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Caparco v. Lefkowitz, Garfinkel, Champi & DeRienzo, Inc.

Superior Court of Rhode Island

August 21, 2015

MICHAEL CAPARCO, SR., Plaintiff,
v.
LEFKOWITZ, GARFINKEL, CHAMPI & DERIENZO, INC. Defendant.

Providence County Superior Court

For Plaintiff: Matthew T. Oliverio, Esq. Christine M. Curley, Esq.

For Defendant: A. Neil Hartzell, Esq. Christopher R. Conroy, Esq.

DECISION

SILVERSTEIN, J.

Before the Court for decision is Plaintiff Michael Caparco, Sr.'s (Plaintiff or Caparco) motion to strike three affirmative defenses from Defendant Lefkowitz, Garfinkel, Champi & DeRienzo, Inc.'s (Defendant or LGC&D) Answer to Plaintiff's Amended Complaint. Defendant opposes Plaintiff's motion and has cross-moved for summary judgment pursuant to Super. R. Civ. P. 56 (Rule 56).

I Facts and Travel

According to the Amended Complaint, LGC&D was retained by Capco Endurance, LLC (Capco Endurance) and its wholly-owned subsidiary, Capco Steel, LLC (Capco Steel) (collectively, Capco), in July 2011 as Capco's accounting firm to replace its prior accounting firm, Feeley & Driscoll, P.C. (F&D). (Am. Compl. ¶¶ 13-14). Caparco was the Chief Operating Officer of Capco Steel and a member of Capco Endurance. Id. ¶ 3. On October 14, 2011, LGC&D sent a letter to Caparco (the Arrangement Letter), formalizing the terms of its engagement as independent accountants for Capco. (Pl.'s Mot. to Strike, Ex. 1). As set forth in the Arrangement Letter, LGC&D was retained to review the "special-purpose consolidated balance sheet" of Capco as of December 31, 2010 and the "related special-purpose consolidated statements of loss and changes in members' equity, " as well as review cash flows for the same year, and then issue a report. Id. at 1. The special-purpose consolidated financial statements were being prepared in order to comply with the requirements of certain loan agreements between Webster Bank, N.A. and Capco. Id. Relevant to the matters at issue here, the Arrangement Letter, under the heading of "Agreement, " contained the following clause:

"[Capco] and LGC&D or any successors in interest agree that no claim arising out of services rendered pursuant to this agreement shall be filed more than two years after the date of the accountants' report issued by LGC&D or the date of this arrangement letter if no report has been issued. [Capco] waives any claim for punitive damages. LGC&D's liability for all claims, damages, and costs of [Capco] arising from this engagement is limited to the amount of fees paid by [Capco] to LGC&D for the services rendered under this arrangement letter." Id. at 5 (hereinafter referred to as the Limitation of Liability Clause).

The Arrangement Letter was signed on December 1, 2011 by Caparco under a clause that reads "ACCEPTED ON BEHALF OF THE ADDRESSEE." Id.

On December 8, 2011, LGC&D delivered Capco's 2010 financial statements to Capco, which encompassed an adjusting of Capco's 2009 financial statements. (Am. Compl. ¶ 16). LGC&D also adjusted the prepaid workers' compensation expense, accrued expenses, and accrued payroll that resulted in the members' equity being reported as $9, 978, 604. Id. at ¶¶ 16, 23. Pursuant to a General Indemnity Agreement entered into by Caparco with Arch Insurance Company (Arch) as Capco's bonding company, Caparco would become personally liable to indemnify Arch for all new bonds executed after the date of the agreement, December 22, 2009, if the member's equity of Capco dropped below $10, 000, 000. Id. at ¶ 9. As a result of this alleged misstatement of the members' equity by LGC&D, Caparco believed he would become personally liable to Arch under the General Indemnity Agreement and allegedly relied on these numbers in the financial statements to "mak[e] business decisions" and decide "whether to use his personal monies" with respect to Capco's operations. Id. at ¶¶ 20, 25-29. Caparco alleges that LGC&D's financial statements were materially false, and based on his personal risk on the various construction projects under his indemnity agreement, he maintains he suffered substantial personal damages.

Caparco originally commenced this action, along with Capco Steel and Capco Endurance as co-plaintiffs, on March 29, 2013 against LGC&D and F&D as defendants. Pursuant to a bench decision rendered on October 28, 2013 and an Order entered on November 13, 2013, the Court mandated that all claims against F&D be sent to arbitration and all further litigation involving F&D be stayed. See Capco Steel, LLC v. Feeley & Driscoll, P.C., No. PB 13-1484, at ¶ 1 (R.I. Super. Nov. 13, 2013) (Order). The stay did not apply to the instant litigation against LGC&D. Id. at ¶ 6. On October 10, 2014, the plaintiffs moved to amend the Complaint and dismiss certain parties and claims from the case pursuant to Super. R. Civ. P. 15 and Super. R. Civ. P. 41(a)(2). Plaintiffs' motion was granted on October 27, 2014, and an Amended Complaint was filed on October 29, 2014. The Amended Complaint removed Capco Steel and Capco Endurance as plaintiffs and removed F&D as a defendant along with the corresponding causes of action. Following the amendment, the operative Complaint asserts only two claims by Caparco against LGC&D -misrepresentation (as set forth in Restatement (Second) Torts § 552) (Count I) and accounting malpractice (professional negligence) (Count II).

Relevant here, LGC&D filed an answer to the Amended Complaint on December 17, 2014 that included twenty-four affirmative defenses. Among the asserted affirmative defenses, Caparco seeks now to strike three: (i) Third: "The Plaintiff's claims are barred by any time limitations set forth in the contract documents"; (ii) Eighteenth: "The Plaintiff's recovery is subject to any contractual limitations of liability"; and (iii) Nineteenth: "The Plaintiff's claims are barred by the terms of the contract documents." (Answer to Am. Compl. at 7, 9).

II Standard of Review

Rule 12(f) of the Rhode Island Superior Court Rules of Civil Procedure (Rule 12(f))[1]permits a party to "stri[ke] from any pleading any insufficient defense, or any redundant, immaterial, impertinent, or scandalous matter." Some commentators have discussed at length whether a motion to strike an affirmative defense should be brought under Rule 12(f) or should more appropriately be brought under Rule 56. See, e.g., Charles Alan Wright et al., 10B Federal Practice & Procedure, Civil § 2737, at 321-22 (3d ed. 1998) (hereinafter Wright & Miller) ("Although a few courts have ruled that a partial summary judgment is not available because a Rule 12(f) motion to strike is the proper procedure, the better approach is to allow Rule 56(d) to be utilized."). As one federal court has noted, where the issue has been discussed, the results have greatly differed. See Krauss v. Keibler-Thompson Corp., 72 F.R.D. 615, 616 (D. Del. 1976). For example, in U.S. Football League v. Nat'l Football League, the court noted that because matters outside the pleading are not normally considered under a Rule 12(f) motion, courts are more inclined to treat the motion to strike as one for partial summary judgment. See 634 F.Supp. 1155, 1165-66 (S.D.N.Y. 1986); see also Ciprari v. Servicos Aereos Cruzeiro do sul, S.A. (Cruzeiro), 245 F.Supp. 819, 820 (S.D.N.Y. 1965), aff'd, 359 F.2d 855 (2d Cir. 1966) ("Since there are some facts outside the pleadings which are stipulated or otherwise beyond dispute and which ought to be considered on this motion, it is ...


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