KITCHENS OF OCEANS, INC. v. McGladrey & Pullen, LLP, No. 4D01-3758.

CourtCourt of Appeal of Florida (US)
Writing for the CourtFARMER, J.
Citation832 So.2d 270
PartiesKITCHENS OF THE OCEANS, INC. and Albert F. Margus, Jr., Appellants, v. McGLADREY & PULLEN, LLP, an Iowa limited liability partnership, Michael A. Balter, an individual, and Salvatore Catanese, an individual, Appellees.
Docket NumberNo. 4D01-3758.
Decision Date11 December 2002

832 So.2d 270

KITCHENS OF THE OCEANS, INC. and Albert F. Margus, Jr., Appellants,
v.
McGLADREY & PULLEN, LLP, an Iowa limited liability partnership, Michael A. Balter, an individual, and Salvatore Catanese, an individual, Appellees

No. 4D01-3758.

District Court of Appeal of Florida, Fourth District.

December 11, 2002.


832 So.2d 271
I. Jeffrey Pheterson and Peter H. Schmidt of Schmidt, Pheterson & Bleau, Boca Raton, for appellants

Ronald B. Ravikoff and Thierry Olivier Desmet of Zuckerman Spaeder, LLP, Miami, and Robert R. Watson Sidley, Austin, Brown & Wood, Chicago, Illinois, for appellees.

FARMER, J.

This case involves a claim by a client against an accounting firm (auditors) for negligence in its audit of certain financial statements. The trial court granted the auditor's motion to dismiss the claim for failure to state a cause of action. We reverse.

The auditors first argued that the engagement agreement's hold harmless provision barred the client's claim for breach of contract. We disagree.

The engagement agreement provided that auditors would perform as follows:

"We will conduct the audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement whether caused by error, fraudulent financial reporting, or misappropriation of assets.
...
"An audit also includes obtaining an understanding of internal control sufficient to plan the audit and to determine the nature, timing and extent of audit procedures to be performed."
The agreement also added that:
"As you know, management is responsible for (1) the preparation of [client's] financial statements, (2) establishing and maintaining effective internal control over financial reporting and safeguarding assets, (3) properly recording transactions in the records, (4) identifying and ensuring that [client] complies with the laws and regulations applicable to its activities, and (5) making all financial records and related information available to us and (6) for adjusting the financial statement to correct material misstatements."

The complaint accuses the auditors of negligence and breach of contract in planning and designing the audit for client's particular business and, thereby, failing to detect an ongoing embezzlement scheme by client's controller.

The hold harmless provision relied on by the auditors states:

"[Client] hereby indemnifies [auditors] and its partners and employees and holds them harmless from all claims, liabilities, losses, and costs arising in circumstances where there has been a knowing misrepresentation by a member of [client's] management, regardless of whether such person was acting in [client's] interest. This indemnification will survive termination of this letter."
832 So.2d 272
In Cox Cable Corp. v. Gulf Power, 591 So.2d 627, 629 (Fla.1992), the court explained that contracts of indemnification which attempt to indemnify a party against its own wrongful acts are viewed with disfavor in Florida and will be
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11 practice notes
  • Ucf Athletics Ass'n Inc. v. Plancher, No. 5D11–2710.
    • United States
    • Court of Appeal of Florida (US)
    • September 6, 2013
    ...causing his injury. Cain v. Banka, 932 So.2d 575 (Fla. 5th DCA 2006) (citing Kitchens of the Oceans, Inc. v. McGladrey & Pullen LLP, 832 So.2d 270 (Fla. 4th DCA 2002)). They are disfavored in the law because they relieve one party of the obligation to use due care and shift the risk of inju......
  • UCF Athletics Ass'n Inc. v. Plancher, Case No. 5D11-2710
    • United States
    • Court of Appeal of Florida (US)
    • August 16, 2013
    ...causing his injury. Cain v. Banka, 932 So. 2d 575 (Fla. 5th DCA 2006) (citing Kitchens of the Oceans, Inc. v. McGladrey & Pullen LLP, 832 So. 2d 270 (Fla. 4th DCA 2002)). They are disfavored in the law because they relieve one party of the obligation to use due care and shift the risk of in......
  • Cain v. Banka, No. 5D05-3986.
    • United States
    • Court of Appeal of Florida (US)
    • June 30, 2006
    ...party the right to recover damages from a person negligently causing his injury. Kitchens of the Oceans, Inc. v. McGladrey & Pullen LLP, 832 So.2d 270 (Fla. 4th DCA 2002). Exculpatory clauses are disfavored and are enforceable only where and to the extent that the intention to be relieved f......
  • Peoples Bank v. Crowe Chizek and Co., No. 2007-CA-001174-MR.
    • United States
    • Court of Appeals of Kentucky
    • June 6, 2008
    ...for professional negligence, other jurisdictions have applied similar tests. In Kitchens of the Oceans, Inc. v. McGladrey & Pullen, LLP, 832 So.2d 270 (Fla.App.2002), a panel of the Florida Court of Appeals held that an auditor's engagement letter must contain language specifically and clea......
  • Request a trial to view additional results
11 cases
  • Ucf Athletics Ass'n Inc. v. Plancher, No. 5D11–2710.
    • United States
    • Court of Appeal of Florida (US)
    • September 6, 2013
    ...causing his injury. Cain v. Banka, 932 So.2d 575 (Fla. 5th DCA 2006) (citing Kitchens of the Oceans, Inc. v. McGladrey & Pullen LLP, 832 So.2d 270 (Fla. 4th DCA 2002)). They are disfavored in the law because they relieve one party of the obligation to use due care and shift the risk of inju......
  • UCF Athletics Ass'n Inc. v. Plancher, Case No. 5D11-2710
    • United States
    • Court of Appeal of Florida (US)
    • August 16, 2013
    ...causing his injury. Cain v. Banka, 932 So. 2d 575 (Fla. 5th DCA 2006) (citing Kitchens of the Oceans, Inc. v. McGladrey & Pullen LLP, 832 So. 2d 270 (Fla. 4th DCA 2002)). They are disfavored in the law because they relieve one party of the obligation to use due care and shift the risk of in......
  • Cain v. Banka, No. 5D05-3986.
    • United States
    • Court of Appeal of Florida (US)
    • June 30, 2006
    ...party the right to recover damages from a person negligently causing his injury. Kitchens of the Oceans, Inc. v. McGladrey & Pullen LLP, 832 So.2d 270 (Fla. 4th DCA 2002). Exculpatory clauses are disfavored and are enforceable only where and to the extent that the intention to be relieved f......
  • Peoples Bank v. Crowe Chizek and Co., No. 2007-CA-001174-MR.
    • United States
    • Court of Appeals of Kentucky
    • June 6, 2008
    ...for professional negligence, other jurisdictions have applied similar tests. In Kitchens of the Oceans, Inc. v. McGladrey & Pullen, LLP, 832 So.2d 270 (Fla.App.2002), a panel of the Florida Court of Appeals held that an auditor's engagement letter must contain language specifically and clea......
  • Request a trial to view additional results

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