{ "id": 12421106, "name": "COMMSCOPE CREDIT UNION, Plaintiff v. BUTLER & BURKE, LLP, a North Carolina Limited Liability Partnership, Defendant and Third-Party Plaintiff v. BARRY D. GRAHAM, JAMES L. WRIGHT, ED DUTTON, FRANK GENTRY, GERAL HOLLAR, JOE CRESIMORE, MARK HONEYCUTT, ROSE SIPE, TODD POPE, JASON CUSHING, and SCOTT SAUNDERS, Third-Party Defendants", "name_abbreviation": "CommScope Credit Union v. Butler & Burke, LLP", "decision_date": "2016-09-23", "docket_number": "No. 5PA15", "first_page": "48", "last_page": "57", "citations": [ { "type": "official", "cite": "369 N.C. 48" } ], "court": { "name_abbreviation": "N.C.", "id": 9292, "name": "Supreme Court of North Carolina" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "764 S.E.2d 642", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2014, "opinion_index": -1 }, { "cite": "237 N.C. App. 101", "category": "reporters:state", "reporter": "N.C. App.", "year": 2014, "opinion_index": -1 }, { "cite": "631 S.E.2d 121", "category": "reporters:state_regional", "reporter": "S.E.2d", "case_ids": [ 12636050 ], "year": 2006, "pin_cites": [ { "page": "123" } ], "opinion_index": 0, "case_paths": [ "/se2d/631/0121-01" ] }, { "cite": "623 S.E.2d 263", "category": "reporters:state_regional", "reporter": "S.E.2d", "case_ids": [ 12634571, 12634572, 12634573 ], "year": 2005, "opinion_index": 0, "case_paths": [ "/se2d/623/0263-01", "/se2d/623/0263-02", "/se2d/623/0263-03" ] }, { "cite": "614 S.E.2d 328", "category": "reporters:state_regional", "reporter": "S.E.2d", "case_ids": [ 12633132 ], "year": 2005, "pin_cites": [ { "page": "335" } ], "opinion_index": 0, "case_paths": [ "/se2d/614/0328-01" ] }, { "cite": "258 S.E.2d 71", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1979, "pin_cites": [ { "parenthetical": "per curiam" } ], "opinion_index": 0 }, { "cite": "298 N.C. 268", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8569974 ], "year": 1979, "pin_cites": [ { "parenthetical": "per curiam" } ], "opinion_index": 0, "case_paths": [ "/nc/298/0268-01" ] }, { "cite": "705 S.E.2d 735", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2011, "pin_cites": [ { "parenthetical": "per curiam" } ], "opinion_index": 0 }, { "cite": "365 N.C. 5", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 4153610 ], "year": 2011, "pin_cites": [ { "parenthetical": "per curiam" } ], "opinion_index": 0, "case_paths": [ "/nc/365/0005-01" ] }, { "cite": "494 S.E.2d 410", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1997, "opinion_index": 0 }, { "cite": "347 N.C. 398", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 551237, 551147, 551116, 551226, 551357 ], "year": 1997, "opinion_index": 0, "case_paths": [ "/nc/347/0398-05", "/nc/347/0398-03", "/nc/347/0398-04", "/nc/347/0398-02", "/nc/347/0398-01" ] }, { "cite": "487 S.E.2d 807", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1997, "opinion_index": 0 }, { "cite": "127 N.C. App. 1", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 11791526 ], "year": 1997, "opinion_index": 0, "case_paths": [ "/nc-app/127/0001-01" ] }, { "cite": "160 S.E. 896", "category": "reporters:state_regional", "reporter": "S.E.", "weight": 6, "year": 1931, "pin_cites": [ { "page": "906", "parenthetical": "quoting 25 C. J. Fiduciary \u00a7 9 (1921)" } ], "opinion_index": 0 }, { "cite": "201 N.C. 577", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8626992 ], "weight": 2, "year": 1931, "pin_cites": [ { "page": "598", "parenthetical": "quoting 25 C. J. Fiduciary \u00a7 9 (1921)" }, { "page": "598" } ], "opinion_index": 0, "case_paths": [ "/nc/201/0577-01" ] }, { "cite": "403 S.E.2d 483", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1991, "pin_cites": [ { "page": "489" } ], "opinion_index": 0 }, { "cite": "328 N.C. 578", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2538399 ], "year": 1991, "pin_cites": [ { "page": "588" } ], "opinion_index": 0, "case_paths": [ "/nc/328/0578-01" ] }, { "cite": "465 U.S. 805", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 11337706 ], "year": 1984, "pin_cites": [ { "page": "817-18" } ], "opinion_index": 0, "case_paths": [ "/us/465/0805-01" ] }, { "cite": "17 C.F.R. \u00a7 210.2-01", "category": "laws:admin_compilation", "reporter": "C.F.R.", "year": 2016, "pin_cites": [ { "page": "(c)(4)(x)" } ], "opinion_index": 0 }, { "cite": "367 S.E.2d 609", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 3, "year": 1988, "pin_cites": [ { "page": "615" }, { "page": "614, 617", "parenthetical": "summarizing