Tuesday, February 10, 2009
The Delaware Supreme Court reversed an order granting summary judgment to a law firm in a professional malpractice action on statute of limitation grounds, concluding that there was a question of fact as to when the client was on inquiry notice of the alleged malpractice. The client owned two apartment complexes and had decided not to sell when an attorney [not the malpractice defendants] advised that he would suffer double taxation on the sale. The new attorney told the client that the problem could be avoided by electing Subchapter S status and holding the property for another 10 years. The client then sued his original lawyers for failure to elect Subchapter S status.
The court here held that, although the client was aware of the double taxation problem in 1999, "one could conclude that [the client] had no reason to question the manner in which [the lawyer defendant] accomplished the restructuring until [the client] received an offer to buy...in 2004, and learned the tax consequences of such a sale." Thus, there was a basis in the record to find that the 2005 lawsuit was filed within the applicable statute of limitations. (Mike Frisch)