Legal Malpractice: Statutes of Limitation Cut (Deeply) Both Ways

by David Cosgrove

According to studies conducted several years ago by the ABA Standing Committee on Lawyers’ Professional Liability, deadlines and the failure to meet them are at the heart of a substantial portion of malpractice claims against lawyers. See ‘The Most Common Legal Malpractice Claims by Type of Alleged Error‘, ABA Law Practice, Vol. 36, No. 4. The most well-known deadline is the “statute of limitations.” The statute of limitations is a general term for a law that sets the maximum period which one can wait before filing a lawsuit. The period of time varies depending on the type of case. It may vary by state as well. Although there are some exceptions, a claim is barred once the limitation period for that claim has expired. In other words, your claim is dead. No lawsuit for you.

Depending on the merit and value of the claim that is barred, the consequences of losing a claim, particularly in this fashion, can be drastic. And those drastic consequences may ultimately fall upon the attorney if his or her negligence caused the death of the claim. But I ran across a case this weekend that reminded me that the statute of limitations is a double-edged sword in the context of legal malpractice claims. And why is that? It is because legal malpractice, or professional liability, claims have time limitations as well.

Assuming the plaintiffs claims were provable and valid, the case of Dean v. Noble, 477 S.W.3d 197 (Mo. App. 2015) is an excellent example of an attorney getting spared rather than speared by a statute of limitations. The facts of the Dean case are rich. But remember, the Court of Appeals recites them as if true, and in a light most favorable to the plaintiff. The plaintiff, Lester Dean, accused his former lawyer (and brother-in-law) of serious misconduct. And that alleged misconduct had enormous implications for Mr. Dean. But at what point in time should Mr. Dean have filed suit against Mr. Noble? And did Mr. Dean have a new attorney that missed the deadline for suing his old attorney?

The Dean case is a good example of not just how the web of various time deadlines both vex and spare attorneys. It is also a good example of how the determination of just where the deadline rests isn’t always so simple to ascertain. Dean’s professional relationship with Noble lasted from approximately 1990 – 1999. But “things went South” in 2007 when, according to Dean, Noble double-crossed him in a business deal and divorced his sister. Ouch! Making that year somehow worse for Dean, the IRS filed a tax lien against just his portion of the interest in a partnership with Noble. Dean claimed that the IRS was acting against him based upon “inside information” Noble provided to them. Dean filed suit that same year. But his suit related only to an alleged breach of contract by Noble, and he sought equitable relief only. He lost the suit in 2009.

Four years later, in 2013, Dean once again filed suit against Noble. This time, however, Dean alleged, among other things, fraud and breach of fiduciary duty. The trial court dismissed the case, but without providing any written justification for doing so. Dean appealed, but the Court of Appeals affirmed the trial court’s dismissal. How could it? How could the court allow the attorney to get away with such horrific alleged conduct, with a client as his victim no less? Answer: Dean claimed that the 5-year limitations period did not begin to run until 2008, when he purports to have discovered the fraud. The Court of Appeals disagreed. It concluded that the clock began to run no later than 2007, noting:

“A cause of action for fraud accrues at the time the defrauded party discovered or in the exercise of due diligence should have discovered the fraud.” Larabee v. Eichler, 271 S.W.3d 542, 546 (Mo. Banc 2008) (internal quotes and citation omitted) (emphasis added). A plaintiff has a duty to make inquiry to discover facts surrounding the fraud and is deemed to have knowledge of the fraud when he possess the means of discovery. Schwartz, 797 S.W.2d at 832. Where a fiduciary relationship exists, however, “only the actual discovery of the fraud serves to begin the limitations period.” Cmty. Title Co. v. U.S. Title Guar. Co., Inc. 965 S.W.2d 245, 252 (Mo. App. 1998) (citing Gilmore v. Chicago Title Ins. Co., 926 S.W.2d 695, 699 (Mo. App. 1996); Burr v. Nat’l Life & Accident Ins. Co., 667 S.W.2d 5, 7 (Mo. App. 1984)).

“Because there was a fiduciary relationship between attorney Noble and his client Dean, Dean’s fraud claim would have “accrued” when Dean actually discovered “the facts constituting the fraud.” See Cmty Title, 965 S.W.2d at 252. Based on the facts alleged in his Petition, it is clear that Dean discovered “the facts constituting the fraud,”- i.e., that Noble’s representations were not true—when Noble refused to return interests in response to Dean’s February 2007 letter, and certainly no later than November 2007, when Dean filed his first lawsuit against Noble.”

Dean’s lawsuit died the year before he filed. Did he wait too long based upon the advice of an attorney?! Food for thought.