and adopting Restatement (Second" } ], "opinion_index": 0 }, { "cite": "322 N.C. 200", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2516944 ], "year": 1988, "pin_cites": [ { "page": "211" } ], "opinion_index": 0, "case_paths": [ "/nc/322/0200-01" ] }, { "cite": "153 S.E.2d 449", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1967, "pin_cites": [ { "page": "457" } ], "opinion_index": 0 }, { "cite": "269 N.C. 701", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8566087 ], "year": 1967, "pin_cites": [ { "page": "711" } ], "opinion_index": 0, "case_paths": [ "/nc/269/0701-01" ] }, { "cite": "760 S.E.2d 263", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 3, "year": 2014, "pin_cites": [ { "page": "266" }, { "page": "266", "parenthetical": "listing categories" }, { "page": "266" } ], "opinion_index": 0 }, { "cite": "367 N.C. 363", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 4313262 ], "weight": 3, "year": 2014, "pin_cites": [ { "page": "367" }, { "page": "367" }, { "page": "367" } ], "opinion_index": 0, "case_paths": [ "/nc/367/0363-01" ] }, { "cite": "749 S.E.2d 262", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2013, "pin_cites": [ { "page": "268", "parenthetical": "quoting Dalton, 353 N.C. at 651, 548 S.E.2d at 707" } ], "opinion_index": 0 }, { "cite": "367 N.C. 136", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 4316065 ], "year": 2013, "pin_cites": [ { "page": "141", "parenthetical": "quoting Dalton, 353 N.C. at 651, 548 S.E.2d at 707" } ], "opinion_index": 0, "case_paths": [ "/nc/367/0136-01" ] }, { "cite": "548 S.E.2d 704", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 3, "year": 2001, "pin_cites": [ { "page": "707" }, { "page": "707" }, { "page": "708" } ], "opinion_index": 0 }, { "cite": "353 N.C. 647", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 135724 ], "weight": 3, "year": 2001, "pin_cites": [ { "page": "651" }, { "page": "651" }, { "page": "651" } ], "opinion_index": 0, "case_paths": [ "/nc/353/0647-01" ] }, { "cite": "144 S.E.2d 603", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1965, "pin_cites": [ { "page": "606" } ], "opinion_index": 0 }, { "cite": "265 N.C. 506", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8575948 ], "year": 1965, "pin_cites": [ { "page": "510" } ], "opinion_index": 0, "case_paths": [ "/nc/265/0506-01" ] }, { "cite": "161 S.E.2d 467", "category": "reporters:state_regional", "reporter": "S.E.2d", "pin_cites": [ { "page": "470" } ], "opinion_index": 0 }, { "cite": "274 N.C. 166", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8559581 ], "pin_cites": [ { "page": "169" } ], "opinion_index": 0, "case_paths": [ "/nc/274/0166-01" ] }, { "cite": "209 S.E.2d 494", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1974, "pin_cites": [ { "page": "499" }, { "page": "499" } ], "opinion_index": 0 }, { "cite": "286 N.C. 130", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8563771 ], "weight": 2, "year": 1974, "pin_cites": [ { "page": "137" }, { "page": "137" } ], "opinion_index": 0, "case_paths": [ "/nc/286/0130-01" ] }, { "cite": "360 S.E.2d 772", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1987, "pin_cites": [ { "page": "780", "parenthetical": "quoting Ragsdale v. Kennedy, 286 N.C. 130, 137, 209 S.E.2d 494, 499 (1974)" }, { "page": "780" } ], "opinion_index": 0 }, { "cite": "320 N.C. 669", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 4730978 ], "year": 1987, "pin_cites": [ { "page": "682-83", "parenthetical": "quoting Ragsdale v. Kennedy, 286 N.C. 130, 137, 209 S.E.2d 494, 499 (1974)" } ], "opinion_index": 0, "case_paths": [ "/nc/320/0669-01" ] }, { "cite": "360 N.C. 493", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 3788520 ], "year": 2006, "pin_cites": [ { "page": "494" } ], "opinion_index": 0, "case_paths": [ "/nc/360/0493-01" ] }, { "cite": "360 N.C. 78", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 3789190, 3790698, 3793132, 3793873, 3791767, 3790329, 3790458 ], "year": 2005, "opinion_index": 0, "case_paths": [ "/nc/360/0078-06", "/nc/360/0078-04", "/nc/360/0078-07", "/nc/360/0078-02", "/nc/360/0078-03", "/nc/360/0078-05", "/nc/360/0078-01" ] }, { "cite": "171 N.C. 