In Feldman v. Farris (2017AP692), the Court of Appeals District IV upheld summary judgment dismissing the plaintiffs’ negligence claims against their accountant based on the statute of limitations.

The plaintiffs, shareholders of Woodside Ranch Resort, retained certified public accountant (CPA) Fred Farris, who facilitated a sale of the plaintiffs’ shares to Midcoast Investments. Farris told the plaintiffs they would not be at risk for transferee tax liability after the deal. However, Midcoast later failed to pay federal taxes owed, and the plaintiffs received notice of transferee liability for over $1 million in unpaid taxes. The plaintiffs sued Farris for negligence.

The questions before the appeals court included:

1. Whether the plaintiffs’ claim was barred under Wis. Stat. § 896.66, which bars actions against CPAs after six years, unless the CPA has committed concealment.
2. Whether there were issues of material fact that would prohibit summary judgment.

Under the first question, the court concluded that Wis. Stat. § 896.66 did apply, barring the present action. The court dismissed the plaintiffs’ claims that Farris waived the right to the affirmative defense of Wis. Stat. § 896.66 by not making that specific defense in his initial answer. (Farris first cited the specific statute as a “statute of repose” in a post-deadline amended answer.) The court concluded that Wis. Stat. § 896.66 is a statute of limitations and, since statues of limitations are affirmative defenses, must be specifically pleaded or raised in motion. However, the appeals court concluded that circuit court properly exercised its broad discretion in allowing Farris’s amended complaint.

Under the second question, the court upheld summary judgment because the plaintiffs did not prove any issues of material fact regarding:

• Whether Farris intentionally delayed the plaintiffs from pursuing legal action against him by cooperating in their federal level proceedings. The court said there were no issues of material fact because Farris and the plaintiffs had mutual interests in advocating in federal court to avoid transferee liability.
• Whether Farris was providing “professional accounting services” under Wis. Stat. § 869.66 applicable. The court said there were no issues of material fact because referring the plaintiffs to Midcoast was part of a broader range of accounting services Farris provided to the plaintiffs.
• Whether Farris committed “concealment” under the exception to the statute of limitations. The court said there were no issues of material fact because concealment must be intentional.