Plaintiffs-Appellants Firefighters' Retirement System, Municipal Employees' Retirement System of Louisiana, and New Orleans Firefighters' Pension & Relief Fund (collectively, "Plaintiffs") filed accounting malpractice claims against Defendant-Appellee Grant Thornton ("GT"). GT filed a motion to dismiss the suit as premature because Plaintiffs failed to bring their claims before an accountant review panel, as required by Louisiana law. The district court agreed with GT and dismissed Plaintiffs' suit without prejudice. Plaintiffs now appeal, contending that GT is either estopped from asserting its right to a review panel or has waived that right. GT cross-appeals, arguing that those claims are extinguished because Plaintiffs failed to request
I. FACTS AND PROCEEDINGS
In 2008, Plaintiffs invested $100 million in the FIA Leveraged Fund ("Leveraged"). The terms of the Leveraged Offering Memorandum stated that GT was "the Fund's independent auditor" and would provide shareholders with "an annual audited financial report" of the Leveraged Fund.
In January 2014, Plaintiffs filed suit against GT in Louisiana state court alleging various accounting malpractice claims.
In its supplemental brief, GT argued that Plaintiffs' suit was premature because they had not submitted their claims to a review panel before filing suit. GT explained that it did not previously raise this issue "because it did not want to create grounds for Plaintiffs to argue it had compromised its personal jurisdiction defense via reliance on a Louisiana statutory procedure." GT urged that the case should still be dismissed for lack of personal jurisdiction, but in the alternative should be dismissed as premature. Plaintiffs responded that GT had waived the prematurity defense by participating in the litigation for three years without mentioning the review panel.
In February 2017, the magistrate judge issued a report and recommendation on GT's motion to dismiss.
II. ANALYSIS
The appeal and cross-appeal raise two main issues: First, whether Plaintiffs' claims against GT were premature because they were not submitted to an accountant review panel; second, whether the claims are time barred under the applicable peremptive period. The district court determined that the claims were premature but did not address the peremption issue.
A. Plaintiffs' claims against GT are premature because they did not submit them before an accountant review panel prior to filing this lawsuit.
1. Standard of Review
We review the grant of a motion to dismiss de novo, "accepting all well-pleaded facts as true and viewing those facts in the light most favorable to the plaintiff."
2. Louisiana Accountancy Act
The parties do not dispute that these claims fall within the Louisiana Accountancy Act. Plaintiffs contend, however, that GT is estopped from asserting its right to a review panel or, in the alternative, that it has waived this requirement.
The LAA states that "[a]ll claims against certified public accountants or firms ... shall be reviewed by a public
It is undisputed that Plaintiffs filed suit before submitting their claims before a review panel. Plaintiffs do not contend they are exempt from this requirement, but argue that GT is estopped from asserting its right to a review panel because it previously asserted that it was not subject to specific personal jurisdiction in Louisiana. Plaintiffs also argue that GT waived its right to a review panel by not raising the issue earlier in the litigation. GT responds that estoppel does not apply because it has not taken inconsistent positions in the litigation. GT also contends that it has not waived its right to a review panel, as such a waiver requires a written agreement by the parties.
i. Judicial Estoppel
"Judicial estoppel is a common law doctrine that prevents a party from assuming inconsistent positions in litigation."
ii. Waiver of Panel Review Requirement
Plaintiffs also argue that GT has waived its right to an accountant review panel by participating in this litigation for three years without raising the LAA review panel requirement. In support of
The LAA states that a public accountant review panel is mandatory but may be waived "[b]y written agreement of both parties."
In that case, the defendant failed to file a dilatory exception of prematurity
Unlike the accountants in Moon Ventures , GT has not filed an answer in this case and addressed the prematurity issue in a motion to dismiss. Even if Moon Ventures applied to this case, GT has not waived its right to a review panel by its nominal participation in this litigation. Furthermore, unlike Moon Ventures , this litigation has not advanced as far as the suit in that case. It has been pending for three years but was stayed for 18 months pending the resolution of a related case. In any event, three years of litigation is still substantially different from the six-year litigation in Moon Ventures .
B. Plaintiffs' claims against GT are time-barred under the relevant peremptive period.
GT cross-appeals and argues that Plaintiffs' claims are time-barred because they did not present their claims before a review panel within the applicable peremptive period. GT raised this issue in district court, but the magistrate judge declined to address it and instead recommended dismissing the case on prematurity grounds. Plaintiffs counter that (1) this issue is not ripe for review because it was not addressed in the district court; (2) it is not appropriate for a motion to dismiss because it involves disputed fact issues; and (3) their claims are not extinguished because either contra non valentum or GT's post-malpractice fraud suspended the peremptive period.
1. Standard of Review
This court reviews a Rule 12(b)(6) dismissal de novo and "may affirm on any basis supported by the record."
