Statutes of Limitations

Statutes of Limitations

A client can prove duty, breach, causation, and damages and still lose on timing alone. Even when a lawyer's malpractice is egregious, an untimely filing wholly defeats the client's cause of action once the defendant asserts the defense, so the lawyers in every case must identify the applicable statute of limitations.¹ A statute of limitations is a legislative deadline for starting suit, and it operates without regard to the merits: a court that finds the claim late never reaches the elements the earlier sections built. Timeliness therefore raises four questions, which this section answers in order. Which statute governs? When did the claim accrue? Did anything postpone or pause the clock? Does an outer cap cut the claim off?

The first question is whether the legislature wrote a deadline for claims against lawyers. Louisiana did: its statute requires any action for damages against a lawyer arising out of an engagement to provide legal services, whether based on tort, breach of contract, or otherwise, to be filed within one year of the act, omission, or neglect, or within one year of the date it was or should have been discovered.² Because a statute worded this way reaches the claim under any label, the theory the client pleads does not change the deadline. Where no such statute exists, a general one applies. In Channel v. Loyacono the Mississippi Supreme Court applied a provision giving three years to all actions for which no other period is prescribed, and in Bank of Saipan v. Carlsmith Ball Wichman Case & Ichiki the Supreme Court of the Commonwealth of the Northern Mariana Islands held that legal malpractice actions fell under a six-year statute covering every cause of action the legislature had not enumerated.³

Even a statute written for lawyers has edges, and a claim can fall on either side of them. California's Code of Civil Procedure § 340.6(a) sets a one-year period, running from when the plaintiff discovers or should have discovered the facts, for an action against an attorney for a wrongful act or omission, other than actual fraud, arising in the performance of professional services.⁴ In Lee v. Hanley the California Supreme Court read the time bar to reach claims whose merits necessarily depend on proof that the lawyer violated a professional obligation: a fiduciary duty, the duty to perform competently, a duty in the legal services contract, or a duty under the Rules of Professional Conduct.⁵ A claim for garden-variety theft escapes the statute, because proving it requires no showing of any professional obligation, even if the theft occurred while the lawyer and the victim were discussing the victim's legal affairs.⁶ The same lawyer and the same relationship can therefore carry two clocks, and fraud claims fall outside both lawyer-specific statutes: California's text excludes actual fraud, and the Louisiana statute does not apply in cases of fraud.⁷

Where no lawyer-specific statute controls, the period turns on how the claim is classified, which is why the theories of liability discussed earlier matter here. The period for a fiduciary claim may differ from the period for negligence, although some states apply one statute to every action against a lawyer based on professional conduct, whatever the theory.⁸ A plaintiff whose negligence claim is late may therefore try to recast it as breach of contract to escape the negligence deadline. Whether a claim counts as contract or tort for limitations purposes depends on the language, structure, and policies of the jurisdiction's own statutes, and the prevailing rule allows no claim for breach of an express contract unless the wrong sued for breaches a specific promise.⁹ A client whose complaint rests only on the lawyer's carelessness will meet resistance to the recasting. On an exam, a stem that describes an obvious blunder followed by a late filing is testing timing first: find the governing statute, ask how the claim is classified, and then fix the moment the clock started.

When Claims Accrue

A claim accrues when the law treats the cause of action as mature enough for the limitations clock to start, and courts have chosen among three starting points for legal malpractice. Under the occurrence rule the clock starts at the lawyer's negligent act; under the time-of-harm rule, when the negligence actually causes damage; and under the discovery rule, when the client discovers or reasonably should discover both the negligence and the injury.¹⁰ The choice can decide a case, because the same facts keep a claim alive under one rule and kill it under another. Jurisdictions differ, and a stem will usually say which governs, but most states apply a discovery rule to legal malpractice claims, so it is the safer assumption when the stem is silent.¹¹