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App.", "case_ids": [ 9131887 ], "year": 2002, "pin_cites": [ { "page": "784" } ], "opinion_index": 0, "case_paths": [ "/nc-app/149/0777-01" ] }, { "cite": "26 U.S.C. \u00a7 6033", "category": "laws:leg_statute", "reporter": "U.S.C.", "weight": 4, "year": 2006, "pin_cites": [ { "page": "(a)(1)" } ], "opinion_index": 0 }, { "cite": "764 S.E.2d 642", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 20, "year": 2014, "pin_cites": [ { "page": "647", "parenthetical": "citations and internal quotations omitted" }, { "parenthetical": "third and fourth alterations in original" }, { "page": "651" }, { "page": "651-52" }, { "page": "652" }, { "page": "647" }, { "page": "648", "parenthetical": "brackets in original" }, { "page": "648" }, { "page": "652" } ], "opinion_index": 0 }, { "cite": "237 N.C. App. 101", "category": "reporters:state", "reporter": "N.C. App.", "weight": 4, "year": 2014, "pin_cites": [ { "page": "105", "parenthetical": "citations and internal quotations omitted" }, { "page": "105" }, { "page": "105-06" }, { "page": "112" } ], "opinion_index": 0 } ], "analysis": { "cardinality": 1066, "char_count": 23160, "ocr_confidence": 0.71, "pagerank": { "raw": 9.012132367130462e-08, "percentile": 0.5035897845781743 }, "sha256": "8775bdbc8293fc49ce73397f1150a4aa82979e05c76d44eab441b521302cf4f9", "simhash": "1:832cdc3128efe357", "word_count": 3689 }, "last_updated": "2023-07-14T22:48:28.411797+00:00", "provenance": { "date_added": "2018-10-24", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Justice BEASLEY did not participate in the consideration or decision of this case." ], "parties": [ "COMMSCOPE CREDIT UNION, Plaintiff v. BUTLER & BURKE, LLP, a North Carolina Limited Liability Partnership, Defendant and Third-Party Plaintiff v. BARRY D. GRAHAM, JAMES L. WRIGHT, ED DUTTON, FRANK GENTRY, GERAL HOLLAR, JOE CRESIMORE, MARK HONEYCUTT, ROSE SIPE, TODD POPE, JASON CUSHING, and SCOTT SAUNDERS, Third-Party Defendants" ], "opinions": [ { "text": "MARTIN, Chief Justice.\nPlaintiff CommScope Credit Union seeks damages from defendant Butler & Burke, LLP, the certified public accounting firm that plaintiff hired to conduct annual independent audits of its financial statements. We allowed discretionary review to address whether defendant owed a fiduciary duty to plaintiff and whether plaintiff\u2019s claims against defendant are barred by the doctrines of contributory negligence and in pari delicto.\nI\nPlaintiff is a North Carolina state-chartered credit union with its principal place of business in Catawba County. Defendant is the CPA firm that plaintiff engaged to provide independent audit services from 2001 to 2010. Federal tax law required that plaintiff annually file Form 990, entitled \u201cReturn of Organization Exempt From Income Tax,\u201d with the Internal Revenue Service. See 26 U.S.C. \u00a7 6033(a)(1) (2006); id. \u00a7 6033(a)(1) (2000); see also id. \u00a7 501(a), (c)(14)(A) (2006); id. \u00a7 501(a), (c)(14)(A) (2000). Plaintiff filed a complaint in Superior Court, Catawba County, alleging that, in performing its annual audits, defendant had \u201cfail[ed] to request and review Plaintiff\u2019s tax returns, and thereby fail[ed] to discover that Plaintiffs then[-] General Manager had not filed\u201d Form 990 \u201cfrom 2001 to 2009.\u201d Plaintiff alleged that defendant\u2019s inaction \u201cresulted in the Internal Revenue Service\u2019s assessment of penalties upon P1a.iut.iff in the . . . amount of . . . $374,200.\u201d Plaintiff asserted claims for breach of contract, negligence, breach of fiduciary duty, and professional malpractice.\nDefendant answered the complaint and pleaded seven affirmative defenses, including contributory negligence and in pari delicto. Defendant subsequently moved to dismiss all of plaintiff\u2019s claims under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure, and for judgment on the pleadings under Rule 12(c). The trial court granted defendant\u2019s motion and entered judgment for defendant. Plaintiff appealed.\nThe Court of Appeals reversed the trial court\u2019s decision. The court stated that the relationship between an independent auditor and its audit client may give rise to a fiduciary duty as a matter of law because that relationship \u201cappears much more like that between attorney and client, [or] broker and principal, than that between mutually interdependent businesses.\u201d CommScope Credit Union v. Butler & Burke, LLP, 237 N.C. App. 101, 105, 764 S.E.2d 642, 647 (2014) (citations and internal quotations omitted). The court determined that, even if no fiduciary duty exists as a matter of law, the specific allegations in plaintiff\u2019s complaint were sufficient to state a claim for breach of fiduciary duty because the terms of the audit engagement letters discussed in the complaint \u201cassur[ed] Plaintiff that [defendant] had the expertise to review financial statements to identify \u2018errors [and] fraud[,]\u2019 even by Plaintiff\u2019s own management and employees.