and 	}
  Engineering, Inc., and Security 	}
  Maintenance, Inc.                     }
       	                                }	Chittenden Superior Court
      v.	                        }	
  	                                }
  Robert Dimke, David Feiden, and	}	DOCKET NO. S1497-01 CnC
  Feiden & Greenberg	                }	
                                                Trial Judge: Matthew I. Katz

             In the above-entitled cause, the Clerk will enter:


       ¶  1.    Plaintiffs Gerald Watson, Kay Watson, New England Graphic
  Machine and Engineering, Inc., and Security Maintenance, Inc., appeal from
  the trial court's order granting summary judgment to defendants Robert
  Dimke, David Feiden, and Feiden & Greenberg, on their negligence complaint. 
  Plaintiffs alleged that defendants had negligently disclosed subpoenaed
  copies of their financial records.  The trial court granted summary
  judgment after finding that defendants did not owe plaintiffs a legal duty,
  and defendants' actions were not the proximate cause of any injury suffered
  by plaintiffs.  Plaintiffs argue that the trial court erred because: (1)
  accountants owe a professional duty to their clients to ascertain the
  validity of a subpoena before disclosing financial information without
  client consent; and (2) accountants are under a duty to maintain the
  confidentiality of client information under 26 V.S.A. § 82(a) unless a
  court orders otherwise.  We affirm. 

       ¶  2.  The following facts are undisputed.  Defendants performed
  accounting services for plaintiffs.  In 1995, North Bennington Industrial
  Buildings, Inc. (NBIB) commenced an ejectment  action against plaintiffs. 
  Plaintiffs cross-claimed and counterclaimed for money damages.  As part of
  the discovery process, NBIB requested certain financial records from
  plaintiffs under V.R.C.P. 34.  Plaintiffs did not object to the production
  of these documents, and produced some of the requested information
  themselves.  When plaintiffs did not produce all of the requested
  documents, NBIB issued subpoenas to defendants Dimke and Feiden to compel
  production of plaintiffs' financial records.
   
       ¶  3.  Upon receiving the subpoena, defendant Feiden called his
  attorney, who advised him to produce the requested documents.  Feiden
  directed defendant Dimke to disclose the documents.  Dimke's personal
  attorney also advised him to produce the records.  Although Mr. Watson
  objected to the disclosure, Dimke complied with the subpoena, and informed
  Mr. Watson of his actions.  Mr. Watson objected in writing, although his
  attorney did not move to quash the subpoenas, nor did he move for a
  protective order.  The underlying case was eventually settled for $300,000
  in favor of the Watsons.  

       ¶  4.  In December 2001, plaintiffs filed suit against defendants,
  alleging, among other claims, that defendants had been professionally
  negligent in disclosing the subpoenaed financial records, and that they had
  suffered damages as a direct and proximate result.  The parties filed
  cross-motions for summary judgment.  In an April 2004 entry order, the
  court granted summary judgment to defendants.  The court found that the
  disclosed information was not privileged because an accountant-client
  privilege did not exist in Vermont or under federal law.  The court
  rejected plaintiffs' assertion that accountants were nonetheless under a
  duty to resist subpoenas when their clients did not consent to disclosure. 
  The court explained that the closest equivalent to a privilege could be
  found in 26 V.S.A. § 82(a), which prohibited public accountants from
  disclosing confidential information "except with the consent of the client
  . . . or as disclosure may be required by law, legal process or the
  standards of the profession."  Even assuming that at least part of the
  information that defendants held was confidential and thereby covered under
  26 V.S.A. § 82, the court explained that the receipt of a subpoena by a
  litigant in a civil suit constituted a requirement to disclose under legal
  process.  Thus, defendants' compliance with this legal requirement did not
  violate any duty that they may have owed plaintiffs.  

       ¶  5.  The court also rejected plaintiffs' contention that the
  subpoenas had not been properly executed.  The court found no evidence to
  show that service of the subpoenas had been incomplete.  Additionally, the
  court explained, although plaintiffs could have raised such arguments in
  support of a motion to quash at the time of service, the standards set
  forth in 26 V.S.A. § 82 did not support such an attack against the facial
  validity of a subpoena in support of a liability claim.  The court found
  that the undisputed facts showed that defendants had received a subpoena,
  sought legal consultation, were aware that they were required to provide
  material within a legal process, and complied.  Because there was neither a
  statutory nor common law duty for accountants to fend off subpoenas, the
  court concluded that defendants did not violate any duty by complying with
  the subpoena.