The occurrence rule is the harshest of the three. It starts the clock on the date of the lawyer's negligent act, a position that traces to the contract roots of the lawyer-client relationship: a client suing on the lawyer's promise to perform with care could recover nominal damages as soon as the promise was broken, so the claim was complete at breach even though no loss had yet followed.¹² Under that rule a claim can expire before harm is done or discovered. A very small number of statutes still start the period on the date the malpractice occurs, and some others use the date of the act but suspend the period while the malpractice is undiscovered and could not reasonably have been discovered. Outside those statutes, the unadorned occurrence rule has largely been abandoned in legal malpractice actions.¹³

That result exposes the flaw in starting the clock at breach. Negligence liability requires damage, so a deadline that runs before any damage exists asks the client to sue over an injury that has not happened, and one that the client, who hired the lawyer for knowledge the client lacks, had no practical way to detect.

The time-of-harm rule follows the conventional negligence approach and starts the statute when the lawyer's negligence has actually caused damage, whether or not the client is aware of it.¹⁴ Some courts apply it to legal malpractice and in effect reject the discovery rule, particularly for drafting errors in a will, which can injure no one until the testator dies. The word harm is flexible: a lawyer's failure to secure a judgment for definite future benefits may be treated as causing actual harm on the date of the judgment if the future loss could be calculated then. Because the rule waits for damage but not for knowledge, an injured client who is unaware loses time just as an informed one does, and the discovery rule corrects exactly that.

Deciding when damage occurs is itself fact-heavy, and the decisions point in two directions. Some courts wait for a concrete injury. In Jones v. Westbrook a lawyer allegedly failed to document a security interest properly when the client sold a business in 2004, and the Alaska Supreme Court held a 2013 suit timely under a three-year statute. The client suffered no appreciable injury when the documents were signed, nor when the escrow manager reported in 2005 that the buyer had missed a payment, because alternative payment arrangements preserved every right; the injury came in late 2011, when the IRS recorded liens that left the client able to hold only junior lienholder status.¹⁵ Warnock v. Karm Winand & Patterson reaffirmed that a malpractice claim will rarely accrue before an adverse judgment, settlement, or dismissal of the underlying action, and the Idaho court in Minnick v. Hawley Troxell Ennis & Hawley, LLP likewise said the claim could not begin accruing until the IRS raised subordination in the underlying tax court proceedings.¹⁶

Other courts find damage earlier. In Antone v. Mirviss the Minnesota Supreme Court held that a claim over a defective prenuptial agreement accrued when the marriage took effect, not when the wife was later awarded part of the appreciation in the divorce. At the wedding the client lost the legal right to unfettered ownership of his premarital property, and the fact that the full extent of the damage could not yet be measured did not mean there was none.¹⁷ What separates Antone from Jones is whether a legal right or position was gone when the lawyer's work took effect. The prenuptial agreement stripped the client of unfettered ownership the moment it operated, while the sale documents in Jones left the client's rights intact until the liens cost the client priority. The timing question is therefore whether the client has lost a right or a position, and an inability to put a dollar figure on the loss does not postpone accrual.

Most states now apply a discovery rule to legal malpractice claims, and many have written it into statute.¹⁸ The rule postpones accrual until the client discovered or reasonably could have discovered both the lawyer's negligent conduct and the client's injury, so time of harm survives as one component: an injury that has not occurred cannot be discovered. The reason lies in the relationship. A lawyer is a fiduciary, and the fiduciary obligation includes disclosing the lawyer's own malpractice, so a rule that kept the clock running while an unrevealed error stayed hidden would reward the very silence the lawyer was bound to break.

The standard is objective and turns on facts rather than law. In Fogarty v. Palumbo the Rhode Island Supreme Court required only that the plaintiff be aware of facts that would put a reasonable person on notice that a potential claim exists, without any need for the nature and extent of the injury to be perfectly crystallized.¹⁹ Widom v. Egenberg shows the rule at work. A lawyer represented several parties to a real estate transaction and did not explain the Statute of Frauds consequences of leaving a side agreement unwritten. The statute allowed six years and suit came almost eight years after closing, yet the New Jersey appellate court held the claim timely, because the clients had no reason to learn until long after closing that they needed independent counsel and a written agreement.²⁰

