Dormant Mistakes: the Statute of Limitations in Professional Negligence-discovery, Fraudulent Concealment, and the Continuous Representation Rule
| Citado como | Vol. 55 No. 2 Pg. 0014 |
| Año de Publicación | 2015 |
| Páginas | 0014 |
Christopher D. Hawkins, Esq. [1]
Professional liability cases present special challenges related to the statute of limitations because mistakes made by attorneys may remain undetected and cause no harm until long after they are made.[2] For example, errors in deeds, estate planning documents, tax advice, prenuptial agreements, land-use permit applications, or contracts may lie dormant for years after the documents were drafted and executed. In addition, a valuable and productive relationship may persist between the attorney and client over many years. Of course, the client relies upon the attorney's expertise, and is generally in no position to meaningfully determine whether the attorney's advice is accurate.[3] It would be inefficient and irrational to require a client to keep a second attorney on standby to examine the work of the first attorney for potential errors. At the same time, however, the discovery rule potentially subjects attorneys to open-ended liability because they are outside the scope of the statute of repose.[4] This accumulating liability may create inefficiencies and increase insurance costs as carriers are required to insure some level of open-ended risk for work performed many years previously, and which they may be unable to defend adequately because files have disappeared and memories have faded.
To balance these competing concerns, legislatures and courts have developed concepts related to the accrual of causes of action. Prior to 1974, New Hampshire observed the occurrence rule, under which a cause of action accrued on the date the negligent act occurred regardless of whether the client was aware of it. The discovery rule, concepts of fraudulent concealment, and the continuous representation developed to ameliorate the harsh impact of the occurrence rule. The legislature has since incorporated the discovery rule into the statute of limitations.[5]
Parties facing a statute of limitations defense frequently seek to avoid dismissal by invoking each of these concepts without considering the significant distinctions between them. The New Hampshire Supreme Court has suggested there are differences between the discovery rule and fraudulent concealment rule, for example,[6] but to date the fraudulent concealment and continuous representation rules have not been fully explained in the context of the discovery rule. This article suggests an analytical framework to do so. Accrual of a cause of action under the discovery rule depends upon the client's awareness - actual or presumptive - of the material facts comprising the cause of action. Fraudulent concealment and continuous representation should be analyzed through the lens of client awareness as well. The discovery rule is best fitted to cases where neither the attorney nor the client is aware a mistake has been made at the time it was made. The fraudulent concealment rule best applies, generally speaking, in cases where the attorney is aware a mistake has been made and the client has been harmed, and the client is unaware of the mistake or the harm. The continuous representation rule is best fitted to cases where both the attorney and client are aware a mistake has been made, and an agreement or mutual understanding has been reached the attorney will attempt to fix the mistake.
I. THE STATUTE OF LIMITATIONS
The fundamental purposes of the statute of limitations are to ensure timely notice to the adverse party, eliminate stale and fraudulent claims, grant repose to claims that otherwise might linger indefinitely, and serve as an instrument of docket management.[7]
II. WHEN A CAUSE OF ACTION FOR LEGAL MALPRACTICE ARISES
The starting point in evaluating a statute of limitations defense is whether a cause of action has arisen. A cause of action for legal malpractice arises once all the elements of the claim are present.[8] The elements of a legal malpractice claim are proof of an attorney-client relationship, a breach of a duty arising from that relationship, and a connection of legally recognized causation between the breach and resulting harm to the client.[9]
III. WHEN A CAUSE OF ACTION FOR LEGAL MALPRACTICE ACCRUES: DISCOVERY AND FRAUDULENT CONCEALMENT
The discovery rule and fraudulent concealment are accrual concepts. They depend upon when the client actually or presumptively becomes aware of the material facts comprising the cause of action.
A. The Discovery Rule
Prior to 1974, there was no distinction under New Hampshire law between when a malpractice cause of action arose and when it accrued: the statute of limitations accrued when the acts of negligence occurred, regardless of whether the client was aware of the negligence and its harmful effect.[10] This meant a cause of action could expire before the client was aware a mistake had occurred. The New Hampshire Supreme Court promulgated the common law discovery rule in professional negligence cases to counteract the harsh effects of the occurrence rule: first in medical malpractice cases,[11] and shortly afterwards in legal malpractice cases.[12] The Court held the discovery rule "finds its justification in the necessary reliance of the layman on the professional in his field and the mystery to the layman of the professional's work."[13] The Court reasoned that it followed from these factors "the client may not recognize negligent professional acts when they occur and should not be expected to."[14]
Under the discovery rule, a malpractice cause of action does not accrue until the client discovers or should reasonably discover that the attorney has acted negligently and that the client has suffered harm as a result. The statute of limitations was later amended to incorporate the discovery rule, which created an analytical distinction between when a cause of action arose and when it accrued.[15]
A cause of action for professional malpractice now accrues if the client is aware or should reasonably be aware of the reasonable possibility of a connection between the lawyer's advice and harm suffered by the client.[16] "Harm" and "damages" are distinct concepts in this context. Harm is the loss of a right, remedy, or interest, or the imposition of a liability, while damages constitute the monetary measure of that harm.[17] The harm can consist of fees incurred to correct the problem[18] , or, more subtly, of a lost opportunity to achieve a better outcome. The cause of action accrues regardless of whether the plaintiff knows the full extent of harm at the time he reasonably should become aware of it[19] , so long as it is tangible and quantifiable.[20]
If the client discovers, and reasonably should discern, a connection between some harm he suffered and the attorney's conduct, the cause of action accrues and the statute of limitations commences to run. This principle vindicates the client's reliance upon the attorney's professional expertise, but has no application after the client is actually or presumptively aware he suffered harm on account of the attorney's actions. The point in time at which the client achieves sufficient awareness depends upon the facts and circumstances of each particular case, and is an issue for the court to decide either on dispositive pleadings[21] or after an evidentiary hearing.[22] Once application of the statute of limitations has been established, the burden of proving an exception applies to toll the statute rests upon the plaintiff.[23]
Many of the legal malpractice cases addressing the statute of limitations focus on when the harm occurred, or when the client should reasonably have become aware of the harm, and its connection to the attorneys' conduct. These cases are fact-intensive. For example, in Feddersen v. Garvey[24], the First Circuit Court of Appeals held the cause of action accrued more than three years before Feddersen filed suit because by that time he had retained two additional law firms, one of whom informed him in writing he had a potential malpractice claim against his first attorney, to defend himself against the consequences of his first attorney's alleged malpractice.[25] In Coyle v. Battles,[26] the New Hampshire Supreme Court held a cause of action accrued in May 1995 at the latest, by which time the plaintiffs had retained separate counsel and threatened to sue the defendants to recover alleged excessive fees.[27] In Draper v. Brennan[28] , the New Hampshire Supreme Court held Draper's cause of action accrued when the court denied his motion to enforce a settlement agreement he believed entitled him to free health insurance.[29]
Feddersen and Coyle may fairly be characterized as "easy" accrual cases because the respective plaintiffs retained successor counsel to advise them of the consequences...
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