Link to Mo. Sup. Ct. Opinion
The Supreme Court of Missouri examined whether the comparative fault doctrine applies to professional negligence cases involving economic loss. As a general rule, in negligence actions, Missouri courts apply comparative fault instead of contributory negligence. However, the Uniform Comparative Fault Act says that comparative fault does not apply to cases of negligent misrepresentation involving economic loss. The Supreme Court of Missouri has never ruled squarely on this issue. The court said that all negligence actions are based on fault and the nature of the injury does not inherently warrant the application of comparative fault in some cases and contributory fault in others. Therefore, the Supreme Court of Missouri, disagreeing with the Uniform Comparative Fault Act, held that comparative fault applies in professional negligence cases involving economic loss and that the trial court erred in submitting an instruction to the jury regarding contributory negligence.
I. Facts and Holding
Children’s Wish Foundation, International, Inc. (CWF) brought suit against Mayer Hoffman McCann, P.C. (Mayer Hoffman) and CBIZ Accounting, Tax & Advisory of Kansas City, Inc. (CBIZ) for professional negligence.[2] CWF’s primary activity is providing gifts to terminally ill children.[3] CWF accepts “gifts in kind,” which are charitable donations of property and distributes them to hospitals and Ronald McDonald houses.[4]
Mayer Hoffman was retained by CWF to audit and assess the accuracy of CWF’s financial statements.[5] Under the audit engagement letter, CWF was required to provide complete and accurate financial records to Mayer Hoffman.[6] In the year prior to the audit, CWF received ten times more “gifts in kind” than normal.[7] After consulting outside sources, Mayer Hoffman determined that the fair market value of the gifts stated by CWF was materially accurate.[8] The audit report concluded that CWF’s financial statements fairly represented the charity’s financial position.[9] The financial statements were forwarded to CBIZ and used to prepare CWF’s 1999 tax return.[10]
In truth, CWF did not have accurate financial statements.[11] Mayer Hoffman mistakenly used the quantity of each gift ordered, instead of received, for calculating the quantity of each “gift in kind” contributed to CWF.[12] As a result, the financial statements overstated the value of “gift in kind” contributions by approximately $1.31 million.[13] In October of 2000, a Pennsylvania court opened an investigation regarding the overstated value of the “gift in kind” contributions.[14] As a result, CWF discovered the erroneous records during an internal investigation and filed the instant action in Missouri state court.[15]
At trial, Mayer Hoffman and CBIZ asserted that CWF provided inaccurate records for the audit.[16] A contributory negligence instruction was submitted to the jury over CWF’s objection.[17] The jury found in favor of Mayer Hoffman and CBIZ.[18] CWF’s sole point on appeal was that the trial court erred in submitting a contributory negligence instruction because “contributory negligence should not apply in a negligence action that involves only economic damages and no personal injury.”[19] According to the Supreme Court of Missouri, the comparative fault rule attempts to allocate fault according to the parties’ conduct, even in professional negligence cases.[20] Therefore, the court held that the trial court erred in submitting an instruction to the jury regarding contributory negligence.[21]
II. Legal Background
Missouri courts review “de novo, as a question of law, whether a jury was properly instructed.”[22] If a faulty jury instruction prejudices a defendant, the trial verdict is subject to reversal.[23] CWF argued that the jury instruction was erroneous because Gustafson v. Benda declared that Missouri would follow the comparative fault doctrine instead of contributory negligence.[24] However, Gustafson involved a personal injury claim, whereas the issue in Children’s Wish Foundation was “whether comparative fault applies in a professional negligence action alleging only economic damages.”[25]
Gustafson held that courts in Missouri should apply the comparative fault doctrine in accordance with the Uniform Comparative Fault Act (UCFA).[26] According to the UCFA, comparative fault should not extend to cases of negligent misrepresentation resulting in economic loss unless the state’s common law would permit the extension.[27] According to the court, since the UCFA recognized that comparative fault is possible in certain economic loss cases, the UCFA’s comparative fault rule is not “theoretically incompatible with economic loss cases.”[28] In addition, the court said that the UCFA is concerned with the application of comparative fault, not with the type of injury that can be pleaded in tort cases.[29] Therefore, extending comparative fault to cases of economic loss exceeds the scope of the UCFA.[30]