2. Peremptive period for accounting malpractice claims
GT contends that Plaintiffs' claims are not only untimely but also extinguished under Louisiana law. Section 9:5604 of the Louisiana Revised Statutes establishes the limitations periods for claims of professional accounting liability. It states:
No action for damages against any accountant duly licensed under the laws of this state ... arising out of an engagement to provide professional accounting service shall be brought unless filed in a court of competent jurisdiction and proper venue within one year from the date of the alleged act, omission, or neglect, or within one year from the date that the alleged act, omission, or neglect is discovered or should have been discovered.... in all events such actions shall be filed at the latest within three years from the date of the alleged act, omission, or neglect.34
These one- and three-year limitations periods are peremptive, so they "may not be renounced, interrupted, or suspended."
i. Contra non Valentum
Under Louisiana law, contra non valentum "prevents the commencement of the running of prescription 'when the plaintiff does not know nor [sic] reasonably should know of the cause of action.' "
Plaintiffs also insist that the fraud exception suspends the running of the peremptive period in this case. The Louisiana Civil Code defines fraud as "a misrepresentation or a suppression of the truth made with the intention either to obtain an unjust advantage for one party or to cause a loss or inconvenience to the other. Fraud may also result from silence or inaction."
Plaintiffs contend that in Lomont v. Bennett , the Louisiana Supreme Court also held that "post-malpractice fraudulent concealment can constitute fraud as contemplated by La. R.S. 9:5605(E),"
In Lomont , the Louisiana Supreme Court held that "post-malpractice fraudulent concealment can constitute fraud" but explained that "[s]pecific intent to deceive is a necessary element of fraud, and fraud cannot be based on mistake or negligence, regardless how great."
In their complaint, Plaintiffs allege that GT "failed to detect and report" the following information in either the initial or restated audits:
• That $42 million of the proceeds of the initial offering were not invested, but used to pay obligations to Citco;
• The conflict of interest between Citco, Fletcher, and Leveraged investors;
• The reasons GT resigned as an auditor of Leveraged; and
• The accurate value of specific notes within the Leveraged Fund.
Even assuming that these allegations are true, as is required at this stage of the proceedings, Plaintiffs have failed to allege that GT made any of these omissions with a "[s]pecific intent to deceive."
iii. Peremptive period
Even though Plaintiffs have failed to allege facts which demonstrate that the
"in a court of competent jurisdiction and proper venue within one year from the date of the alleged act, omission, or neglect, or within one year from the date that the alleged act, omission, or neglect is discovered or should have been discovered.... [and] in all events such actions shall be filed ... within three years from the date of the alleged act, omission, or neglect."49
The parties disagree regarding when the relevant conduct occurred and when Plaintiffs knew, or should have known, about the alleged misconduct.
Even if Plaintiffs did not have constructive notice of the alleged misconduct until 2013, their claims are still perempted. After the district court dismissed the case, Plaintiffs filed their first petition before an accountant review panel on March 23, 2017. GT argues that this petition is now perempted because filing in state court does not interrupt the applicable peremptive period, and all of the alleged misconduct occurred more than three years before March 23, 2017.
The Louisiana Fifth Circuit Court of Appeal recently addressed a similar fact pattern.
On appeal, the Louisiana Fifth Circuit explained that "[b]ecause the rights to which peremptive periods attach are extinguished after the passage of a specified period of time, nothing may interfere with the running of a peremptive period."
Applying the rule in Bernard to this case, Plaintiffs' claims are time-barred. Louisiana law is clear that Plaintiffs cannot bring a malpractice claim against GT before submitting their claim to an accountant review panel.
III. CONCLUSION
We AFFIRM the district court's dismissal of Plaintiffs' claims as premature. Additionally, all of Plaintiffs' accounting malpractice claims must be dismissed with prejudice because they were filed outside the relevant peremptive period and thus were extinguished.
Notes
GT alleges that it did not issue the audit opinions at issue in this case. It contends a separate legal entity, Grand Thornton Cayman, did all of the work for the Leveraged audit reports. Plaintiffs claim that GT performed all of the audit services and the two entities have an agency relationship. Regardless, it is not necessary for us to reach this issue in order to resolve the issues presented in this appeal.
Plaintiffs also contend that during the relevant time period, GT served as a personal financial advisor for Alphonse Fletcher. In the course of this relationship, Leveraged loaned Fletcher $27 million, allegedly in violation of the terms of the Leveraged Offering. Plaintiffs allege that this transaction demonstrates that GT had a conflict of interest and was therefore unable to perform its role as Leveraged's "independent auditor." This argument, however, is not directly related to the issues in the present appeal.
