Wednesday, July 22, 2015
C.A. Rejects Limitations Tolling Argument in Malpractice Case
One-Year Period Began When Negligence Allegedly Occurred, Not When Underlying Case Settled—Panel
By KENNETH OFGANG, Staff Writer
The one-year period in which to sue attorneys who allegedly missed the deadline to file a crucial motion began to run when the deadline expired, not when the plaintiffs later settled the case for what they claimed was a reduced amount because of the attorneys’ negligence, the Court of Appeal for this district has ruled.
Div. Two yesterday ordered publication of its June 25 opinion affirming a judgment in favor of San Diego attorney L. Scott Keehn and Keehn & Associates, APC in an action by the firm’s former clients, Shaoxing City Maolong Wuzhong Down Products, Ltd. and Shui Yan Cheng’s. Los Angeles Superior Court Judge Rolf M. Treu granted the defendants summary judgment on the ground the plaintiffs waited too long to sue.
Keehn had represented the plaintiffs in bankruptcy court following a dispute in which the plaintiffs won an arbitration award of $5.35 million against Aeolus Down, Inc. and two individuals. Before the plaintiffs obtained a judgment confirming the award, another creditor filed a blanket lien attaching to all of Aeolus’s assets and Aeolus and the other debtors filed for bankruptcy.
Keehn and his firm were brought into the case in order to challenge the blanket lien as a fraudulent transfer. The bankruptcy court set a stipulated deadline of Oct. 7, 2009 for the filing of a formal challenge to the lien.
The deadline expired with no challenge being filed. On Nov. 10, the bankruptcy court denied Keehn’s request for a retroactive extension of the deadline.
The plaintiffs then fired Keehn and hired Ian Landsberg and Landsberg and Associates as its new counsel. The dispute went to mediation, resulting in a Feb. 22, 2010 agreement by which the plaintiffs accepted $3.75 million as full satisfaction of the arbitration award and judgment.
The plaintiffs sued Keehn and Landsberg for malpractice on Feb. 18, 2011, alleging that each was guilty of malpractice and that they he remaining $1.6 million of the arbitration award was lost as a result. Treu granted separate summary judgment motions, holding that the suit against Keehn was time-barred and that the plaintiffs could not prove a case against Landsberg because the evidence they would have needed to prove him guilty of malpractice was inadmissible under the mediation confidentiality statutes.
The judgment in favor of Landsberg was affirmed in a separate unpublished opinion June 25. The appellate panel yesterday denied a request to publish that opinion.
With respect to the judgment in favor of Keehn, Justice Brian Hoffstadt, writing for Div. Two, said the trial judge was correct in holding that the one-year period began, at the latest, when Keehn’s motion for an extension was denied in November 2009, not when the case settled 16 months. The “actual injury” needed to trigger the statute of limitations occurred at that time, the justice concluded.
Once the bankruptcy judge denied the extension, Hoffstadt reasoned, it was “definitively confirmed that plaintiffs lost their right to challenge the…lien,” and the plaintiffs were injured by the weakening of their negotiating position in the ensuing mediation. The plaintiffs’ claim that they did not subjectively believe they had suffered actual injury because Landsberg assured them they could attack the lien regardless of the bankruptcy judge’s ruling does not create a triable issue of fact, Hoffstadt said, because “subjective belief is irrelevant to the question of whether actual injury has been sustained.”
No Triable Issue
The justice also rejected the contention that a statement by an employee of Keehn to a co-counsel of Landsberg that Keehn would be assisting Landsberg in his handling of the case created a triable issue as to whether Keehn was still representing the plaintiffs, tolling the statute. No such issue exists, Hoffstadt said, because Keehn’s representation ended as a matter of law when he was formally substituted out of the case, in the absence of objective evidence that he continued to provide advice or services.
The alleged statement by Keehn’s employee does not rise to that level, the justice said, because it shows at most that Keehn was going to assist the transition to new counsel. The jurist noted that the plaintiffs’’ appellate counsel conceded that Keehn never spoke to, or in any way assisted, the plaintiffs or Landsberg after he was substituted out.
Attorneys on appeal were Timothy D. McGonigle for the plaintiffs and Douglas A. Pettit, Valerie G. Hong, and Matthew C. Smith of Petit Kohn Ingrassia & Lutz for Keehn.
The case is Shaoxing City Maolong Wuzhong Down Products, Ltd. v. Keehn & Associates, APC, 15 S.O.S. 3720.
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