Judge rejects motion to dismiss claims in city lawsuit

A lawsuit filed against two accounting firms being sued by the city of Yukon will move forward after a Canadian County judge denied a motion to partially dismiss the case.

District Judge Paul Hesse, in a hearing Friday morning, denied the motion filed on behalf of accounting firms R.S. Meacham and FSW&B.

The two firms are being sued for what the city says was their role in the Yukon’s near-financial disaster in 2015.

The lawsuit claims the firms were negligent and in breach of contract when they failed to notify the city of its financial problems.

The city is claiming negligence, breach of contract and breach of fiduciary duty. Attorneys representing Meacham and FSW&B argued that all of the claims, except for the negligence claim, should be dismissed because they argue the same facts and would result in the same damages.

The attorney representing FSW&B said it was improper to tie the two claims together.

Todd Court, an attorney representing Yukon, said the city stands by its argument that all of the claims are tied together, and that motions to dismiss the claims before going before a jury are frowned upon.

“Motions to dismiss are disfavored and should never be granted if the plaintiffs can prove the facts that entitle them to relief,” the city’s response states.

Hesse agreed and rejected the motion to dismiss during the 15-minute hearing.

THE CASE

Meacham was hired in 2011 to provide financial advice to the city.

In 2012, the city hired Stillwater-based FSW&B to conduct its city audits.

In 2015, city council members became concerned about the city’s finances and sought a forensic audit that discovered mismanagement that included the city’s use of reserved funds to pay bills without the city council’s authorization.

The financial problems eventually lead to the resignation of then-city manager Grayson Bottom, who has sued the city for wrongful termination and defamation in federal court.

The city has countersued Bottom, claiming that he was negligent in doing his job.

In the breach of contract matter, the city argues that R.S. Meacham entered into an agreement to provide financial statement preparation, audit coordination, accounting assistance and general advisory services.

The city claims that Meacham failed to provide those services, including the accurate preparation of financial statements.

Meacham was in breach of the agreement by providing  misstatements about how much money was being spent by the city and how much money was being generated, the document states.

The city claims FSW&B was in breach of contract by failing to perform accurate audits.

In their motion to dismiss, both attorneys for the accounting firms and Bottom claimed any injury to the city was the result of “acts and omissions” of the city and/or the Yukon Municipal Authority.

The city’s injuries “were proximately caused or contributed to by the unforeseeable wrongful or negligent act or omission of third parties or persons over whom Mr. Bottom exercised no control,” the court documents state.

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