Plaintiffs also named Consulting Services Group, LLC ("CSG") as a defendant; however, Plaintiffs had already filed claims against CSG and twenty-two other defendants in state court. The new claims against CSG were consolidated with the previous suit. CSG is no longer a defendant in this case.
The delay between the date of filing and the magistrate judge's opinion is largely explained by an eighteen-month stay during this courts' consideration and ruling in the related case of Firefighters' Ret. Sys., et al. v. Citco Grp. Ltd. ,
The court did not address GT's peremption arguments.
Hines v. Alldredge ,
Ashcroft v. Iqbal ,
Twombly ,
Beavers v. Metro. Life Ins. Co. ,
See Bickerstaff v. Bickerstaff ,
In re Superior Crewboats, Inc. ,
Reed v. City of Arlington ,
See
Moon Ventures, L.L.C. v. KPMG, L.L.P. , 2006-1520, p. 6 (La. App. 3 Cir. 8/15/07),
See
Louisiana's dilatory exceptions serve a similar purpose as do motions to dismiss under the Federal Rules of Civil Procedure. See La. Code Civ. Proc. arts. 923, 926 ; see also N. Stephan Kinsella, A Civil Law to Common Law Dictionary ,
Moon Ventures, L.L.C. ,
La. Code Civ. Proc. art. 928.
Moon Ventures, L.L.C. ,
The dissent in Moon Ventures explained that while a party may waive the dilatory exception, it cannot waive the right to a review panel. See
See
See also Bernard, Cassisa, Elliott & Davis v. Estate of Laporte , 12-758 (La. App. 5 Cir. 3/27/13),
For a brief discussion of the civil law doctrine of peremption, see Jeffrey J. Gelpi, Comment, Has Prescription Preempted Peremption?: A Plea to Bury the Ghosts of Survival Actions ,
Asadi v. G.E. Energy (USA), L.L.C. ,
See Arvie v. Broussard ,
See, e.g. , Manemann v. Garrett ,
Plaintiffs urge this court not to resolve the peremption question because the same issue is now pending in district court. Some procedural background may be beneficial here. After the district court dismissed Plaintiffs' claims as premature, they filed a notice with an accountant review panel and initiated a proceeding in district court to obtain discovery related to such a panel. GT objected to the review panel and filed a motion to dismiss the discovery proceeding based on the same peremption argument it raises in this cross-appeal. According to GT, both the district court and the accountant review panel have not yet addressed the peremption issue. GT claims that if we do not address peremption now, a future appeal will present "the very same question."
La. Civ. Code art. 3461.
Terrebonne Par. Sch. Bd. v. Columbia Gulf Transmission Co. ,
Terrebonne Par. Sch. Bd. v. Mobil Oil Corp. ,
Reeder v. North , 97-0239 (La. 10/21/97),
Plaintiffs claim that contra non valentum applies here based on the Louisiana Supreme Court's decision in Lomont , in which the court held contra non valentum applied when the plaintiff's "delay in bringing [suit] was a direct result of [the defendant's] fraud." Lomont v. Bennett , 2014-2483 (La. 6/30/15),
La. Civ. Code art. 1953.
Lomont ,
Lomont ,
See id ;La. Civ. Code art. 1953.
GT contends that Plaintiffs' claims are based on the 2007 and 2008 audit opinions, and therefore their 2014 lawsuit and 2017 review panel request are perempted because both were filed more than three years after the alleged misconduct. GT also argues that Plaintiffs' claims based on the 2011 restatements are perempted because they admitted they knew their investment was not liquid and the accounting statements were inaccurate when they received the promissory notes on June 15, 2011. Plaintiffs contend they were not on notice of the alleged malpractice until November 2013, when they learned of additional factual inaccuracies in the 2011 audit restatements. As discussed above, even accepting Plaintiffs' claims as true, those claims are still barred by the peremptive period in
Hines ,
The undisputed facts of this case, however, indicate that Plaintiffs likely had notice of the alleged misconduct in 2011. In their initial petition in the Citco case, Plaintiffs explained that the date they received the promissory note in 2011 was "the first point in time that [Plaintiffs] had any notice or knowledge that [their] investment in [Leveraged] was not liquid and that the valuations contained in the account statements issued to it were not accurate." Pl.'s Pet. for Damages ¶ 41, Firefighters' Ret. Sys. v. Citco Grp. Ltd. , Civil Action No. 3:13-cv-373 (M.D. La. June 11, 2013), filed as Exh. A to Defendants' Notice of Removal, ECF No. 1 ("Plaintiffs' Initial Petition for Damages"). This petition is a matter of public record and subject to judicial notice. See Norris v. Hearst Trust ,
Bernard, Cassisa, Elliott & Davis ,
Bernard, Cassisa, Elliott & Davis v. Estate of LaPorte , 2013-0899 (La. 5/31/13),
See