Friday, December 29, 2017

Discovery Rule In Legal Malpractice

The United States Court of Appeals for the District of Columbia Circuit has held that a legal malpractice case survives the pleading stage

This legal-malpractice action arises from Defendant Michael M. Davidson’s representation of Houshang and Vida Momenian (the “Momenians”) in a lawsuit filed in D.C. Superior Court on August 18, 2009 (the “2009 Litigation”). The Momenians settled the 2009 Litigation on October 12, 2010, but allege Defendant failed to explain that the settlement meant all of their claims were fully and finally dismissed. On May 6, 2015, the Momenians (collectively with the Houshang Momenian Revocable Trust, “Plaintiffs”) sued Defendant for, inter alia, his allegedly negligent settlement advice. Defendant moved to dismiss pursuant to the three-year statute of limitations, arguing that if Plaintiffs had exercised reasonable diligence investigating their claims, they would have been on notice of the cause of action at some point prior to May 6, 2012. Defendant also moved to dismiss for failure to state a claim on the merits.

The District Court twice dismissed the complaint as untimely: first with leave to amend, and second with prejudice, concluding that Plaintiffs’ amended complaint failed to allege facts sufficient to overcome the timeliness bar. The District Court engaged in a thorough and careful analysis of the timeliness issue. However, taking the allegations of the complaint as true and drawing all reasonable inferences in Plaintiffs’ favor, we do not agree that Plaintiffs’ claims are conclusively time barred at the pleading stage.

Under the circumstances of this case, including the parties’ attorney-client relationship, Plaintiffs’ efforts to check in with Defendant about the 2009 Litigation every three months following the 2010 settlement plausibly fulfilled their duty to investigate their affairs with reasonable diligence. It is therefore plausible that Plaintiffs’ claims did not accrue prior to May 6, 2012. Accordingly, we reverse and remand for proceedings consistent with this opinion.

The court on the discovery rule in legal malpractice claims

Where an injury is by its nature not readily apparent, D.C. courts apply a more forgiving “discovery rule” under which a claim accrues only if a plaintiff has actual or inquiry notice of a cause of action, regardless of when the injury occurred.

...the existence and nature of a fiduciary relationship are important aspects of the relevant circumstances a court assesses to determine whether a plaintiff exercised reasonable diligence investigating claims against her fiduciary. BDO Seidman, 89 A.3d at 500 (“The analysis is highly factbound and requires an evaluation of all of the circumstances, including the conduct and misrepresentations of the defendant, the reasonableness of plaintiff’s reliance on the defendant, and the existence of a fiduciary relationship between the parties.” (quotation marks omitted)). A fiduciary relationship between a plaintiff and defendant may “reduce the significance of[] any lack of diligence on [a plaintiff’s] part,” and courts have given heightened protection to a client’s reliance upon her lawyer’s advice and representations when evaluating a plaintiff’s reasonable diligence investigating malpractice claims. See Drake v. McNair, 993 A.2d 607, 620 (D.C. 2010); Ray, 747 A.2d at 1142 (collecting cases)...

We conclude Plaintiffs’ allegations plausibly demonstrate reasonable diligence under the circumstances here. Assuming the posture of review on a motion to dismiss, we are not persuaded that calling one’s lawyer every three months to check in on a case, and relying on the lawyer’s assurances that he was “working on it,” is insufficient to fulfill a plaintiff’s duty to investigate her affairs. See Ray, 747 A.2d at 1142. It is plausible that a reasonable person would rely on an attorney’s regular assurances that he was working on a case and feel no need to investigate further, at least not after only eighteen months. Indeed, it is common knowledge that litigation often lasts for years.

Circuit Judge Wilkins authored the opinion. (Mike Frisch)

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