Professional Negligence Law Reporter

Warren Averett, LLC, v. Landcastle Acquisition Corp., 2019 WL 1146331 (Ga. Ct. App. Mar. 13, 2019).

A Georgia appellate court held that an accounting firm’s contract damages provision was unenforceable where it lacked prominence among the rest of the contract terms.

Law firm Morris Hardwick Schneider, P.C., retained an accounting firm to perform audits of several years of law firm balance sheets. The firm’s managing partner signed an engagement letter and returned it to the accounting firm. After accounting firm Warren Averett, LLC, acquired the first accounting firm, the managing partner signed a second engagement letter. 

The law firm later discovered that the managing partner had allegedly embezzled millions of dollars from the firm’s trust and escrow accounts, which were not included in the various audits.

The law firm’s assignee filed suit against Warren Averett, LLC, alleging breach of contract and professional negligence. The defendant moved for partial summary judgment, arguing that the two engagement letters limited the amount recoverable on any claim to the amount of professional fees paid by the law firm, which totaled approximately $87,000. The plaintiff then filed a cross-motion for partial summary judgment on the basis that the damages provision was unenforceable as a matter of law because, among other reasons, it was not sufficiently prominent to provide notice.

The trial court held that the damages provision was unenforceable.

Affirming, the court noted that to be enforceable, exculpatory clauses must result from a meeting of the minds on the subject matter and must be explicit, prominent, and unambiguous. When determining whether an exculpatory or limitation of liability clause is adequately prominent, the court said, courts should consider whether the clause is contained in a separate paragraph, contains a separate heading, and is distinguished by additional features, such as font size. Here, the court found, the provision contained in both engagement letters is the same font size as the surrounding text. Further, the provision is not capitalized, italicized, or set in bold type. Finally, the court said, the provision was placed near the bottom of the third page of the letters under the generic heading “issue resolution.”

Accordingly, the court found that under the totality of circumstances, the trial court had correctly concluded that the damages provision failed to meet the prominence requirement and was thus unenforceable.

Plaintiff counsel: Charles S. Conerly and David A. Luzum, both of Carrollton, Ga.