Unhappiness does not start the clock, though an exam stem often invites the opposite conclusion by noting that the client was displeased with the lawyer or the result from early on. In Viglione v. Farrington the court found that a client's disappointment with a final divorce settlement did not mean she had discovered that the lawyer's representation was significantly flawed. In Ross v. Ihrie a federal court in Michigan rejected the argument that a client who was dissatisfied from the beginning of the representation had discovered a lawyer's wrong advice that a Nevada statute capped a personal injury recovery at $50,000, because the limitations period for legal malpractice does not begin to run just because a client is unhappy with the lawyer's work.²¹ Unhappiness attaches to an outcome, and an unwelcome outcome is no sign of negligence, as the earlier discussion of errors of judgment showed. The discovery rule asks for facts pointing to the lawyer's negligent conduct and an injury. If displeasure alone started the clock, every client who lost a case would have to sue at once to guard against the chance that something had gone wrong, and a client with no reason to suspect the lawyer could lose a claim without ever learning it existed.

The date a document was signed fares no better. In a dispute with the other party to a contract, a person is presumed to have read and understood its terms at signing, but that presumption does not start the limitations period on a claim against the lawyer who prepared the document. In a discovery-rule state the defendant-lawyer must still prove that the client actually discovered, or reasonably should have discovered, the error or omission.²² The client signed on the strength of the lawyer's work, and treating the signature as discovery would charge the client with catching exactly the errors the lawyer was hired to prevent.

Discovery arrives when the client gains specific facts about the lawyer's conduct. A client's threat to sue or to file a grievance has been held to show discovery, and something less than a threat can do the same.²³ In Franklin Financial, Inc. v. Sandoz a Louisiana appellate court held that a client discovered its lawyer's malpractice, and the period began, when the client sent the lawyer a letter detailing the lawyer's errors, even though the client argued that its continuing relationship with the lawyer kept it from realizing the full extent of the errors.²⁴ In Channel v. Loyacono the Mississippi Supreme Court placed the start at the point where clients in a mass tort action suspected wrongdoing and consulted another lawyer, or were approached by lawyers who had left the case and wanted to take it over.²⁵ Set Franklin Financial beside Viglione. The divorce client felt let down by a result and could name no mistake, while the Franklin Financial client had written the errors down, so the first held a feeling and the second held facts. That is the line between disappointment and discovery.

Because discovery depends on the whole picture, courts weigh the defendant's conduct and misrepresentations, the reasonableness of the client's reliance on the lawyer, and the existence of a fiduciary relationship, and they do not look for one decisive event.²⁶ The inquiry is typically highly fact-bound, and the lawyer who raises the defense carries the burden of showing that the client discovered, or should have discovered, the error.²⁷ A given stem will place its client somewhere between two poles: a client with neither injury nor notice, like the client in Jones before the liens were recorded, and a client who has put the lawyer's errors in writing, like the one in Franklin Financial.

Tolling and Repose

After the accrual analysis, three kinds of rules can still move the clock: continuous representation postpones its start, tolling grounds pause it, and a statute of repose cuts it off. The first is the most heavily tested. Under the continuous-representation rule, an increasing number of decisions treat the end of the lawyer's relationship or representation as the proper time to start the statute.²⁹ Courts describe the effect in two vocabularies. Tolling means that a running period is temporarily suspended by some special circumstance, while postponed accrual means that the claim is treated as not yet accrued, so the period has not begun, and a number of courts postpone accrual of a client's claim against a lawyer until the representation on the matter at issue ends.³⁰ On an exam the label matters less than the result: the client's deadline is counted from the end of the representation instead of from the lawyer's error.

The rule rests on what a client is doing while the lawyer is still working on the matter. A client whose lawyer remains engaged on the problem can reasonably expect the lawyer to correct it, so the lawyer's failure to do so is in a sense a continuing failure and not a single past act.³¹ A clock that ran during that period would force the client to choose between suing the lawyer mid-matter, which would likely end the representation when it was most needed, and waiting, which would risk the claim. Fairness supports holding the statute off until the relationship on the particular problem ends, but termination does not by itself start the statute when the client could not have discovered the injury until some time after termination.³² A client who learns of the injury only after the representation ends therefore keeps the protection of the discovery rule.

