Project Control Services, Inc. v. Reynolds

• Decision Date: 07 February 2001
• Docket Number: No. A00A2510.,A00A2510.
• Parties: PROJECT CONTROL SERVICES, INC. v. REYNOLDS et al.
• Court: Georgia Court of Appeals

545 S.E.2d 593

247 Ga. App. 889

PROJECT CONTROL SERVICES, INC. v. REYNOLDS et al.

No. A00A2510.

Court of Appeals of Georgia.

February 7, 2001.

Smith, Currie & Hancock, Karl F. Dix, Deborah R. Murphey, Dorsey R. Carson, Jr., Atlanta, for appellant.

Burnside, Wall, Daniel, Ellison & Revell, Harry D. Revell, Augusta, for appellees. MIKELL, Judge.

Plaintiff Project Control Services, Inc. ("Project Control") is a small business that provides professional services, such as scheduling and cost budgeting, for complex projects. The five defendants¹ are current or former employees of Westinghouse Savannah River Company ("Westinghouse"). Project Control filed this action in the Superior Court of Columbia County, and the amended complaint alleges four counts: (1) violations of the Georgia Public Accountancy Act; (2) violations of the South Carolina Accountancy Act; (3) interference with economic relationships; and (4) fraud, misrepresentation, and false pretenses. The court granted the defendants' motion to dismiss. This appeal followed. We affirm the dismissal.

Construed most favorably to Project Control as the nonmoving party, the pleadings demonstrate that Westinghouse contracted with the U.S. Department of Energy ("DOE") to manage and operate the DOE Savannah River Site facility in South Carolina. The prime contract between Westinghouse and the DOE provided that Westinghouse would perform or have performed audits of the accounts and records of subcontractors with cost reimbursable elements in their prices.

Project Control entered into three subcontracts with Westinghouse for work on the Savannah River Site. Each subcontract provided for the inspection and audit of Project Control's accounts and records by Westinghouse and the DOE. The subcontracts also contained forum selection clauses requiring that any disputes be litigated in South Carolina and choice of law provisions stating that federal law would control, or, if there was no applicable federal law, that South Carolina law would apply.

Project Control requested that the Defense Contract Audit Agency ("DCAA"), the governmental entity which performs audits for the DOE, perform the required audit; however, defendant Abbey Evans, an employee of Westinghouse, declined to refer the audit to the DCAA and directed Project Control to permit the audit by Westinghouse employees. The defendants participated in the audit of Project Control's records as employees of Westinghouse.

During the audit, a number of cost elements were questioned. Project Control did not supply documentation to resolve the questioned costs to the satisfaction of the auditors. The attempted audit was not completed, and the three subcontracts expired. After the unfinished audit, Project Control discovered that none of the named defendants were registered, certified, or licensed as public accountants in Georgia or any other state. As a result, Project Control believed that the audit was illegally performed and alleged that it incurred damages including loss of good will, the costs associated with its participation in the audit, and lost profits resulting from potential contracts for which Project Control could not compete due to the ongoing audit. Project Control first filed a lawsuit against Westinghouse in federal district court in Georgia, alleging breach of contract, breach of implied duty of good faith and fair dealing, and interference with business relationships; the suit was transferred to federal district court in South Carolina. Subsequently, Project Control filed the present action in superior court against the individual defendants. The federal jury in South Carolina returned a verdict in favor of Westinghouse during the pendency of this appeal. ²

1. On appeal, Project Control first argues that the trial court erred in dismissing the action based on its conclusion that Project Control could not establish a cause of action under the Georgia Public Accountancy Act based on the conduct alleged in the complaint. We disagree.

Our review of the grant of a motion to dismiss is de novo. A motion to dismiss may be granted only where a plaintiff would not be entitled to relief under any set of facts that could be proven in support of its claim. Mattox v. Yellow Freight Systems, 243 Ga. App. 894, 534 S.E.2d 561 (2000). Under this standard, we will assume, based on Project Control's complaint, that the defendants were not licensed public accountants when they performed the audit. See Cellular One v. Emanuel County, 227 Ga.App. 197, 198, 489 S.E.2d 50 (1997). However, our review of the relevant statutes demonstrates that Project Control cannot maintain an action against these defendants.

The practice of public accountancy is regulated by the Georgia Public Accountancy Act of 1977 (the "Act"), OCGA § 43-3-1 et seq. Under the Act, the State Board of Accountancy (the "Board") is granted the authority to promulgate rules and regulations governing the practice of public accountancy. OCGA §§ 43-3-3; 43-3-5(a). The Act requires that a public accountant be registered and hold a permit. OCGA § 43-3-35. However, it also specifies that certain practices are excepted from its requirements. OCGA § 43-3-36(b) provides in pertinent part that:

Nothing contained in this chapter shall prohibit any person from offering to perform or performing for the public, for compensation, any of the following services:... (4) Internal verification and analysis of books or accounts of original entry; (5) The preparation of unaudited financial statements, schedules, or reports; (6) The devising and installing of systems or methods of bookkeeping, internal controls of financial data, or the recording of financial data....

Significantly, Rule 20-2-.11 of the Rules & Regulations of the State of Georgia defines the practice of public accountancy as follows:

"Practice of or practicing public accounting" shall be deemed and construed to mean offering to perform or performing for a client one or more types of services involving the use of accounting or auditing skills, or one or more types of management advisory or consulting services, or the preparation of tax returns or the furnishing of advice on tax matters, while holding oneself out in such manner as to state or imply that one is a licensee.

We conclude that the conduct alleged in the complaint does not constitute the practice of public accountancy as contemplated by the Act. The Supreme Court recognized in Mayor &c. of Savannah v. Canady, 255 Ga. 23, 24, 334 S.E.2d 693 (1985), that the Act itself does not expressly define the practice of public accounting. In that case, the Court held that a licensed certified public accountant ("CPA") who was employed by a firm of CPAs and listed in the telephone directory as a CPA was engaged in the practice of public accounting. Conversely, we have held that a privately employed accountant was not subject to statutory licensing requirements. Stephens v. Parrino & Ware, 138 Ga.App. 634, 636(5), 226 S.E.2d 809 (1976). The defendants in the case sub judice performed the audit as a matter of private agreement pursuant to the subcontracts between Project Control and Westinghouse. Project Control does not allege that the defendants held themselves out as licensed public accountants, or that they performed accounting services for clients. Rather, acting at all times as employees of Westinghouse, the defendants merely verified and analyzed Project Control's books and accounts for the benefit of Westinghouse. Therefore, their conduct as alleged in the complaint did not violate the Act.

Based on this conclusion, it is not necessary for us to determine whether the Act provides a private right of action to recover damages for its violation. We recognize that such a determination would be an issue of first impression for this Court; however, we do not reach it because it is not necessary to the disposition of this case.

2. Project Control also argues that it may maintain a cause of action under a similar statute³ in South Carolina that governs the practice of public accountancy. Because a portion of the audit was performed in South Carolina, Project Control has alleged violations of that statute as well. Again, we find no error in the court's dismissal of the complaint.

Like the Georgia Public Accountancy Act, the South Carolina statutes establish licensing...