Watson v. Dimke, No. S1497-01 Cncv (Katz, J., Apr. 5, 2004)

[The text of this Vermont trial court opinion is unofficial. It has been
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STATE OF VERMONT
Chittenden County, ss.:




WATSON

v.

DIMKE




                                 ENTRY

      Taking a page from the Modern Politican’s Playbook on Information
Disclosure,?? plaintiffs argue the novel position that while information


      1
        See In re Cheney, 334 F.3d 1096 (D.C. Cir. 2003); Press Release,
Judicial Watch, Judicial Watch Calls on Howard Dean to Release Sealed
Gubernatorial Papers (Oct. 1, 2003), available at http://www.judicialwatch
.org/092503_PR.shtml.
between accountants and clients is not privileged, it does create a duty in
accountants to resist subpoenas or other legal process when their clients do
not consent. This kind of privilege-lite does not have the support of 26
V.S.A. § 82 or the facts involved in this case. We decline the invitation to
interpret otherwise.

        As part of litigation in Bennington County involving plaintiffs and a
third party, the current defendants, Dimke, Feiden, and Feiden &
Greenberg, who had provided accounting services for plaintiffs, were
served with a subpoena. The subpoena was for records that defendants held
in regards to plaintiffs and their businesses. Both parties admit that this
information was not privileged since there has never been an accountant-
client privilege in Vermont or on the federal level. See United States v.
Bein, 726 F.2d 107, 112–13 (2d Cir. 1984). The closest equivalent to a
privilege is the statutory guidelines for accounting information under 26
V.S.A. § 82. Under that provision:

       No firm or any of its employees or other public accountants
       engaged by the firm, shall disclose any confidential
       information obtained in the course of a professional
       engagement except with the consent of the client or former
       client or as disclosure may be required by law, legal process,
       or the standards of the profession.”

26 V.S.A. § 82(a). Because we will follow the plain meaning of a statute
where its language is unambiguous and clear, Reed v. Glynn, 168 Vt. 504,
506 (1998), this statute allows the disclosure of confidential
communications between clients and accountants through at least four,
independent avenues, consent, law, legal process, or professional standards.
Assuming for the purposes of this motion that at least part of the
information that defendants held was confidential and thereby covered
under § 82, there is no question that receipt of a subpoena by a litigant in a
civil suit would qualify as a requirement to disclose under legal process.
Therefore, defendants’ compliance with this legal requirement did not
violate any duty they might have owed to the Watsons.

        Apart from plaintiffs’ unsupported interpretation of § 82(a), which
would require consent before any disclosure, they also argue that the
subpoena received by defendants was not properly executed which thereby
invalidated defendants’ responsibility to disclose. Their first contention is
that the subpoena was served by mail on December 24, 1998, in
contravention of V.R.C.P. 45(b). Although Rule 45(b) does not condone
the legality of mail service, defendants point out that they were served in
person by Sheriff Brian Abbey on December 28, 1998. Three days later
they complied with the subpoena. That defendants have not produced a
copy of the service on defendant Feiden is not fatal to this claim since
plaintiffs have not provided any reason to understand that service was
incomplete. Gallipo v. City of Rutland, 163 Vt. 83, 86 (1994) (summary
judgment is proper when party with burden has failed to make a showing
sufficient to establish an essential element of his case). The same holds for
plaintiffs’ other contention that the subpoena failed to include the text of
Rule 45(c) & (d). As defendants note, the copy of the subpoena referenced
by plaintiffs is a one-sided copy of a two-sided document. Moreover, this
document is a standard court form which is known to contain the required
text of Rule 45 on its second side. (State of Vermont Subpoena, Form No.
501, Rev. Mar. 1995).

       To take a step back, the plaintiffs’ arguments are essentially that
there maybe some discrepancies with the formal subpoena that defendants
had an obligation to challenge. Where this asserted duty to fight or
challenge a subpoena comes from is not clear. The standard provided under
26 V.S.A. § 82(a) merely allows disclosure under the requirements of legal
process. If our Legislature intended accountants to always file a pro forma
objection, and notify their clients, it had a ready model. See Vt. R. Prof’l
Conduct 1.6, cmt. (discussing attorney disclosures otherwise required or
authorized). There is no requirement that this process be a formal
subpoena, and there is no suggestion that parties should arduously guard
their client confidentiality under the penalty of liability for professional
negligence. Certainly, as Rule 45 states, parties served with a subpoena are
welcome to challenge, but there is no requirement that they do. Plaintiffs
arguments may have been valid for a motion to quash the subpoena when it
was served, but the standards of § 82(a) will not support this attack against
the facial validity of a subpoena for a liability claim. Nothing suggests
such a motion would have been successful. As far as the uncontested facts
show, the defendants received a subpoena, sought legal consultation, were
aware that they were required to provide material within a legal process,
and complied. The flexibility of § 82 and the purpose of Rule 45 is to
allow such disclosure when it is relevant to litigation and help parties gather
information. We conclude that defendants did not violate any standard
established under 26 V.S.A. § 82 or some other duty to plaintiffs by
complying. In sum, there is neither statutory or common law duty for
accountants to fend off subpoenas.

        Finally, even if there had been some duty between defendants and
plaintiffs, there has been no evidence of proximate cause between the
defendants’ disclosure and plaintiffs’ injury. Once defendants disclosed the
financial information, plaintiffs settled with the third party for a substantial
amount of money. Plaintiffs claim that, but for this disclosure, they would
have had a larger award. Proximate cause requires that there be a causal
connection between defendants’ actions and plaintiffs harm. Rivers v.
State, 133 Vt. 11, 14 (1974). This is commonly called “but for” causation.
The documents that defendants disclosed to the third-party through
subpoena were not privileged documents. As defendants have noted, they
were subject to discovery in the underlying case. At any rate, they did
nothing to change the plaintiffs’ legal position or the third party’s liability.

        The disclosure may have interrupted the plaintiffs’ tactical plan in
litigation, but there is no evidence that the subpoena compliance undercut
plaintiffs’ ability to recover a larger amount. Plaintiffs’ decision to settle,
while potentially a result of the disclosure, was not a necessary result but a
tactical one. Without further evidence it would be speculative to conclude
that “but for” the release of unprivileged information, plaintiffs would have
recovered a larger sum. This was the time to submit that evidence. State v.
Blodgett, 163 Vt. 175, 180 (1995).

       Both because there is no proof of breach of a legal duty and no proof
of harm, defendants’ motion for summary judgment is granted. Plaintiff’s
claims against defendants are dismissed.

       Dated at Burlington, Vermont________________, 2004.




                                            ________________________
                                            Judge