\u201d Id. (third and fourth alterations in original). The court concluded that defendant had thus \u201csought and received \u2018special confidence reposed in one who in equity and good conscience is bound to act in good faith and with due regard to the interests of the one reposing confidence.\u2019 \u201d Id. (quoting Harrold v. Dowd, 149 N.C. App. 777, 784, 561 S.E.2d 914, 919 (2002)).\nNext, the Court of Appeals addressed defendant\u2019s motion to dismiss as applied to plaintiff\u2019s claims for breach of contract, negligence, and professional malpractice. Defendant\u2019s motion had stated affirmative defenses based on the doctrines of in pari delicto and contributory negligence, and based on the terms of the engagement letters. The court concluded that defendant\u2019s affirmative defenses of in pari delicto and contributory negligence would not entitle defendant to dismissal at. this stage because \u201cnothing in the pleadings establishes either that [plaintiff\u2019s General Manager\u2019s] failure to file the tax returns was (1) negligent rather than intentional wrongdoing or excusable conduct or (2) imputed to Plaintiff as a matter of law.\u201d/d at 110-11, 764 S.E.2d at 651. The court also concluded that the terms of the engagement letters were too ambiguous to warrant dismissal of plaintiff\u2019s claims based on the pleadings alone. Id. at 111-12, 764 S.E.2d at 651-52.\nThe court therefore reversed the trial court\u2019s order granting defendant\u2019s motion to dismiss and for judgment on the pleadings. Id. at 112, 764 S.E.2d at 652. We allowed defendant\u2019s petition for discretionary review and now affirm in part and reverse in part.\nII\nWe review de novo the grant of a motion to dismiss under Rule 12(b)(6) and for judgment on the pleadings under Rule 12(c). Bridges v. Parrish, 366 N.C. 539, 541, 742 S.E.2d 794, 796 (2013); Toomer v. Branch Banking & Tr. Co., 171 N.C. App. 58, 66, 614 S.E.2d 328, 335, disc. rev. denied, 360 N.C. 78, 623 S.E.2d 263 (2005).\nIn considering a motion to dismiss under Rule 12(b)(6), the Court must decide \u201cwhether the allegations of the complaint, if treated as true, are sufficient to state a claim upon which relief can be granted under some legal theory.\u201d Bridges, 366 N.C. at 541, 742 S.E.2d at 796 (quoting Coley v. State, 360 N.C. 493, 494, 631 S.E.2d 121, 123 (2006)).\nOn a motion for judgment on the pleadings, \u201c[a]ll well pleaded factual allegations in the nonmoving party\u2019s pleadings are taken as true and all contravening assertions in the movant\u2019s pleadings are taken as false.\u201d Daniels v. Montgomery Mut. Ins. Co., 320 N.C. 669, 682-83, 360 S.E.2d 772, 780 (1987) (quoting Ragsdale v. Kennedy, 286 N.C. 130, 137, 209 S.E.2d 494, 499 (1974)). As with a motion to dismiss, \u201c[t]he trial court is required to view the facts and permissible inferences in the light most favorable to the nonmoving party.\u201d Id. at 682, 360 S.E.2d at 780 (quoting Ragsdale, 286 N.C. at 137, 209 S.E.2d at 499). A Rule 12(c) movant must show that \u201cthe complaint . . . fails to allege facts sufficient to state a cause of action or admits facts which constitute a complete legal bar\u201d to a cause of action. Jones v. Warren, 274 N.C. 166, 169, 161 S.E.2d 467, 470\n(1968) (quoting Van Every v. Van Every, 265 N.C. 506, 510, 144 S.E.2d 603, 606 (1965)).\nWe now address whether the facts pleaded in plaintiff\u2019s complaint, if true, would establish that defendant owed a fiduciary duty to plaintiff when defendant performed its independent audits of plaintiffs financial statements. For a fiduciary duty to exist, there must be a fiduciary relationship between the parties. Dalton v. Camp, 353 N.C. 647, 651, 548 S.E.2d 704, 707 (2001). This Court has defined a fiduciary relationship as one in which \u201cthere has been a special confidence reposed in one who in equity and good conscience is bound to act in good faith and with due regard to the interests of the one reposing confidence.\u201d Green v. Freeman, 367 N.C. 136, 141, 749 S.E.2d 262, 268 (2013) (quoting Dalton, 353 N.C. at 651, 548 S.E.2d at 707). All fiduciary relationships are characterized by \u201ca heightened level of trust and the duty of the fiduciary to act in the best interests of the other party.