An accounting is the process that allows for the discovery of financial records, transaction records, or audits of another party.Bringing a Lawsuit for an Accounting
Lawsuits for accountings are generally considered equitable proceedings. Under Florida law, a party that wants an equitable accounting must prove that: (1) a fiduciary relationship exists between the parties or the subject transaction is complex; and (2) the remedy at law is inadequate. Therefore, the court’s jurisdiction to hear an action for an accounting can rest either on the complexity of the transaction, the need for discovery or the existence of a fiduciary or trust relationship. A plaintiff seeking an accounting must be a person who defendant owes an obligation to; otherwise, the Complaint may be dismissed. A lawsuit for an accounting is generally a two-stage proceeding, asking first for the establishment of the basis or right for the accounting, with the actual accounting following after the earlier determination. The court determines the scope and extent of the accounting. In some cases where the transactions between the parties extend over many years, the matters involved are intricate, and a full and complete statement of the account is needed to allow the court to rule intelligently on the issues framed by the pleadings, the court may appoint a special master whose job it is to oversee the accounting.Fiduciary Relationships
When a trust or fiduciary relationship is present, an action for an accounting is deemed to be equitable in nature without regard to other considerations. The very existence of any confidential or fiduciary relation is enough to invoke the court’s equity jurisdiction whenever the duties arising out of that relationship require one of the parties to make an accounting to the other.Situations Where an Accounting May Be Appropriate
- An action between an attorney/client, executor/heir, guardian/ward, corporate officer/shareholder, agent/principal or trustee/beneficiary.
- Actions by investors against dissolved corporations and their representatives that have a fiduciary relationship with the investors.
- Actions by sales agents for an investment fund against the fund's manager and trustee where no legal remedy is available.
- Actions by one joint venture against another joint venturers.
- Actions involving employment relationships
In addition to all other defenses that may be applicable depending upon the facts of a given equitable accounting case, the following defenses are unique to accounting actions:
Account not complex. “To bring a claim for an equitable accounting, the moving party must allege that ‘the contract demands between litigants involve extensive or complicated accounts and that it is not clear that the remedy at law is as full, adequate and expeditious as it is in equity.
Accounting unnecessary for a full adjudication. A complaint that merely alleges an uncomplicated oral agreement will not warrant an action for an accounting.
Jury inappropriate. Equitable relief like an accounting is conducted by the judge in a bench trial, and not by a jury.What do I do if my Business is involved in Lawsuit for an Accounting?
Although business partners often set out with honest intentions, disputes arise and they often center on money. The need for an accounting can arise any time a business partner or other fiduciary cuts off an innocent party from knowing the finances of the company such as when they impermissibly change bank accounts, passwords, steal money from the company or fail to account for profits. Therefore, it is not unusual for one or more business partners to seek and be awarded an accounting when litigation ensues. An accounting allows an innocent party to be compensated for his/her fair share of the company’s profits and otherwise demonstrate that the other party is being dishonest. If you have questions about filing an action for an accounting or if you or your business has been sued for an accounting, contact Miami business lawyer Andrew J. Pascale immediately before your legal rights are lost.