Arrowhead Systems Inc. v. Grant Thornton LLP (Breach of Contract)

In Arrowhead Systems Inc. v. Grant Thornton LLP (2019AP2268), the Court affirmed summary judgement for accounting firm Grant Thornton who were being sued by Arrowhead for negligence, breach of duty, and breach of contract because Grant Thornton did not alert Arrowhead to a specific strategy that could have saved him money.

Facts

From 2003 to 2014, Arrowhead contracted with the accountants, and during that time, the accountants never recommended a specific tax strategy that could be available for exporters like Arrowhead. It was estimated that if the tax strategy had been used starting in 2003, Arrowhead would have saved $124,500 in taxes. Arrowhead sued for negligence, breach of duty, and breach of contract, as well as fraud. The circuit court granted summary judgement against Arrowhead on every claim, and found that Arrowhead’s sole shareholder, Young, lacked standing to bring direct claims against the accountant.

Decision

The Court of Appeals affirmed the circuit court on every matter, finding:

(1) [T]he annual agreements between Arrowhead Systems and the accountants govern the claims by Arrowhead Systems; (2) Arrowhead Systems’ claims are barred by an Illinois two-year limitations period contained in the annual agreements, and that the limitations period was not tolled under the doctrines of fraudulent concealment or equitable estoppel; (3) Arrowhead disavowed in the circuit court that it was making an independent fraud claim and therefore cannot pursue it going forward; and (4) Young lacks standing to pursue any of the claims, which belong to Arrowhead Systems, despite the fact that he was the sole shareholder and the corporation had elected to adopt the Subchapter S flow-through taxation feature.

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