\u201d Dallaire v. Bank of Am., N.A., 367 N.C. 363, 367, 760 S.E.2d 263, 266 (2014).\nThe very nature of some relationships, such as the one between a trustee and the trust beneficiary, gives rise to a fiduciary relationship as a matter of law. See, e.g., Wachovia Bank & Tr. Co. v. Johnston, 269 N.C. 701, 711, 153 S.E.2d 449, 457 (1967). The list of relationships that we have held to be fiduciary in their very nature is a limited one, see Dallaire, 367 N.C. at 367, 760 S.E.2d at 266 (listing categories), and we do not add to it lightly. We have not previously included the relationship of an independent auditor and its audit client in this list, and for good reason. Independent auditors often have significant obligations to third parties or to the public at large that would prevent them from acting solely in their audit clients\u2019 best interests. Though an auditor contracts to audit an individual client, the audit report is frequently intended to benefit and to be relied on by third parties such as investors or creditors. Raritan River Steel Co. v. Cherry, Bekaert & Holland, 322 N.C. 200, 211, 367 S.E.2d 609, 615 (1988). Because of this, we have held that an independent auditor owes a duty to avoid negligent misrepresentations not only to the auditor\u2019s client, but also \u201cto any other person, or one of a group of persons, whom the accountant or his client intends the information to benefit.\u201d Id. at 210, 214, 367 S.E.2d at 614, 617 (summarizing and adopting Restatement (Second) of Torts \u00a7 552 (Am. Law Inst. 1977)).\nThe obligation to third parties is even more pronounced when a CPA firm audits the financial statements of a company that is subject to the reporting requirements of the Securities Exchange Act of 1934. See 15 U.S.C. \u00a7 78j\u20141 (2012). For instance, as amici point out, the Sarbanes-Oxley Act of 2002 prohibits these auditors from providing, additional services\u2014such as investment advising or legal services\u2014to their audit clients that could compromise their ability to act impartially and in the public interest. Id. \u00a7 78j-1(g)(7)-(8). Federal law also prohibits independent auditors who audit these companies from \u201c[p]roviding an expert opinion or other expert service for an audit client.\u201d 17 C.F.R. \u00a7 210.2-01(c)(4)(x) (2016). And the United States Supreme Court has recognized that independent auditors \u201cassume [ ] a public responsibility transcending any employment relationship with the client,\u201d and that they \u201cowe[ ] ultimate allegiance to the [client\u2019s] creditors and stockholders, as well as to the investing public,\u201d rather than to the audit client. United States v. Arthur Young & Co., 465 U.S. 805, 817-18 (1984). These federal requirements\u2014whether or not they apply to audits of state-chartered credit unions\u2014underscore why we cannot conclude that an independent auditor is always in a fiduciary relationship with its audit client.\nThough no fiduciary relationship arises here as a matter of law, one may arise in fact. We have recognized that the existence of a fiduciary relationship \u201cdepends ultimately on the circumstances.\u201d HAJMM Co. v. House of Raeford Farms, Inc., 328 N.C. 578, 588, 403 S.E.2d 483, 489 (1991). Specifically, a fiduciary relationship arises whenever \u201cthere is confidence reposed on one side, and resulting domination and influence on the other.\u201d Abbitt v. Gregory, 201 N.C. 577, 598, 160 S.E. 896, 906 (1931) (quoting 25 C. J. Fiduciary \u00a7 9 (1921)). Thus, we must determine whether the specific allegations in plaintiff\u2019s complaint could, if true, give rise to a fiduciary relationship in fact between plaintiff and defendant.\nThe complaint alleges that, each year from 2001 to 2009, defendant agreed to audit plaintiff\u2019s financial statements and other related records \u201cin accordance with generally accepted auditing standards,\u201d also known as GAAS. As the complaint indicates, when a CPA firm performs an independent audit, North Carolina law defines GAAS as including the Statements on Auditing Standards issued by the American Institute of Certified Public Accountants (AICPA). 21 N.C. Admin. Code 08N .0403 (2016).