Accountant-Client Privilege in Tennessee
The Accountant-Client Privilege in Tennessee:
In the case of a divorce, should the privilege apply to prevent one spouse from obtaining documents the other spouse provided to prepare a joint tax return?
T.C.A. § 62-1-116 contains what is known as the “accountant-client” privilege. Of note, according to Westlaw, only twelve (12) cases from 1990 to present make reference to and/or cite this particular statute. Therefore, unlike the well-known attorney-client privilege, the accountant-client privilege has not been as widely litigated in Tennessee, especially in the domestic relations sector.
The only case in Tennessee that fully examines the accountant-client privilege is Federal Ins. Co. v. Arthur Anderson & Co., 816 S.W.2d 328 (Tenn. 1991). In that case, Federal Insurance sued Arthur Anderson under theories of negligence, negligent misrepresentation, and breach of a third-party beneficiary contract, arguing that Anderson’s audits were negligently performed, which resulted in Federal Insurance, to their detriment, issuing bonds to Rodgers Construction. Id. at 328. In the litigation, Federal Insurance issued requests for documents to Anderson, who relied on T.C.A. § 62-1-116, arguing that the privilege belonged to the client. Id. at 329. “The specific issue presented [to the Supreme Court of Tennessee was] ‘whether the privilege created in T.C.A. § 62-1-116, providing that certified public accountants shall not in any manner be required to divulge any information which may have been communicated to them or obtained by them by reason of the confidential nature of their employment, can nonetheless be waived by the accountant's client.’” Id. The Supreme Court ultimately agreed with the trial court that the privilege belonged to the client, not the accountant.
Tennessee’s accountant-client privilege “applies only to confidential information . . . [and] to come within the terms of the statute [T.C.A. § 62-1-116] the information must have been communicated to the accountant in a confidential setting arising from the employment. To come within the terms of the statute the information must have been communicated to the accountant in a confidential setting arising from the employment. Therefore, the privilege exists to protect the confidence of the one communicating the information. It must follow that the privilege belongs to the client.” Fed. Ins. Co. v. Arthur Anderson & Co., 1990 WL 73924, at *2 (Tenn. Ct. App. June 6, 1990). Therefore, in Tennessee, if the accountant-client privilege belongs to the client, who is the “client,” particularly when it comes to obtaining documents through a subpoena for one spouse in a divorce action, when an accountant prepares and files a joint tax return?
Although Tennessee’s “accountant-client” privilege has not been widely litigated, other jurisdictions have analyzed the issue under their own similar statutes. In Harwood v. Randolph Harwood, Inc., 333 N.W.2d 609, 611 (Mich. Ct. App. 1983), a case that dealt with an action for breach of an alleged contract of employment, the Michigan Court of Appeals found that “the [accountant-client] privilege at most belonged jointly to plaintiff and defendant and neither one can assert it against the other” (emphasis added). Further, the court also stated, “Jurisdictions which have recognized an accountant-client privilege by statutes similar to ours have drawn an analogy to the attorney-client privilege and have held that communications to an accountant jointly employed by the parties created no privilege that one party could assert against the other.” Id. (emphasis added).
Likewise, in Pattie Lea, Inc. v. District Court of City and County of Denver, 423 P.2d 27, 30 (Colo. 1967), the Supreme Court of Colorado stated, “Certified public accountants hired by a corporation are hired for the benefit of all of its stockholders and such employment forbids concealment from the stockholders of information given the accountant by the corporation.” A parallel can be drawn with a married couple, who hired an accountant to prepare a joint tax return – accountants hired by a married couple are hired for the benefit of both parties and such employment forbids concealment from either spouse of information given the accountant by the other spouse.
Similarly, in Gearhart v. Etheridge, 208 S.E.2d 460, 461 (Ga. 1974), the Supreme Court of Georgia stated, “All communications between the joint clients and the accountant are privileged as to all outside parties, but the privilege does not exist between the principals involved.” The court also drew an analogy to the attorney-client privilege and quoted a treatise on the Georgia Law of Evidence in doing so, which states as follows:
If two or more persons jointly consult an attorney for the purpose of having him prepare a deed or contract for them, the communications which either makes to the attorney are not privileged in the event of any subsequent litigation between the parties. In such situations it is considered that the attorney does not have an attorney-client relationship with either of the joint parties.
Thomas Green, Georgia Law of Evidence, s 185 (1957). Therefore, the privilege – whether with an attorney and client or accountant and client – cannot be asserted by one party against the other party when the parties’ interests diverge, such as in a pending divorce action.
Thus, as far back as 1967 – over fifty (50) years ago – other jurisdictions analyzing the “accountant-client” privilege have stated and held that the privilege cannot be asserted by one party against the other party. Thus, using the analysis from other jurisdictions discussed above, in a divorce action, one spouse should not be permitted to rely on the accountant-client privilege to prevent the other spouse from obtaining documents from an accountant who was utilized to prepare a joint tax return. But until this issue is litigated within a domestic relations matter, we can only speculate and express an opinion.
