SK Partners I, LP v. Metro Consultants, Inc.
408 Ill. App. 3d 127
| Ill. App. Ct. | 2011Background
- Plaintiffs SK Partners I–IV and Sal's Holding Company claim accounting malpractice caused tax overpayments due to depreciations miscalculations by Metro Consultants, Inc.
- Metro prepared federal tax returns for 2000–2002; last used on or before April 15, 2003; plaintiffs later hired CJBS for accounting tasks.
- Stuart of CJBS testified that depreciation issues were evident by October 2003; by November 11, 2003, he alerted plaintiffs and proposed up to a year to amend filings.
- Amended returns were filed September 11, 2004 (Sal's) and October 2004 (SK Partners) after an accrual of miscalculated depreciation was evident.
- IRS audit followed; refunds issued December 13, 2004 through April 21, 2006; plaintiffs filed suit September 21, 2006.
- Circuit court granted Metro’s 2-619 dismissal based on statute of limitations; appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 2-619 dismissal proper given discovery rule. | Discovery rule tolls while injury is suspected. | Limitations ran once injury was discovered or should have been discovered. | Dismissal proper; statute expired by latest November 11, 2005. |
| When did the statute of limitations begin to run for accounting malpractice involving tax overpayment? | Overpayment damages discovered when IRS refunds began (Dec 2004). | Overpayment damages occurred earlier when overpayments were made, triggering discovery later. | Start no later than Sep 11, 2004; expiration by Sep 11, 2006. |
| Does Federated Industries apply to overpayments as the triggering event for accrual? | Rule should align with tax overpayment overpayment discovery. | Use Federated as guidance but distinguish overpayments; deficiency approach not controlling. | Federated guidance adopted; overpayment damages trigger accrual earlier than refunds. |
| Are the plaintiffs’ damages ascertainable and did the discovery occur sufficiently to trigger a clock? | Damages discovered only upon IRS acceptance of amended returns. | Damages occurred with overpayment; discovery was triggered by November 2003 communications. | Damages and discovery triggered by November 11, 2003; action untimely by November 11, 2005. |
| Should appellate standards transform these facts into a factual question for discovery timing? | Whether knowledge is a factual issue should permit revival. | 2-619 allows early dismissal on legal/fact issues; timing shown in record. | Record supports de novo review on discovery timing; still affirm dismissal. |
Key Cases Cited
- Federated Indus., Inc. v. Reisin, 402 Ill.App.3d 23 (2010) (deficiency approach; start of injury when IRS notes deficiency or customer accepts proposed assessments)
- Dancor Int'l, Ltd. v. Friedman, Goldberg & Mintz, 288 Ill.App.3d 666 (1997) (discovery rule delays start until reasonable belief injury due to wrongful conduct)
- Jackson Jordan, Inc. v. Leydig, Voit & Mayer, 158 Ill.2d 240 (1994) (discovery rule allows delayed accrual of professional negligence claims)
- Gale v. Williams, 299 Ill.App.3d 381 (1998) (recognizes discovery rule in professional negligence contexts)
- Warnock v. Karm Winand & Patterson, 376 Ill.App.3d 364 (2007) (damages must be proven proximately caused by negligence; accrual tied to actionable damages)
- Lucey v. Law Offices of Pretzel & Stouffer, Chartered, 301 Ill.App.3d 349 (1998) (legal malpractice accrual generally when injury and damages are discovered; rarely before adverse judgment)
- Mc Baldwin Financial Co. v. DiMaggio, Rosario & Veraja, LLC, 364 Ill.App.3d 6 (2006) (section 2-619 standard; de novo review on legal sufficiency and timeliness)