\nUnder the AICPA Statements on Auditing Standards in effect when defendant conducted its audits, the object of a financial statement audit was to express an opinion on whether the financial statements fairly presented the financial position of the audit client. Codification of Accounting Standards and Procedures, Statement on Auditing Standards, AU \u00a7 110.01 (Am. Inst, of Certified Pub. Accountants 1972) [hereinafter \u201cAU\u201d]. The independent auditor had to \u201cmaintain independence in mental attitude in all matters relating to the audit.\u201d Id. \u00a7 220.01 (Am. Inst, of Certified Pub. Accountants 2006); accord id. \u00a7 220.01 (Am. Inst, of Certified Pub. Accountants 1972). This required that the independent auditor be \u201cwithout bias with respect to the client\u201d and demonstrate \u201ca judicial impartiality that recognizes an obligation for fairness not only to management and owners of a business but also to ... those who may otherwise rely . . . upon the independent auditor\u2019s report.\u201d Id. \u00a7 220.02 (Am. Inst, of Certified Pub. Accountants 1972).\nTo. protect the public\u2019s confidence in the independence of independent auditors, this standard required not only that an auditor \u201cbe independent,\u201d but that the auditor also \u201cbe recognized as independent.\u201d Id. \u00a7 220.03. To be recognized as independent, an auditor had to \u201cbe free from any obligation to . . . the client, its management, or its owners.\u201d Id. So under AICPA standards, and thus under the terms of the audit engagement, defendant had to maintain its independence from plaintiff and be free from obligations to or bias about plaintiff. Defendant was required to consider the interests of third parties who might rely on the audit, and to further those interests, even though they could conflict with the interests of the audit client. By contrast, a fiduciary must act in the best interests of its principal. See Dallaire, 367 N.C. at 367, 760 S.E.2d at 266. Defendant\u2019s commitment to audit plaintiff\u2019s financial statements in accordance with GAAS thus did not create a \u201cfiduciary relationship . . . in fact.\u201d Dalton, 353 N.C. at 651, 548 S.E.2d at 708 (quoting Abbitt, 201 N.C. at 598, 160 S.E.at906).\nNor does the complaint allege that defendant agreed to perform any additional services for plaintiff that could give rise to a fiduciary relationship in fact. In reaching the contrary conclusion below, the Court of Appeals relied on Estate of Smith v. Underwood, 127 N.C. App. 1, 487 S.E.2d 807, disc. rev. denied, 347 N.C. 398, 494 S.E.2d 410 (1997), \u201cwhere the accountants were providing accounting and tax-related services,\u201d CommScope, 237 N.C. App. at 105, 764 S.E.2d at 647. Here, however, plaintiff\u2019s complaint does not allege that defendant provided tax-related services or, as we discuss below, agreed to do anything other than conduct an audit in accordance with GAAS.\nThe Court of Appeals reasoned that, under the facts pleaded in the complaint, defendant sought and received a special confidence from its audit client, through defendant\u2019s pledge to \u201cplan and perform [ ]audit[s] to obtain reasonable assurance about whether the financial statements are free of material misstatements, whether from errors, fraudulent financial reporting, misappropriation of assets, or violations of laws or government regulations that are attributable to ... acts by management or employees acting on behalf of\u2019 plaintiff. CommScope, 237 N.C. App. at 105-06, 764 S.E.2d at 648 (brackets in original). The Court of Appeals held that this pledge, read in the light most favorable to plaintiff, gave rise to a fiduciary duty. Id. at 106, 764 S.E.2d at 648. But defendant\u2019s pledge simply mirrored what the provisions of GAAS required. In every independent audit engagement that complied with GAAS, the auditor had to \u201cplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud.\u201d AU \u00a7 110.02 (Am. Inst, of Certified Pub. Accountants 1997). In other words, defendant\u2019s pledge was well within the realm of what an independent auditor was obligated to do under GAAS in the first place. That pledge did not elevate defendant\u2019s relationship with plaintiff into a fiduciary one.\nThe complaint also alleges that plaintiff retained defendant to \u201cnotif[y] . . . appropriate credit union personnel of recommended improvement in administrative or accounting functions.