NJ A1254 has been referred to the Judiciary Committee of the New Jersey State Assembly. The bill seeks to make the statute of limitations for all professional liability actions two years, down from the current six for actions against professionals causing only economic damage. The bill also seeks to return New Jersey to the “American Rule,” and prevent plaintiffs’ attorneys from recovering the cost of litigation through “Saffer fees.” Similar bills have failed in the past, and the current bill faces strong opposition.
Posts Tagged ‘Statute of Limitations’
Tippi Hedren, the actress best known for her part in Alfred Hitchcock’s The Birds, recently had a nearly $1.5 legal malpractice verdict affirmed on appeal. Ms. Hedren was injured on set in June 2006, when a tarp holding a gallon of water gave way and dropped on her head. In a Hitchcock like twist, the accumulation of water was blamed on a bird’s nest blocking a condensation tube in an air conditioning system. Ms. Hedren alleged the water caused a return of recurring headaches (Ms. Hedren had spinal fusion prior to 2006 to treat her chronic headaches).
In October 2006, Ms. Hedren retained Joseph D. Allen, Esquire to represent her in a personal injury action against the owner and lessee of the sound stage where the injury occurred. A timely complaint was filed in March of 2007. Thereafter, Mr. Allen entered into an agreement to dismiss the lawsuit without prejudice, but did not obtain an agreement tolling the statute of limitations. It is not clear from the court opinion why Mr. Allen agreed to dismiss. When Mr. Allen refiled the lawsuit, a demurrer was sustained on the basis of the statute of limitations.
In the legal malpractice action, Mr. Allen conceded negligence, and the trial “essentially involved trying the underlying case to determine what Hedren reasonably could have expected to recover but for Allen’s negligence.” The jury awarded Ms. Hedren $1,483,708, which included $213,400 for past lost earnings; $170,000 for future medical expenses; $440,308 for future lost earnings and lost earning capacity; $300,000 for past noneconomic loss, including physical pain and mental suffering; and $360,000 for future noneconomic loss, including physical pain and mental suffering.
On appeal, Mr. Allen argued the court erred in refusing to instruct on superseding causation and comparative fault. Mr. Allen also argued Ms. Hedren’s medical expert’s opinion on causation had no basis. Finally, Mr. Allen argued the court erred in allowing speculative expert testimony regarding economic loss, and that the jury’s award was excessive as a matter of law. The California Court of appeals rejected all of Mr. Allen’s arguments and affirmed the award.
Failure to calendar, know deadlines, and/or timely file consistently account for nearly a third of all legal malpractice actions. Malpractice avoidance requires counsel be aware of the applicable statute of limitations.
On February 19, 2013, the Superior Court issued an opinion in O’Kelly v. Dawson, 421 WDA 2012. Superior Court’s opinion by Judge Wecht upheld a legal malpractice verdict in favor of plaintiff, James O’Kelly who was represented by defendant/appellant, Michele S. Dawson, Esquire, in an underlying divorce. The primary allegation was the attorney had not finalized an alimony agreement between the spouses, and as a result, a less favorable alimony award was entered by the master in the divorce action. The appeal argued the spouses never agreed on all of the essential terms of the alimony agreement, and the statute of limitations barred legal malpractice action.
The Superior Court determined that the jury was presented with conflicting evidence with respect to whether the essential terms of alimony had been agreed upon, and found their decision that an agreement had been reached did not “shock the conscience.” The Superior Court noted it could not put itself “into the jury’s place.”
