A hospital sued the accounting firm that prepared its cost reports for low income patient reimbursement after another accountant reviewed the cost reports (on behalf of a prospective purchaser) and found that there was $1.7 million in unrecovered reimbursements. The hospital alleged breach of contract and, at trial, was awarded damages for the temporary loss of the use of the unrecovered funds.

The accounting firm appealed, arguing that the hospital had "constructive knowledge" that there were more funds to be recovered when it hired the second accounting firm to review the two cost reports, and therefore was not entitled to the award of loss of use of funds. The court found that "constructive knowledge" requires more than a "mere apprehension that something might be wrong," and that the hospital did not display any certainty over whether more funds could be recovered by the second accounting firm. The court, nonetheless, reversed the award because the value of the loss had not been established.