Wednesday, January 11, 2006
Court of Appeal Rules:
Malpractice Statute Still Tolled After Lawyer Leaves Firm
By KENNETH OFGANG, Staff Writer/Appellate Courts
The tolling of the statute of limitations for a malpractice action against a law firm continues after the responsible lawyer leaves the firm if he or she continues to represent the client, the Court of Appeal for this district ruled yesterday.
Reversing a contrary ruling by Los Angeles Superior Court Judge John P. Shook, Div. Two reinstated a claim against Arter & Hadden resulting from the firm’s representation of Beal Bank, SSB in its efforts to collect default interest on certain loans.
The bank sued the firm along with Eric Dean, a partner at the firm at the relevant times, and Steven Gubner. Gubner was an associate at Arter & Hadden when he began representing the bank, and continued to represent it after leaving to create Gubner & Associates—which became Ezra, Brutzkus & Gubner—in December 1998.
Beal Bank was unable to recover the interest, due to an adverse ruling by a bankruptcy judge while Gubner was still at Arter & Hadden. The bank, represented by Gubner’s new firm, lost its appeals.
The bank sued the lawyers in September 2002, while Gubner was still its counsel of record in the bankruptcy court. It alleged that had the attorneys competently assessed and advised it of its legal position, it would have moved to settle the dispute and would not have continued to incur legal fees and expenses for litigation in the bankruptcy court, district court, and Ninth U.S. Circuit Court of Appeals.
The plaintiff, in opposing demurrers, cited the provision of Code of Civil Procedure Sec. 340.6 that tolls the statute of limitations while the allegedly negligent attorneys continue to represent the client. Noting a conflict of authority on the issue, however, Shook ruled that as to Dean and Arter & Hadden, tolling ended when Gubner took the case to his new firm, so the one-year limitations period had long expired.
But Justice Kathryn Doi Todd said that tolling the statute as to the attorney’s former law firm is consistent with the legislative intent behind the tolling provision.
The jurist wrote:
“...Beal Bank is not seeking to hold Arter & Hadden and Dean liable solely on the theory that they are vicariously liable for actions taken by Gubner while he was employed by the firm. Rather, Beal Bank is seeking to hold all defendants directly liable for their own allegedly negligent acts. Under these circumstances, it would be inequitable to force the Gubner defendants alone ‘to pay the statutory price’ for the continued representation. Moreover, the detriment caused by the disruption to the ongoing attorney-client relationship affects not only the attorney, but the client as well. The purpose of the continuing-representation tolling provision is to benefit the client’s interest by preserving undisturbed the client’s relationship with its attorney so that the attorney can try to undo the damage he has done to the client.”
The justice rejected the defendants’ contention that the trial court should be affirmed because continued tolling would unnecessarily prolong the time for filing cases and make malpractice insurance more expensive and, in many cases, unobtainable.
“We agree that this is a serious concern,” Doi Todd wrote. “But it is not one that can be resolved on the record before us. Nor do we agree that the time for filing legal malpractice cases would be extended indefinitely. The limitations period is tolled only while the attorney continues to represent the client in the same specific subject matter in which the alleged malpractice occurred.”
Attorneys on appeal were Harvey L. Gould of Leland, Parachini, Steinberg, Matzger & Melnick and Vicki L. Freimann, Richard Fannan and David M. Rice of Carroll, Burdick & McDonough for Beal Bank and John M. Moscarino and Paula C. Greenspan of Moscarino & Connolly for the defendants.
The case is Beal Bank, SSB v. Arter & Hadden, LLP, 06 S.O.S. 132.
Copyright 2006, Metropolitan News Company