Court Exposes Law Firms To Increased Legal Malpractice Claims Under The Continuous Representation Doctrine
November, 2009
The Appellate Division, First Department, recently held that the statute of limitations in a legal malpractice action can be tolled where an attorney continuously represents the same client in the same matter, even though the attorney switched firms twice during the course of that representation. See Waggoner v. Caruso, 2009 NY Slip Op. 06739 (1st Dep't 2009).
In 1998, Plaintiff retained Kenneth A. Caruso ("Caruso"), then an attorney with Pillsbury Winthrop Shaw Pittman, LLP ("Pillsbury"), to recover $10 million he invested into a purported high-yield investment program (the "Underlying Action"). Id. at *2. Plaintiff's investment was immediately stolen upon its deposit at Citibank. Id.
In November, 2001, Caruso and his practice group left Pillsbury to join Chadbourne & Parke, LLP ("Chadbourne") and in January, 2002, Chadbourne replaced Pillsbury as Plaintiff's counsel in the Underlying Action. Id. at *4. Thereafter, in May, 2005, Caruso left Chadbourne to join Bracewell & Giuliani, LLP ("Bracewell") as a partner; and Bracewell, in turn, replaced Chadbourne as Plaintiff's counsel in the Underlying Action. Id. at *3. Caruso continuously represented Plaintiff from the date the Underlying Action was commenced in 1998, through May, 2006, when Plaintiff discharged Caruso and Bracewell. Id.
In July, 2007, Plaintiff-investor commenced an action against Caruso and his firm, Bracewell, with claims "sound[ing] in legal malpractice, breach of fiduciary duty, fraud and conspiracy to commit fraud." Id. In addition, Plaintiff named Caruso's former law firms, Chadbourne and Pillsbury, as Defendants. Id. Plaintiff alleged that, among other things, Caruso and his employer law firms conspired in the theft of the $10 million investment that Caruso was retained to recover. Id. at *4.
In September, 2008, Plaintiff's legal malpractice lawsuit against Caruso and the aforementioned law firms were dismissed by New York State Supreme Court, New York County Justice Bernard, J. Fried for: (i) failure to state a cause of action as to all Defendants; and (ii) as time-barred as to Pillsbury. Id. Although the First Department upheld the lower court's dismissal, it "did not do so on the ground that [the] legal malpractice action against Pillsbury [was] time-barred." Id.
New York's Civil Practice Law and Rules ("CPLR") provides that a legal malpractice action must be commenced within three years of accrual. See CPLR §216 (6); see also CPLR §214(6). The First Department recognized that Plaintiff's malpractice claim against Pillsbury accrued in 2001 when Caruso left the firm ¾ nearly six years before the malpractice action was commenced. Waggoner at *4. Nonetheless, the Court wrote that, "[u]nder the doctrine of continuous representation...the statute of limitations is tolled while representation on the same matter in which the malpractice is alleged is ongoing." Id.
Stressing public policy considerations supporting the applicability of the doctrine of continuous representation, the Court held that "the statute of limitations was tolled by the doctrine of continuous representation during the time Caruso represented Plaintiff in the Underlying Action] while he was a partner at Chadbourne and Bracewell." Id.
Specifically, the Court noted that "[s]ound public policy considerations...support the tolling of the statute of limitations with respect to the legal malpractice claim against Pillsbury" because "[a]ny suit brought by plaintiffs against Pillsbury would have been based upon Caruso's acts of malpractice." Id. Caruso, who was then still representing Plaintiff in the same matter, "would have thereby been exposed to Pillsbury's claims for contribution or indemnification" and their continuing attorney-client relationship jeopardized. Id. at *4 -*5.
Learning Point: The continuous representation doctrine is rooted in public policy that a client cannot be expected to jeopardize the attorney-client relationship during the course of representation. The Waggoner Court's application of the doctrine exposes law firms and/or its insurers to increased claims because the three-year statute of limitations in which to bring legal malpractice actions can be tolled long after the firm ceases representation.
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