What’s in a word? Apparently a lot if the N.C. State Board of Certified Public Accountant Examiners is involved and the word — or more properly said, abbreviation — is “RSM.” On July 19, the N.C. Court of Appeals upheld an agency ruling barring a CPA firm’s proposed name change to include the abbreviation in its name.

McGladrey & Pullen, LLP is a certified public accounting firm affiliated with RSM McGladrey, Inc., a national consulting, wealth management, and corporate finance firm. RSM McGladrey, Inc., in turn is owned by H&R Block with “RSM” being an acronym for the British firm of Robson Rhodes, the French company Salustro Reydel, and McGladrey.

In the fall of 2002, McGladrey & Pullen applied to change its name to “RSM McGladrey & Pullen, LLP, Certified Public Accountants.” The N.C. State Board of Certified Public Accountant Examiners, however, refused to approve the name change. The board found the renaming could deceive the public into believing that any firm with “RSM” in its name was a CPA firm.

McGladrey & Pullen appealed, contending among other things the board’s ruling violated its First Amendment right to free speech.

A majority of the three-judge Court of Appeals panel ruled against the company, finding that the CPA board’s ruling did not violate McGladrey & Pullen’s free speech rights.

“The State, through the Board, may regulate deceptive commercial speech,” wrote Judge John Tyson for the court. “Regulation of deceptive commercial speech does not violate petitioner’s freedom of speech… Substantial evidence in the whole record supports the Board’s unchallenged findings of fact, which in turn supports the Board’s conclusions of law that petitioner’s proposed name had ‘the capacity or tendency to deceive.’”

Judge James Wynn dissented from the majority holding.

“In the CPA Board’s declaratory ruling denying the name change, it stated ‘the use of ‘RSM’ in the name of the firm would have the capacity or tendency to deceive the public by giving the impression that any firm using a name that begins with ‘RSM,’ regardless of the nature of the firm, is a lawful CPA firm.’ But this is not a concrete reason for the restriction; instead, it is merely conjecture. Indeed, the record shows that a CPA board member stated, ‘I think it’s important to note that whether it’s deceitful or not, we didn’t — we don’t believe that. It’s just that it gets caught in the language of our rules more than anything else’…

“Moreover, the CPA Board’s emphasis on the addition of three letters, ‘RSM’, ignored the addition of the words ‘Certified Public Accountants’ to the end of the proposed name change. Indeed, the proposed name of ‘RSM McGladrey & Pullen, LLP, Certified Public Accountants’ when compared to ‘RSM McGladrey, Inc.’ would be less misleading than the current name of ‘McGladrey & Pullen, LLP.’ As McGladrey & Pullen points out, the word ‘McGladrey’ has been used in both names for five years without prohibition, and there is no evidence that the public has been deceived by those names. In sum, I would hold that the CPA Board’s denial of McGladrey & Pullen’s proposed name change impermissibly restricted McGladrey & Pullen’s right to free speech under the First Amendment of the United States Constitution.”

The Court of Appeal’s decision likely is not the final word on the matter. North Carolina law requires the N.C. Supreme Court to hear cases with a Court of Appeals’ dissented if the losing party further appeals.

The case is McGladrey & Pullen, LLC v. N.C. State Bd. of Certified Pub. Account Exam’rs, (04-911)
http://www.aoc.state.nc.us/www/public/coa/opinions/2005/040911-1.htm

Michael Lowrey is associate editor of Carolina Journal.