The statute of limitations argument was not before the jury, but argued in a motion for summary judgment, as well as a post-trial motion. The appellant had requested the issue of statute of limitations not be sent to the jury, but be decided by the judge. The trial court found the statute of limitations was tolled by the equitable discovery doctrine until the date of the trial court order adopting the master’s recommendation. On appeal, it was argued that no two reasonable minds could disagree the statue limitations barred the claim, and in the alternative, that the trial judge erred in not sending the issue to the jury with respect to the exercise of reasonable diligence by the husband in discovering the alleged error. The court noted appellant argued before the trial court that no two reasonable minds could differ in finding that the plaintiff knew, or should have known, of the potential malpractice as of the date of the master’s recommendation, and therefore the issue should not go before the jury. The appellant succeeded as to process, “but failed as to substance.” While recognizing this would usually be an issue for the jury, the Superior Court found appellant could not “now be heard to assert that the trial court erred in granting Appellant’s request that the limitations issue be reserved for the court.” The Superior Court found the argument that the issue should have been sent to the jury had been waived. The Superior Court found the trial court “necessarily made a factual finding as to Husband’s reasonable diligence.” The Superior Court noted that following the master’s recommendation, appellant had advised the husband the trial court would reject the master’s recommendation and order alimony to reflect the parties’ proposed alimony agreement.
Judge Colville filed a dissenting opinion. The dissenting opinion was not published with the majority opinion.
Professional liability avoidance requires attorneys to be aware of the possibility of equitable tolling of the statute limitations. While Pennsylvania operates under a strict “occurrence rule” with respect to the statute of limitations, the statute may be tolled if an attorney offers reassurances of a positive result after an alleged act of negligence.
The “Impact Rule” has long been the standard plaintiffs must meet to recover emotional distress damages in a number of states (including Pennsylvania, with exceptions). The Impact Rule generally holds a plaintiff may recover emotional distress damages only if he or she sustained some type of physical contact or injury. On December 20, 2012, the Supreme Court of Kentucky rendered its decision in Keeney v. Osborne, a legal malpractice action, arising out of an underlying potential claim by a homeowner whose home had a small airplane crash into it. Brenda Osborne, the homeowner, sued her attorney, Steven Keeney, because he did not file a claim against the pilot of the airplane, Clifford Queensberry, before the statute of limitations expired. Ms. Osborne was in her house when Mr. Queensberry’s airplane crashed into its roof. Ms. Osborne was not injured in any way, but alleged her pre-existing anxiety, depression, hypertension, insomnia, and diabetes were all exacerbated due to trauma resulting from the crash.
Mr. Keeney was retained within six months of the accident, but did not file an action against Mr. Queensberry within the one-year applicable statute of limitations. Although, Mr. Kinney did eventually file a lawsuit, he did not respond to a motion for summary judgment based upon the statue limitations, and did not inform Ms. Osborne about the motion for summary judgment. Ms. Osborne filed a legal malpractice action against Mr. Keeney. Ms. Osbourne’s action also included claims for breach of contract and fraud and deceit. The jury returned the verdict in her favor which included damages for loss of personal property, for pain and suffering from the airplane crash, for punitive damages against Mr. Queensberry, for legal fees paid to Mr. Keeney, for mental anguish resulting from Mr. Keeney’s representation, and $3,500,000 in punitive damages against Mr. Keeney. The appellate court reversed the awards for emotional distress damages resulting both from the airplane crash and from Mr. Keeney’s conduct because there had been no physical impact.
The Kentucky Supreme Court found the trial court committed reversible error by improperly instructing the jury with respect to the suit-within-a-suit standard for determining legal malpractice. The Kentucky Supreme Court reversed and remanded the matter for further proceedings. However, the court explicitly held “a physical impact or touching is no longer required to recover for claims involving emotional distress.” The Kentucky Supreme Court found the justifications for the impact rule were outdated, and noted that “at least forty jurisdictions have either rejected the impact rule or abandoned it.” The Kentucky Supreme Court adopted the rule utilized in Tennessee, that recovery should be allowed only for “severe” or “serious” emotional injury. The court defined serious or severe emotional injury as “where a reasonable person, normally constituted, would not be expected to endure the mental stress engendered by the circumstances of the case.” The court held a plaintiff must present medical or scientific expert evidence to support the claimed injury or impairment. The Kentucky Supreme Court also made this rule retroactive.
Attorneys on both sides of the bar must be aware of the evolving landscape regarding emotional distress claims. While the Kentucky Supreme Court’s opinion dismissing the physical impact rule may allow emotional injury claims in cases where they would not have previously been allowed, the requirement of expert testimony may also restrict some emotional distress claims.