The rule has edges, and they are the facts that exam stems manipulate. The representation qualifies as continuing only if it concerns the same or a related subject matter, and the rule gives no help when the representation was interrupted or sporadic, because the representation must in fact be continuous.³³ In Duane Morris LLP v. Astor Holdings, Inc. the alleged malpractice occurred in one litigation, and the lawyer later represented the client in an unrelated matter, so the later work gave the client no extension.³⁴ The limit follows from the reason for the rule. The reliance that justifies postponement is reliance on the lawyer to fix the particular error, and work on some other matter gives the client no expectation of repair and no reason to hold off suing. If any later assignment kept an old error alive, a lawyer who handled a client's affairs for decades would carry exposure for every earlier mistake until the final assignment ended.

An exam stem that says the lawyer continued to represent the client decides nothing until you ask two questions: whether the later work concerned the same or a related matter, and whether it was continuous. A client who returns every few years for an isolated task presents the sporadic pattern. A lawyer who goes on enforcing the very agreement the error damaged has kept the representation alive.

Courts also divide over whether an appeal in the underlying case holds the clock. In Draper v. Brennan the court held that where a lawyer commits malpractice in a claim that results in litigation, an appeal of the adverse ruling does not affect the limitations period. By contrast, Stokes-Craven v. Robinson held that the period does not begin until the appeal against the client is resolved, and Moonlight Enterprises, LLC v. Mroz held that the period against a trial lawyer did not begin until that lawyer's last act for the client in dealing with the clerk's office on entry of final orders, even though the client had told the lawyer it had retained different counsel for the appeal.³⁵ The split tracks a disagreement over whether the client's loss is fixed when the error occurs or stays open until the appeal ends, since a reversal could erase it. An exam stem will ordinarily say which view the jurisdiction follows.

The continuing relationship is only one ground for tolling. Tolling based on lack of discovery of the lawyer's errors, an agreement of the parties, or the pendency of other litigation, such as the client's pursuit of post-conviction relief, is of particular relevance to malpractice claims. The familiar disabilities, minority and mental incapacity, can also suspend the period, although the law varies from state to state and it is not easy to generalize.³⁶ The pending-litigation ground matters in the criminal-defense setting, where a client who must first obtain exoneration needs the clock not to expire while the post-conviction case is pending. Lack of discovery matters most when the lawyer hides the mistake. Some statutes keep an occurrence rule but suspend the period while the malpractice is not and could not reasonably have been discovered, and a lawyer's own fiduciary obligation to disclose a malpractice is one reason courts accept discovery-based postponement.³⁷ The inquiry is fact-bound and looks at the defendant's conduct and misrepresentations, the reasonableness of the client's reliance, and the fiduciary relationship.³⁸ A lawyer who writes to the client the week after an error and admits it starts the clock by that disclosure. A lawyer who reports the matter as “moving along” for three years after the claim has expired is using silence to run the clock out, and a court applying a discovery-based tolling rule will hold the period suspended until the client learns the truth.

A statute of repose works differently from every doctrine above. It sets an outside limit measured from a fixed event, usually the lawyer's act or omission, and the period expires whether or not the client has discovered anything. A discovery rule moves only the start of the ordinary limitations period, so it does not extend a repose cutoff unless the statute's own text provides an exception, and whether any given tolling doctrine reaches a repose period is a question of that text.³⁹ The two kinds of period promise different things. The ordinary period protects the client who has just learned of a wrong, while repose guarantees the lawyer that exposure ends on a known date, trading the occasional late-discovered claim for certainty. Without the cutoff, a client's continuing ignorance would keep the lawyer exposed indefinitely, long after the evidence had gone stale.

A claim therefore has to clear two clocks, the ordinary period as postponed or tolled and the repose cap. A stem that places the discovery date comfortably inside the ordinary period has answered only the first question, and the answer also requires checking the date of the act against any repose provision.