\u201d Viewed in isolation, this allegation might be construed to mean that defendant agreed to provide accounting or consulting services outside the scope of an independent audit. But the rest of the complaint makes it clear that defendant did not, and that defendant\u2019s promises simply tracked what GAAS requires for an independent audit. According to the complaint, defendant specifically represented to plaintiff that the engagement would \u201cinclude obtaining an understanding of internal control sufficient to plan the audit and to determine the nature, timing, and extent of audit procedures to be performed.\u201d (Emphasis added.) Defendant also agreed that \u201c[i]n the course of performing audit procedures, [it] would be alert to situations for which [it] could make recommendations for improvement in administrative or accounting functions\u201d (emphasis added), and that it would \u201ccommunicate those recommendations to the Supervisory Committee in a letter separate from [the] report on [plaintiff\u2019s] financial statements.\u201d\nThis is simply what defendant had to do when following the AICPA standards. When defendant first agreed to conduct independent audits of plaintiff\u2019s financial statements, GAAS Standard of Field Work No. 2 required an independent auditor to obtain a \u201csufficient understanding of internal control... to plan the audit and to determine the nature, timing, and extent of tests to be performed.\u201d AU \u00a7 150.02 (Am. Inst, of Certified Pub. Accountants 1972). Although later amended, this standard did not significantly change the nature of the auditor\u2019s responsibilities. See id. \u00a7 150.02 (Am. Inst, of Certified Pub. Accountants 2006). The auditor did not have to actively search for deficiencies in the audit client\u2019s internal controls. Id. \u00a7 325.04 (Am. Inst. of Certified Pub. Accountants 2009); id. \u00a7 325.04 (Am. Inst, of Certified Pub. Accountants 2006); id. \u00a7 325.04 (Am. Inst, of Certified Pub. Accountants 1997). If the auditor became aware of sufficiently serious deficiencies during the course of the audit, however, it generally had to report them to the client. Id. \u00a7 325.17 (Am. Inst. of Certified Pub. Accountants 2009); id. \u00a7 325.20 (Am. Inst. of Certified Pub. Accountants 2006); id. \u00a7 325.02 (Am. Inst, of Certified Pub. Accountants 1997). But the audit\u2019s purpose was still \u201cto report on the financial statements and not to provide assurance on internal control.\u201d Id. \u00a7 325.11 (Am. Inst. of Certified Pub. Accountants 1989) (emphasis added); accord id. \u00a7 325.22 (Am. Inst, of Certified Pub. Accountants 2009); id. \u00a7 325.25 (Am. Inst, of Certified Pub. Accountants 2006). Defendant operated within this framework and agreed to find internal control deficiencies only to the extent necessary to perform its audits. Because defendant did not agree to affirmatively search for deficiencies outside of the performance of its audits, it did not agree to do anything beyond what an independent auditor normally does.\nThus, plaintiffs allegations, treated as true, do not establish that defendant owed it a fiduciary duty in fact. And as we have seen, the relationship between an independent auditor and its audit client does not categorically give rise to a fiduciary duty as a matter of law. The trial court correctly dismissed plaintiff\u2019s breach of fiduciary duty claim. We therefore reverse the decision of the Court of Appeals on this issue.\nm\nOur disposition of plaintiffs breach of fiduciary duty claim leaves us with one other issue. As we have said, the Court of Appeals also held that plaintiff\u2019s complaint withstood defendant\u2019s motion to dismiss plaintiff\u2019s other claims. See CommScope, 237 N.C. App. at 112, 764 S.E.2d at 652. Defendant argued before the Court of Appeals, and again argues in this Court, that those claims are barred by the affirmative defenses of contributory negligence and in pari delicto. The members of the Court are equally divided, however, on whether the facts alleged in the complaint establish these defenses. The decision of the Court of Appeals on this issue is accordingly left undisturbed and stands without precedential value. See, e.g., State v. Long, 365 N.C. 5, 705 S.E.2d 735 (2011) (per curiam); State v. Greene, 298 N.C. 268, 258 S.E.2d 71 (1979) (per curiam).\nWe therefore affirm the decision of the Court of Appeals in part and reverse it in part, and remand this case to the Court of Appeals for further remand to the trial court for additional proceedings not inconsistent with this opinion.\nAFFIRMED IN PART; REVERSED IN PART; REMANDED.