Can multiple writings establish accountant liability to third parties? Reynolds v. Bickel Explained

In Reynolds v. Bickel, the Utah Supreme Court addressed a critical question for professional liability practitioners: whether Utah Code section 58-26a-602(2)(b)’s writing requirement can be satisfied through multiple related documents rather than a single explicit statement.

Background and Facts

Scott Reynolds retained Tanner L.C. to minimize his personal tax liability from selling three S corporations. The accounting firm’s partner, Jeffrey Bickel, provided ongoing tax advice through email exchanges and spreadsheet analyses. However, Bickel significantly underestimated Reynolds’ tax liability by $1,513,641. When Reynolds sued for professional negligence, defendants argued they were protected by Utah’s third-party liability statute because they never explicitly identified in writing that their services were intended for Reynolds’ reliance.

Key Legal Issues

The central issue was interpreting Utah Code section 58-26a-602(2)(b), which protects accountants from third-party liability unless they both knew the client intended the third party to rely on their services and “identified in writing to the client” that the services were intended for the third party’s reliance. The district court granted summary judgment for defendants, finding no single writing satisfied this requirement.

Court’s Analysis and Holding

The Utah Supreme Court reversed, applying statute of frauds principles by analogy. The court held that multiple writings can satisfy section 58-26a-602(2)(b) if there is a “nexus” between them, either through express or implied reference. Here, Bickel’s emails responding to spreadsheets about Reynolds’ tax liability, combined with the circumstances showing only Reynolds could benefit from the advice, collectively demonstrated the required written identification of intended reliance.

Practice Implications

This decision significantly expands potential accountant liability to third parties. Practitioners should advise accounting clients that informal communications discussing third-party tax consequences may collectively satisfy the writing requirement, even without explicit acknowledgment statements. The ruling also demonstrates how courts may apply contract law principles to interpret professional liability statutes, making comprehensive documentation strategies essential for risk management.