APPEAL from a judgment of the Superior Court of Los Angeles County, Ann Jones, Judge. Affirmed. (Los Angeles County Super. Ct. No. BC391839).
The opinion of the court was delivered by: Epstein, P.J.
CERTIFIED FOR PUBLICATION
In this appeal we consider whether an accounting firm has a duty of care answerable in negligence to its client's employees when hired to prepare W-2 Wage and Tax Statements for the client. The trial court sustained the demurrer to the employees' second amended complaint against the accounting firm for professional negligence without leave to amend. We affirm the judgment.
FACTUAL AND PROCEDURAL SUMMARY
Appellants Emanuele Giacometti, Marco Pellichero, and Alfredo Fuduli (collectively employees) were waiters at Aulla, LLC, doing business as Ago Restaurant (restaurant). According to the allegations in the second amended complaint, the charging pleading, the restaurant required waiters and busboys to pool 40 percent of their tips.*fn1 The employees alleged that the restaurant managers improperly allocated a percentage of the tips to themselves.
Respondents Gumbiner Savett, Inc., a professional accounting firm, and Michael Rieff, a certified public accountant at the firm (accountants), were hired by the restaurant to prepare year-end documents with respect to earnings and taxes. According to the employees, in preparing W-2 documents, the accountants included the tip money taken by the restaurant managers as income to the employees. This resulted in over-reporting employees' income by as much as $30,000 per employee. The employees alleged that the inaccuracy in the figures reported in their W-2 forms subjected them to investigation by the Internal Revenue Service (IRS). Giacometti was audited by the IRS and has been subjected to litigation. After he was notified of his audit, Giacometti wrote to the accountants requesting that his W-2 form be corrected. Accountants did not correct the statement of income reported on his form.
Employees brought this action against the restaurant, its managers, the accounting firm and the individual accountant. In their original complaint, employees alleged causes of action against the restaurant and its managers for violations of the Labor Code and Business and Professions Code. They asserted three causes of action against the accountants: negligence, conspiracy, and intentional infliction of emotional distress. They alleged that accountants negligently or fraudulently over-reported income on their W-2 forms. Accountants' demurrer was sustained with leave to amend.
Employees filed a first amended complaint, again alleging causes of action for negligence, conspiracy, and intentional infliction of emotional distress. It included additional facts but did not include additional theories of liability. The accountants again demurred. The trial court sustained the demurrer to the causes of action for conspiracy and for intentional infliction of emotional distress without leave to amend. The demurrer to the cause of action for negligence was sustained with leave to amend.
The employees filed their second amended complaint alleging a single cause of action against the accountants for professional negligence. The accountants again demurred. The trial court sustained the demurrer without leave to amend and dismissed the employees' action against the accountants with prejudice.*fn2 The employees appeal the order dismissing their action against the accountants. The appeal raises only the duty of an accountant hired by an employer to accurately report employees' income to the IRS.
On appeal from a judgment dismissing an action following the sustaining of a demurrer, we consider the legal sufficiency of the complaint and treat the demurrer as accepting as true all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) We review de novo "whether the complaint states facts sufficient to constitute a cause of action." (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)
When a demurrer is sustained without leave to amend, "we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.]" (Blank v. Kirwan, supra, 39 Cal.3d 318.)
To state a cause of action for professional negligence, a party must show "(1) the duty of the professional to use such skill, prudence and diligence as other members of the profession commonly possess and exercise; (2) breach of that duty; (3) a causal connection between the negligent conduct and the resulting injury; and (4) actual loss or damage resulting from the professional negligence." (Nichols v. Keller (1993) 15 Cal.App.4th 1672, 1682.) "The threshold element of a cause of action for negligence is the existence of a duty to use due care toward an interest of another that enjoys legal protection against unintentional invasion." (Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 397 (Bily).) "Where there is no legal duty, the issue of professional negligence cannot be pled because with the absence of a breach of duty, an essential element of the cause of action for professional negligence is missing." (Major Clients Agency v. Diemer (1998) 67 Cal.App.4th 1116, 1132.) In this case, the duty element is the employees' obstacle.
The general rule is that privity of contract is a requisite to a professional negligence claim. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 342.) Biakanja v. Irving (1958) 49 Cal.2d 647 (Biakanja), is the leading California case discussing whether a legal duty should be imposed absent privity of contract. In Biakanja, a notary public prepared a will for the decedent and negligently failed to have it properly attested. The court allowed the decedent's brother, the sole beneficiary of the will, to recover from the notary public. In extending the duty of care to the beneficiary of the will in the absence of privity, the court articulated factors to be considered in such a decision: "the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant's conduct and the injury suffered, the moral blame attached to the defendant's conduct, and the policy of preventing future harm." (Biakanja, supra, 49 Cal.2d at p. 650.) Later ...