A statute of limitations ruling favoring lawyers [MCLE]

Legal Malpractice

March 2017

By Dan L. Stanford

The 3rd District Court of Appeal recently published an opinion which gives lawyers cause to celebrate. In Flake v. Neumiller & Beardslee, 2017 DJDAR 1943 (March 2, 2017), the court upheld a summary judgment ruling in favor of lawyer defendants in a legal malpractice case, finding that the statute of limitations on the clients claim started to run when the attorneys' motion to withdraw had been filed, not the date on which the motion was granted and the official withdrawal took place. It is certainly a conservative ruling on the subject of "continuous representation" sufficient to toll the statute of limitations and deserving of discussion.

The statute of limitations for legal malpractice claims is found in Code of Civil Procedure Section 340.6, which reads, in relevant part: "(a) An action against an attorney ... shall be commenced within one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first. ... [I]n no event shall the time ... exceed four years except that the period shall be tolled during the time that ... [t]he attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred."

In Flake, attorneys from Neumiller & Beardslee had represented Stanley Flake and others as plaintiffs in a real estate development dispute. After a trial lasting 36 days, the plaintiffs did not fare well. Not only did they lose, but an attorney fees and cost award of $750,000 was entered against them. Apparently that angered Flake, who, among other things, believed he should not have been a party plaintiff in his individual capacity, but rather as a trustee of a corporate trust.

After the trial, but while post-trial motions were pending, two things happened. First, Flake hired a different lawyer to at least participate in, if not "handle," the post-trial motions. And second, the Neumiller firm filed a motion to be relieved as counsel with the trial court. The motion to be relieved was filed Nov. 25, 2009. It was unopposed by anyone, including Flake, but it was not granted until Jan. 7, 2010. On Jan. 11, 2010, the Neumiller firm sent a letter to the client notifying of the court's decision in what looks like a classic "termination letter." Flake sued the Neumiller firm on Jan. 6, 2011, obviously the day before the one-year anniversary of the trial court's order granting Neumiller's motion to be relieved.

The trial court granted summary judgment to the Neumiller firm, finding that the one-year statute of limitations found in Section 340.6 had expired and the running of the statute was not tolled past the date the motion was filed. Flake took an appeal.

The Court of Appeal recognized that the one-year statute is tolled so long as an attorney continues to represent the client in the same matter (see Beal Bank, SSB v. Artec & Hadden, LLP, 42 Cal. 4th 503, 514 (2007)), but also correctly recognized there is no bright-line test for when such representation ceases.

The court's opinion correctly points out that neither the subjective belief of the client nor the formal act of withdrawing are alone sufficient to conclude when the relationship ended. See Worthington v. Rusconi, 1994 29 Cal. App. 4th 1488 (1994); Shapero v. Fliegel, 191 Cal. App. 3d 842, 846 (1987). Instead, as the court noted, the test is an objective one involving consideration of a number of factors. The court quoted the general rule as follows: "In deciding whether an attorney continues to represent a client, we do not focus 'on the client's subjective beliefs'; instead, we objectively examine 'evidence of an ongoing mutual relationship and of activities in furtherance of the relationship.' [Citations.] 'Where an attorney unilaterally withdraws or abandons his client, "the representation ends when the client actually has or reasonably should have no expectation that the attorney will provide further legal services."'" (Citations omitted.)

Reviewing the facts of this case, the court concluded, "any objectively reasonable client would have understood on receipt of the motion to withdraw that Neumiller had stopped working on the case." And, the date on which the trial court granted the motion was of no importance. Before there is too much celebration by the bar, three facts of the Flake case should be remembered. First, there was clear evidence that Flake had hired another lawyer to handle the post-trial motions and any appeal. In fact a "substitution of attorneys" had been circulated, signed by Flake and Neumiller, but never finalized or filed. Second, the motion to withdraw was unopposed by Flake. And finally, the motion was granted by the trial judge. The obvious question becomes: What result if the client had no other lawyer, the motion to withdraw was opposed and the trial court denied the attorney's motion? It is easy to imagine that a different result might occur.

The practice tip for lawyers who pursue legal malpractice claims is pick the most conservative date when it comes to analyzing the statute of limitations of 340.6 and its tolling provisions. Don't delay and don't rely on the fact that the official court order was entered on a later date. And, the practice tip for all lawyers is to (a) send out termination letters in all matters, and (b) don't ever sue a client for fees and costs until, at least, the one year statute of limitations has run. Remember, your contract claim has a longer statute of limitations.

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