Last year Akin Gump Strauss Hauer & Feld won summary judgment in a legal malpractice action arising out of a failed real estate development. The real estate developer, Riverwalk Cy Hotel Partners, hired Akin Gump to represent it in the purchase of a tract of land. Riverwalk then contracted with Lyda Sinerton Builders Inc. to build a hotel. Akin Gump was subsequently retained to defend Riverwalk in a nuisance, business interference and trespass claim. The nuisance claim arose out of dust and debris at the construction site.
The legal malpractice action was based on a contention that Akin Gump did not seek indemnification for Riverwalk from Lyda. Riverwalk also alleged Akin Gump overbilled it during the representation. Akin Gump filed for summary judgment based upon the expiration of the applicable statute of limitations. Summary judgment was granted, and Riverwalk appealed. On appeal, the Fourth District Court of Appeals in San Antonio reversed and remanded, holding the statue limitations was stayed until the expiration of all appeals in the underlying action. While this is been the law in Texas for some time, Akin Gump had argued it was not applicable in this matter because the underlying action did not stem from the alleged legal malpractice. The Court of Appeals disagreed, noting the legal malpractice claims “arise out of” the underlying lawsuit.
The law on statutes of limitations in legal malpractice cases is different throughout the country. In Pennsylvania, legal malpractice cases are subject to an occurrence rule, so that the statue limitations begins to run at the time the alleged legal malpractice occurred, and pendency of appeals does not toll the statute of limitations. See, Robbins & Seventko Orthopedic Surgeons, Inc. v. Geisenberger, 449 Pa.Super. 367, 674 A.2d 244, 248 (Pa. Super. 1996). When bringing or defending a legal malpractice action, a careful analysis of the applicable statute of limitations is vitally important.
The Federal Circuit Court of Appeals has breathed new life into a decade old legal malpractice and fraud action against Morgan Lewis. The action involves an incorrectly filed patent application for a type of electronic billboard. A Federal District Judge in California had granted a motion for summary judgment on statute of limitations grounds, but that has been overturned by the three judge Circuit Court of Appeals panel. The panel found that the statute of limitations for legal malpractice had expired, but the fraud claim (for covering-up the malpractice) was tolled under California’s equitable tolling law during a period the case had been pursued in state court and had not expired.
Two recent cases illustrate one of the central problems with legal malpractice cases, they frequently just will not end. In the case of In re: CANOE MANUFACTURING CO., INC., Chapter 7, Debtor, one of the owners of Canoe attempted to reopen a closed Chapter 7 bankruptcy in order to bring an action against the lawyer who had represented the corporation in the bankruptcy. The Bankruptcy Court for the Eastern District of Pennsylvania noted the owner did not have the ability to bring this action, as a corporation in bankruptcy can only act through counsel. However, the court also noted the original bankruptcy petition was filed in 1987. The court noted the owner had information regarding the claim against the attorney, and was making arguments about his attorney’s alleged failures as early as 1990. The opinion exhaustively lists the various claims made by the owner since that point, a number of which were appealed to the highest levels. Although the court refused to reopen the bankruptcy proceedings, given the twenty-five year litigation history, it seems unlikely that this matter will end soon.
Last week, in In re Fagel, the court of appeals for the Ninth Circuit issued an opinion with respect to arguments over the proper amount of damages from a legal malpractice action which involved an underlying litigation from 1993. Another case with a nearly twenty year litigation history.
These cases emphasize the importance of legal malpractice avoidance. Avoiding professional liability litigation can prevent litigation that will often run on for years.
Although not strictly speaking a “legal malpractice” decision, the Eastern District of Pennsylvania’s decision in Travelers Indem. Co. v. Stengel, 2011 WL 6739458 (E.D. Pa. 2011), is of interest in terms of legal malpractice defense, and the case history shows how convoluted these actions can get. The case was a contribution action arising out of an underlying legal malpractice action, which arose out of an underlying wrongful use of civil proceedings (Dragonetti) action, which in turn arose out of a zoning appeal.
