By Jennifer J. Vosburg
June 1, 2003

Accountant malpractice litigation is a growth industry. Corporate fraud, a bad economy and people losing money — somebody has to pay. Whose fault can it be (and more importantly, who can be sued) other than those sneaky CPAs with their calculators? Anybody who can understand the tax codes must be smart enough to cheat their clients or have made a mistake. (After all, how can they think with their brain cells dominated by the tax codes.) The logical conclusion is that the CPA’s malpractice must be the only reason that the client has lost money. Hence, the exponential, nationwide growth in claims against accountants.
Before the days of Enron and Arthur Anderson, the Louisiana Legislature passed a little known revision to the Louisiana Accountancy Act.1 In 1997, by Acts 1997, No. 747, ‘1, a review-panel procedure was enacted requiring peer review before a suit could be filed in state court. Now that CPAs have developed a new logo in the shape of a bull’s-eye, the importance of the 1997 revision is coming to light. It is a surprise to many that all claims against a CPA must first be brought in the form of a complaint before the Society of Louisiana Certified Public Accountants2 and be subject to a review panel before suit can be filed.

La. R.S. 37:101(1) provides a broad definition of the term “claim”:

Any cause of action against a certified public accountant or firm arising out of alleged negligence or breach of contract or fiduciary duty in the practice of public accounting or alleged negligence or breach of contract or fiduciary duty in connection with professional services, including but not limited to the following:
(a) The providing of business and financial advice.
(b) Advice relative to plans or actions to qualify for tax benefits or otherwise reduce the amounts of tax owed.
(c) Advice relative to the structuring of pension or retirement or insurance plans or other employee benefits.
(d) The provision, including design of computer software for accounting or bookkeeping functions.
(e) Any other advice relative to the conduct of any business whether conducted for profit or not.

The definition of “claim” leaves little wiggle room for even the most creative of counsel to find a way to avoid the review-panel process.
The review panel process, formulated after the more familiar medical-review panel process, creates a forum for claimants to perform discovery and get a much quicker and cheaper opinion as to the viability of a claim before filing suit. The accountants also receive the benefit of discovery and the potential of a favorable opinion prior to suit being filed and, hopefully, in lieu of suit being filed.
The filing of a complaint with the Society interrupts the running of prescription.3 Claims against accountants are subject to a one-year prescriptive period and a three-year peremptive period.4 For example, each yearly audit performed for a corporation is considered an individual act. Therefore, any claim arising from an audit performed more than three years from the filing of the claim would be preempted. Walle Corp. v. Hibernia Nat’l Bank, 96-803 (La.App. 5 Cir. 03/25/97), 692 So.2d 1238. A defendant CPA may raise an exception of prescription or peremption in response to the complaint. La. R.S. 37:108 authorizes the defendant CPA to file such an exception in a court of competent jurisdiction without the need for completion of the review-panel process and without waiving the CPA’s right to a review panel. If the claim is untimely, the panel is dissolved.
Procedurally, the review-panel process is fairly streamlined. After filing a complaint, the Society provides notice to the respondent CPA of the complaint.5 The claimant then has the burden to take action to secure the appointment of an attorney to serve as chair.6 The Society maintains a list of attorneys willing to serve as chair, but the parties are not limited to that list.
The parties then have 15 days to agree to an attorney who will chair the panel. This usually results in posturing by the parties as to whom the attorney should be and from what locale. With foresight, the Act helps to quash those disputes by providing that if the parties cannot agree, the Society will then ask the Louisiana Supreme Court to randomly select five attorneys from the parish of the CPA’s domicile from whom the parties select on a strike basis.7
The attorney chair has no vote or voice in the merits of the complaint, but serves in an advisory capacity to administer the review-panel process as efficiently as possible. The attorney chair is charged with establishing a reasonable schedule for the submission of evidence within 90 days of the selection of the panel.8
Each party selects a CPA to serve as a member of the review panel, who in turn select a third “independent” panel member. Certified public accountants who have held a Louisiana license for 10 consecutive years are eligible to serve on the panel. Only three panelists are allowed, no matter how many complainants or defendants.9 If a party fails to make his selection, the attorney chairman is empowered to select a panel member for the party.10
The parties are allowed to conduct written discovery and take depositions. The use of expert witnesses is also sanctioned by the act. However, do not plan on having your expert witness put on a live show for the review panel. Only written evidence may be submitted to the panel for review. However, the panel does have discretion on the form of evidence that may be admitted.11 In addition, the panel itself may request information and consult with other “public accounting authorities.”12
The parties have the right to examine the materials received and reviewed by the panel. Moreover, the parties may question the review panel once the evidence has been submitted if the panel is convened by a party. The attorney chair presides at all meetings, which are required by the Act to be “informal.”13
After reviewing the evidence, the panel then must express an opinion. That opinion is limited to one of three conclusions set out in La. R.S. 37:199:

(1) The evidence supports the conclusion that the defendant or defendants failed to comply with the appropriate standard of care as charged in the request for review.
(2) The evidence does not support the conclusion that the defendant or defendants failed to meet the applicable standard of care as charged in the request for review; or
(3) That there is a material issue of fact, not requiring expert opinion, bearing on liability for consideration by the court.

The first two possible opinions are self explanatory. However, the language in subpart three is less clear. Unfortunately, there are no reported cases that explain in what situation a material issue of fact would exist that would relieve the review panel from expressing an expert opinion.
The review panel’s opinion is admissible in any court proceeding that is brought by the claimant. Similar to the medical-review-panel process, the accountant panelists may be called as a witnesses at trial. If your party received a favorable decision from the panel, it would be money well spent to have essentially three experts testify in your favor. The Act is specific in cloaking the panelist with absolute immunity from any civil liability for actions taken in the course and scope of their duties as panelists.14
The review-panel process is still in its infancy, without jurisprudence to provide guidance. However, the State Society is doing an excellent job in administering the program and is very helpful and informative. I hope the review-panel process will prevent frivolous claims, but it may be too early to tell.


1La. R.S. 37:71 et seq.
2There is a separate entity known as the Louisiana State Board of Certified Public Accountants who has its own complaint and investigatory process. The procedure for complaints filed with the State Board are not discussed in this article.
3La. R.S. 37:92.
4La. R.S. 9:5604.
5La. R.S. 37:104.
6La. R.S. 37:103.
7La. R.S. 37:109.
8La. R.S. 37:110.
9La. R.S. 37:112.
10La. R.S. 37:111.
11La. R.S. 37:116.
12La. R.S. 37:118.
13La. R.S. 37:117.
14La. R.S. 37:120.