       ¶  6.  Even if defendants did owe plaintiffs some legal duty, the
  court explained, plaintiffs had not demonstrated that defendants'
  disclosure was the proximate cause of any injury that they  suffered.  The
  court found no evidence that defendants' compliance with the subpoenas had
  undercut plaintiffs' ability to recover a larger settlement amount. 
  Plaintiffs' decision to settle, the court explained, while potentially a
  result of the disclosure, was a tactical decision, rather than a necessary
  result of defendants' actions.  The court found that without additional
  evidence, it would be speculative to conclude that "but for" the release of
  unprivileged information, plaintiffs would have recovered a larger sum. 
  Thus, because there was no proof of a legal duty owed, nor proof of harm,
  the court granted defendants' motion for summary judgment, and dismissed
  plaintiffs' claims against defendants.  This appeal followed.  
   
       ¶  7.  Plaintiffs maintain that the trial court erred in finding the
  absence of a legal duty.  They argue that, viewed as a whole, 26 V.S.A. §
  82 clearly imposes a duty on accountants to ascertain the validity of
  subpoenas before disclosing client information.  Plaintiffs assert that the
  Legislature purposely distinguished between governmental and
  nongovernmental subpoenas, and intended that an additional legal process or
  consent of the client be required before an accountant must disclose
  information pursuant to the latter.  Plaintiffs argue that in light of 26
  V.S.A. § 82(a), and V.R.C.P. 45, which sets forth a procedure by which
  subpoenas may be challenged, and given their opposition to the disclosure
  of the requested documents, defendants were under a duty to object pursuant
  to Rule 45 and withhold client information until a court issued an order
  compelling their compliance.  In support of their argument, plaintiffs
  point to the "Standards of the Profession" set forth in the American
  Institute of Public Accountants Code of Professional Conduct (AICPA), which
  prohibits disclosure of confidential information without client consent
  with an exception for information requested pursuant to a "validly issued
  and enforceable subpoena."  Plaintiffs point to the use of the words
  "validly issued" and "enforceable" as evidence of the existence of the
  affirmative duty described above. 

       ¶  8.  We review a grant of summary judgment using the same standard
  as the trial court.  Richart v. Jackson, 171 Vt. 94, 97, 758 A.2d 319, 321
  (2000).  Summary judgment is appropriate when, taking all allegations made
  by the nonmoving party as true, there are no genuine issues of material
  fact and the movant is entitled to judgment as a matter of law.  Id.;
  V.R.C.P. 56(c).  A party is entitled to summary judgment if he presents at
  least one legally sufficient defense that would bar a plaintiff's claims. 
  Smith v. Day, 148 Vt. 595, 597, 538 A.2d 157, 158 (1987).  Summary judgment
  was properly granted here. 

       ¶  9.  To support their negligence claim, plaintiffs need to show
  that defendants owed them a legal duty, the breach of the duty was the
  proximate cause of their harm, and they suffered actual loss or damage. 
  O'Connell v. Killington, Ltd., 164 Vt. 73, 76, 665 A.2d 39, 42 (1995). 
  There is no legal support for plaintiffs' assertion that accountants are
  under an affirmative duty to resist subpoenas, and we reject plaintiffs'
  tortured interpretation of 26 V.S.A. § 82.  The plain language of 26 V.S.A.
  § 82(a) prohibits accountants from disclosing confidential information
  except as "may be required by law, legal process or the standards of the
  profession."  Where, as here, the language of a statute is clear and
  unambiguous, "we must apply the plain meaning of the language used."  Reed
  v. Glynn, 168 Vt. 504, 506, 724 A.2d 464, 465 (1998).  Assuming that the
  requested information was confidential, and thus within the ambit of 26
  V.S.A. § 82, a request for documents via subpoena is a "legal process"
  within the plain meaning of the statute.  
        
       ¶  10.  Plaintiffs offer no persuasive support for a contrary
  conclusion.  We reject their contention that the Legislature intended to
  impose a heightened duty on accountants to resist non-governmental
  subpoenas merely because 26 V.S.A. § 82(b) provides that "[t]his section
  does not limit the authority of this state or of the United States to
  subpoena and use information in connection with any investigation, or
  proceedings."  The plain language of the statute simply does not support
  such an interpretation.  Additionally, the existence of a procedure for
  challenging subpoenas in no way imposes a duty on accountants to avail
  themselves of this mechanism upon receipt of a subpoena.  Finally, the use
  of the words "valid" and "enforceable" in the AICPA's standards does not
  support plaintiffs' assertion that accountants must determine the validity
  of subpoenas prior to compliance.  Because plaintiffs cannot establish that
  defendants owed them a legal duty, nor that they breached any duty in
  disclosing the subpoenaed information, summary judgment was properly
  granted for defendants. 


       Affirmed.


                                       BY THE COURT:


                                       _______________________________________
                                       John A. Dooley, Associate Justice

                                       _______________________________________
                                       Denise R. Johnson, Associate Justice

                                       _______________________________________
                                       Marilyn S. Skoglund, Associate Justice

                                       _______________________________________
                                       Paul L. Reiber, Associate Justice

                                       _______________________________________
                                       Frederic W. Allen, Chief Justice (Ret.),
                                       Specially Assigned