Travelers was pursuing the action as an assignee of the rights of a couple by the name of Sanford. Stengle represented the Sanfords in bringing a zoning appeal, which included a RICO claim against the T members of the Board of Supervisors, although the Sanfords filed the RICO claim pro se, Stengle drafted it. Immediately thereafter, representation was taken over by Stengle’s co-defendant Berry who filed an amended RICO complaint. The amended complaint was dismissed, and two members of the Board brought a wrongful use of civil proceedings action against the Sanfords. The attorneys assigned by the Sanfords’ insurer, the Nelson firm, did not file an answer to the Supervisor’s complaint, and a judgment was entered against the Sanfords for $3,030,000. The Sanfords then brought a legal malpractice action against the Nelson firm. Travelers, as insurers for the Nelson firm settled the legal malpractice action and the wrongful use action by paying the Supervisors $1,500,000. The Travelers v. Stengle case, seeking contribution from Stengle and Berry, followed.
The court granted summary judgment in favor of Stengle and Berry, finding that the Nelson firm and Stengle and Berry were not joint tortfeasors, and as they were not joint tortfeasors there could be no contribution. The court reasoned Stengle and Berry owed the Sanfords a different duty than the Nelson firm, that different experts would be needed to prove the two cases, and that the acts were severable in time. Importantly, “neither individual was able to guard against the acts of the other.” The court also found that the harm was so far removed from Stengle and Berry’s actions that it was not foreseeable and could not constitute proximate cause.
In Javaid v. Weiss, 2011 WL 6339838 (M.D. Pa. 2011), the court granted dismissal of the plaintiffs legal malpractice claims finding that the complaint was too speculative. The court also found that defendants had raised significant questions about whether the claim was barred by the two year statute of limitations for a professional liability claim. Although plaintiff had asserted a separate count of breach of contract, the court found he had not “adequately pled a separate claim for breach of contract, but has instead simply repackaged his allegations of negligence and recast them as a breach of contract claim.” This decision is a strong reiteration of the concept that a legal malpractice claim sounding in contract must be based on the breach of an explicit contractual term.
What is the the malpractice or professional liability avoidance takeaway from these cases? There are two obvious lessons from the Travelers case: 1) do not over-plead, and 2) file answers to complaints in a timely manner. The case also will be useful when defending legal malpractice or wrongful use of civil proceedings claim which include cross-claims for contribution. From the Javaid case we learn that if you do not breach an explicit contract provision, you will have a good statute of limitations defense for cases that are filed more than two years after the alleged negligence.
Communication is one of the most important parts of the attorney-client relationship. Rule of professional conduct 1.4 tells us the minimum communication necessary to abide by the rules, including: (a) A lawyer shall: (3) keep the client reasonably informed about the status of the matter. One of the more painful ramifications of this for lawyers is telling our clients when mistakes have been made. This is important from an attorney ethics standpoint, but also from a malpractice avoidance standpoint. Identifying and addressing problems with cases is a good way to avoid a legal malpractice action. Avoiding a legal malpractice action is the best professional liability defense there is.
The importance of not hiding ones errors was highlighted by a recent arbitration decision in which Tom Rutter, Esquire awarded a couple more than $1 million in a legal malpractice action. The Karoly firm and lawyer Lewis Thompson, Esquire were found to have committed malpractice in missing the statute of limitations in an automobile accident action. Mr. Rutter noted that Mr. Thompson not only missed the statute of limitations, but he told his clients he had filed the papers on time and created false documents, including a false court filing stamp, to show he filed on time. Because of this, a punitive damage award was added to the compensatory damages.
For those of us who practice professional liability defense in both states, two of the biggest differences between New Jersey and Pennsylvania are the statute of limitations and fee shifting. In Pennsylvania, the statute of limitations for professional liability actions is two years (or four years if sounding in contract). Pennsylvania also follows the “American Rule” for legal malpractice cases, meaning each side is responsible for their own fees and costs.
The New Jersey statute of limitations is six years. New Jersey also allows fee shifting in legal malpractice cases. The New Jersey State Bar has understandably sought to change this; however, previous attempts have failed. A new bill that would prevent fee shifting and change the statute of limitations for most professional liability actions to two years was introduced earlier this month. It is currently pending before the Regulated Professions Committee.