The trend in Missouri is for courts to hold that Gustafson’s abrogation of contributory negligence is not applicable to negligence cases involving economic loss.[31] However, Children’s Wish Foundation is the first time the Supreme Court of Missouri has directly addressed the issue.[32] According to the court, application of comparative fault should not be limited solely because of the nature of the injury.[33] The crux of a negligence action is the “negligent breach of a legal duty of care that results in injury or loss to the plaintiff.”[34] Since all negligence actions are based on fault, the nature of the injury does not inherently warrant the application of comparative fault in some cases and contributory fault in others.[35]
The court also looked to the law of other jurisdictions and found that many states apply comparative fault to negligence actions regardless of the nature of the damages.[36] Therefore, the Supreme Court of Missouri held that Gustafson’s comparative fault rule should be applied to professional negligence claims resulting in economic loss.[37] As a result, the court found that the trial court erred in submitting a contributory negligence instruction to the jury.[38]
In Missouri, to obtain a reversal due to instructional error, “the party claiming the error must establish prejudice because the instruction misdirected, misled or confused the jury.”[39] Missouri courts adopt a presumption that instructional error is prejudicial when the verdict is in favor of the party for whom the instruction is given.[40] In this case, Mayer Hoffman requested the jury instruction, and the jury found in favor of Mayer Hoffman.[41] Therefore, “CWF was prejudiced because Instruction No. 11 improperly permitted the jury to find that any negligence on the part of CWF served as a bar to any recovery.”[42]
III. Comment
Children’s Wish ties up one of the loose strings in Missouri’s negligence law by extending the application of the comparative fault doctrine to professional negligence cases involving economic loss.[43] In this case, the Supreme Court of Missouri seemed to focus on the importance of uniformity in the law. This is evident from the court’s discussion of reasons to apply comparative fault in all negligence cases, instead of applying comparative fault in some cases and contributory negligence in others.[44] All negligence actions are based on fault, so the nature of the injury does not warrant applying different standards to negligence actions based on the type of harm suffered.[45] The fact that the court focused on uniformity in negligence law signals that the Supreme Court of Missouri will likely apply comparative fault to other areas of negligence law to which the court has not yet expressly extended the doctrine.
-Drew Weber
[1] No. SC90944 (Mo. February 8, 2011) (en banc), available at http://www.courts.mo.gov/file.jsp?id=44279. The West reporter citation is Children’s Wish Foundation Int’l, Inc. v. Mayer Hoffman McCann, P.C., 331 S.W.3d 648 (Mo. 2011) (en banc).
[2] Id. at 649.
[3] Id.
[4] Id.
[5] Id.
[6] Id.
[7] Id.
[8] Id.
[9] Id.
[10] Id.
[11] Id.
[12] Id. at 650.
[13] Id.
[14] Id.
[15] Id.
[16] Id.
[17] Id.
[18] Id.
[19] Id.
[20] Id. at 649.
[21] Id.
[22] Harvey v. Washington, 95 S.W.3d 93, 97 (Mo. 2003) (en banc).
[23] State v. Carson, 941 S.W.2d 518, 523 (Mo. 1997) (en banc).
[24] Children’s Wish Foundation Int., 2011 WL 681093 at 651 (citing Gustafson v. Benda, 661 S.W.2d 11 (Mo. 1983) (en banc)).
[25] Id.
[26] Id. (citing Gustafson, 661 S.W. 2d at 15).
[27] UCFA Section 1 Cmt., 12 U.L.A. Master Ed. 125 (2008).
[28] Children’s Wish Foundation Int’l., 2011 WL 681093 at 652.
[29] Id.
[30] Id.
[31] Id.
[32] Id. at 653.
[33] Id.
[34] Id.
[35] Id.
[36] Id. at 654. See also Scioto Memorial Hospital Association v. Price Waterhouse, 659 N.E.2d 1268, 1272 (Ohio 1996); Florenzano v. Olson, 387 N.W.2d 168 (Minn. 1986); Standard Chartered PLC v. Price Waterhouse, 945 P.2d 317, 353 (Ariz. App. 1996); Gilchrist Timber Co. v. ITT Rayonier, Inc., 696 So.2d 334, 336 (Fla. 1997); ESCA Corp. v. KPMG Peat Marwick, 959 P.2d 651 (Wash. 1998).
[37] Children’s Wish Foundation Int’l., 2011 WL 681093 at 653-54.
[38] Id. at 654.
[39] Sorrell v. Norfolk S. Ry. Co., 249 S.W.3d 207, 209 (Mo. 2008) (en banc).
[40] Karnes v. Ray, 809 S.W.2d 738, 742 (Mo. App. 1991).
[41] Children’s Wish Foundation Int’l., 2011 WL 681093 at 654.
[42] Id.
[43] Id. at 653-54.
[44] Id. at 653.
[45] Id.