\nJustice BEASLEY did not participate in the consideration or decision of this case.", "type": "majority", "author": "MARTIN, Chief Justice." } ], "attorneys": [ "Carlton Law PLLC, by Alfred P. Carlton, Jr. and Ian S. Richardson; and Patrick, Harper & Dixon, LLP, by L. Oliver Noble, Jr., for plaintiff-appellee.", "Sharpless & Stavola, P.A., by Frederick K. Sharpless; and Wiley Rein LLP, by Richard A. Simpson, pro hoc vice, and Ashley E. Eiler, pro hoc vice, for defendant/third-party plaintiff-appellant.", "Alston & Bird LLP, by Brian D. Boone, for Chamber of Commerce of the United States of America, amicus curiae.", "Womble Carlyle Sandridge & Rice, LLP, by Brent F. Powell, C. Mark Wiley, and Michael R. Cashin, for Cherry Bekaert LLP, CliftonLarsonAllen LLP, and Dixon Hughes Goodman LLP, amici curiae.", "Allen, Pinnix & Nichols, P.A., by Noel L. Allen and Nathan E. Standley, for National Association of State Boards of Accountancy, amicus curiae.", "Smith, Anderson, Blount, Dorsett, Mitchell & Jemigan, L.L.P., by J. Mitchell Armbruster, Michael W. Mitchell, and Lauren H. Bradley, for North Carolina Association of Certified Public Accountants, American Institute of Certified Public Accountants, and Center for Audit Quality, amici curiae.", "Hedrick Gardner Kincheloe & Garofalo LLP, by Mel J. Garofalo, for North Carolina Chamber, amicus curiae." ], "corrections": "", "head_matter": "COMMSCOPE CREDIT UNION, Plaintiff v. BUTLER & BURKE, LLP, a North Carolina Limited Liability Partnership, Defendant and Third-Party Plaintiff v. BARRY D. GRAHAM, JAMES L. WRIGHT, ED DUTTON, FRANK GENTRY, GERAL HOLLAR, JOE CRESIMORE, MARK HONEYCUTT, ROSE SIPE, TODD POPE, JASON CUSHING, and SCOTT SAUNDERS, Third-Party Defendants\nNo. 5PA15\nFiled 23 September 2016\n1. Fiduciary Relationship\u2014auditor\u2014duties to third parties\u2014 not a fiduciary relationship\nThe trial court erred by allowing a motion to dismiss under Rule 12(b)(6) and for judgment on the pleadings under Rule 12(c) in an action for breach of fiduciary duty and other claims arising from an auditor\u2019s failure to discover that plaintiff\u2019s General Manager had not filed required tax returns for plaintiff (which was exempt from federal tax) for several years. Independent auditors often have significant obligations to third parties or to the public at large that would prevent them from acting solely in their audit clients\u2019 best interests, and a fiduciary relationship therefore does not arise as a matter of law, although it may exist in fact.\n2. Appeal and Error\u2014evenly divided Supreme Court\u2014Court of Appeals ruling stands\u2014no precedential authority\nThe decision of an evenly divided Supreme Court left intact the ruling of the Court of Appeals on whether certain defenses were sufficiently alleged in the complaint, although the Court of Appeals opinion was without precedential authority.\nJustice BEASLEY did not participate in the consideration or decision of this case.\nOn discretionary review pursuant to N.C.G.S. \u00a7 7A-31 of a unanimous decision of the Court of Appeals, 237 N.C. App. 101, 764 S.E.2d 642 (2014), reversing an order entered on 26 September 2013 by Judge Richard L. Doughton in Superior Court, Catawba County. Heard in the Supreme Court on 1 September 2015.\nCarlton Law PLLC, by Alfred P. Carlton, Jr. and Ian S. Richardson; and Patrick, Harper & Dixon, LLP, by L. Oliver Noble, Jr., for plaintiff-appellee.\nSharpless & Stavola, P.A., by Frederick K. Sharpless; and Wiley Rein LLP, by Richard A. Simpson, pro hoc vice, and Ashley E. Eiler, pro hoc vice, for defendant/third-party plaintiff-appellant.\nAlston & Bird LLP, by Brian D. Boone, for Chamber of Commerce of the United States of America, amicus curiae.\nWomble Carlyle Sandridge & Rice, LLP, by Brent F. Powell, C. Mark Wiley, and Michael R. Cashin, for Cherry Bekaert LLP, CliftonLarsonAllen LLP, and Dixon Hughes Goodman LLP, amici curiae.\nAllen, Pinnix & Nichols, P.A., by Noel L. Allen and Nathan E. Standley, for National Association of State Boards of Accountancy, amicus curiae.\nSmith, Anderson, Blount, Dorsett, Mitchell & Jemigan, L.L.P., by J. Mitchell Armbruster, Michael W. Mitchell, and Lauren H. Bradley, for North Carolina Association of Certified Public Accountants, American Institute of Certified Public Accountants, and Center for Audit Quality, amici curiae.\nHedrick Gardner Kincheloe & Garofalo LLP, by Mel J. Garofalo, for North Carolina Chamber, amicus curiae." }, "file_name": "0048-01", "first_page_order": 124, "last_page_order": 133 }