Thank you for sharing!

Your article was successfully shared with the contacts you provided.
A Thursday ruling from the state Supreme Court leaves former clients less time to hit a firm with a malpractice suit. The clock for filing a malpractice suit starts ticking when a client ends its relationship with a law firm — even if the client still retains one of the firm’s former attorneys, the court ruled. “When a lawyer leaves a firm and takes a client with him, the firm’s representation of the client ceases,” Justice Kathryn Mickle Werdegar wrote for a unanimous court. The decision, which came a scant 22 days after oral arguments, should be met with relief by the state’s lawyers. Nine major law firms joined the Los Angeles County and Orange County bar associations in filing amicus curiae briefs that sought the result reached Thursday. John Moscarino, a partner in Los Angeles’ Moscarino & Connolly who represented the winning law firm, hailed the ruling as significant “because it closes what could have been an open-ended liability.” The former partners of the now-defunct Arter & Hadden are now off the hook for any damages in a $3.5 million malpractice suit filed in late 2003 by Texas-based Beal Bank. The Cleveland-based firm was accused of negligence in a case in which it unsuccessfully tried to collect unpaid loans for the bank. Arter & Hadden’s lawyers argued that Beal Bank had failed to comply with Code of Civil Procedure §340.6, which requires malpractice suits to be filed within one year of when a client should have discovered a lawyer’s wrongdoing, or within four years of the date the act was committed, whichever comes first. Arter & Hadden and Beal Bank had parted ways on Dec. 31, 1998 — about five years before the bank sued. Beal Bank contended that 340.6′s continuous representation rule, which tolls the statute of limitations as long the attorney still works for the client, should apply because Steven Gubner, a former Arter & Hadden associate, continued to represent Beal Bank when he left to start his own practice. Beal Bank claimed, therefore, that its deadline to file for malpractice was Sept. 26, 2005, four years after its relationship with Gubner ended. Los Angeles County Superior Court Judge John Shook sided with the law firm, but the Second District Court of Appeal reversed — and created a conflict within the state appellate courts. The Supreme Court said the Second District’s decision had gone against the Legislature’s intent, to balance a client’s right to relief from negligence with attorneys’ need for a reasonable limitations period. “Contrary to the Legislature’s express intent to curtail open-ended liability,” Werdegar wrote, “the court of appeal rule would revive indeterminate liability for firms every time an attorney leaves and takes a client with him or her. In each such instance, exposure would extend indefinitely based on forces outside the firm’s control.” The court, however, went on to encourage lawyers to consider tolling agreements with clients. “The liberal use of tolling agreements and stays in malpractice cases,” Werdegar wrote, “may reduce the impact on the underlying litigation, ensure that plaintiffs do not have their claims prematurely barred � and allow current counsel, to the extent practicable, to continue to work to ameliorate the consequences of any past mistakes.” Beal Bank’s appellate lawyer, San Francisco-based David Rice, managing partner of Carroll, Burdick & McDonough, didn’t return a call seeking comment. Elwood Lui, a partner in Jones Day’s Los Angeles office who represented the L.A. County and Orange County bars as amici, said the ruling places “a balance on the statute of limitations” and doesn’t let “stale claims sit forever.” Moscarino, who represented Arter & Hadden, noted that the ruling helps not only large firms, but solo practitioners and small-firm lawyers who might leave their practices for other law-related jobs or judgeships. The ruling is Beal Bank SSB v. Arter & Hadden LLP, 07 C.D.O.S. 11711.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.