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The clock starts running on the deadline for filing a legal malpractice claim when all appeals on the underlying suit have been exhausted, the Texas Supreme Court ruled on March 1. In a 7-0 decision, the high court held in Apex v. Tolin that the tolling rule it adopted a decade ago in Hughes v. Mahaney & Higgins was not modified in 1997′s Murphy v. Campbell, an accounting malpractice case. The ruling, from which Justice Priscilla Owen abstained, is expected to clear up the confusion in the intermediate appellate courts regarding when the statute of limitations is tolled in legal malpractice cases involving litigation. In a brief filed on behalf of Stable Energy in support of Apex, Houston lawyer David Furlow cited Clint Eastwood’s observation: “A man’s got to know his own limitations.” As a result of the supreme court’s ruling in Apex, lawyers will have “a much better understanding” of when the statute of limitations begins to run if they are facing a legal malpractice claim, says Furlow, a partner in Morris & Campbell. “And frankly, I think this will lead to lawyers being sued less,” he says. John Glover, the lawyer representing the towing company, says the ruling benefits lawyers and clients. “In the big picture, a stable, predictable system is good for everybody,” says Glover, a partner in Houston’s Chamberlain Hrdlicka White Williams & Martin. Glover says the ruling keeps a lawyer from being sued prematurely. It also keeps the client from being put in the inconsistent position of defending what a lawyer did in the underlying case while attacking the lawyer’s actions in the malpractice claim, he says. Mike Jamail, the lawyer who represents a Louisiana firm named as a defendant in Apex, believes lawyers are the losers in this ruling because it prolongs the period in which they can be sued for malpractice. “This case is antagonistic to lawyers in terms of its opinion,” says Jamail, a partner in the Reaud Law Firm in Beaumont, Texas. The state supreme court also dealt with statute-of-limitations questions in an 8-0 ruling in Underkofler, et al. v. Vanasek, another case decided on March 1. The court held in Underkofler that the 5th U.S. Circuit Court of Appeals in Dallas correctly decided that the statute was tolled pending final resolution of the underlying suit. But the court also held that the Hughes tolling rule does not apply to deceptive trade practices claims in a legal malpractice action. “I couldn’t have asked for a better outcome for my client in regards to the limitation as applied to malpractice cases,” says Robert Lybrand, who represents Hugh F. Vanasek in his malpractice claim against Paul B. Underkofler Jr. and the firm of Goins, Underkofler, Crawford & Langdon. “It pretty much puts us back in the trial court where we were when we started,” Lybrand, a partner in Turner & Lybrand in Coppell, Texas, says of the ruling. Apex also is expected to go back to the trial court, where the lawyers representing William M. Tolin III and Benckenstein & Oxford of Beaumont say they’ll be ready. “We won it once. We’ll just have to go back and win it again,” says G. William “Billy” Shepherd III, a partner in Cruse, Scott, Henderson & Allen in Houston. Sam Cruse Jr., another partner in the Houston firm, says he wants to talk with the clients to decide whether they first want to file a motion for rehearing by the supreme court. GRAY AREA Apex sued Tolin and his firm, Benckenstein & Oxford, for allegedly failing to file a limitation of liability action in the defense of a personal injury suit filed by an injured worker. The worker’s injuries allegedly resulted when he fell from a vessel caught in the wash of a barge being towed by an Apex tugboat. A brief filed on Apex’s behalf indicates that such a filing is a customary liability-limiting procedure under admiralty and maritime law. Although Apex initially hired Benckenstein & Oxford to handle the matter, the company hired New Orleans-based Hebert, Mouledoux & Bland as lead counsel for the trial. Jamail says he doesn’t expect the ruling in Apex to affect the Louisiana firm dramatically because it was hired about eight months after the deadline was missed for filing the action to limit the towing company’s liability. The company filed and withdrew the malpractice claim in Louisiana before bringing the matter to a Texas court. Apex sued both law firms in Texas on Feb. 19, 1997, and alleged that its lawyers’ mistakes exposed the company to liability in excess of the value of the tugboat. After the injured worker won a more than $7 million judgment, Apex hired another lawyer to negotiate a settlement that the company alleged forced it to pay $1.7 million more than the vessel was worth. Oxford & Bland sought a summary judgment on the grounds that the two-year statute of limitations had started running no later than Jan. 27, 1995, when the parties purportedly agreed to settle the personal injury case, according to the supreme court’s opinion. The 58th District Court in Beaumont ruled in the lawyers’ favor and was affirmed by the 9th Court of Appeals. The appeals court in Beaumont ruled that Apex suffered a legal injury no later than Aug. 31, 1994, the date of the judgment in the underlying case. Citing the supreme court’s decision in Murphy, the 9th Court held that the tolling provision had been narrowed to situations in which the client continues to use the same lawyer in the pending litigation. Justice Deborah Hankinson, author of the supreme court’s opinion, said that hiring a new attorney would not necessarily eliminate the problem of a client having to adopt inconsistent positions in the underlying case. “The client could still be forced to defend what the allegedly malpracticing attorney did in the underlying case, while attacking those same actions in the malpractice case,” she wrote. There has been confusion among the mid-level appellate courts as to whether Murphy modified the tolling rule established by Hughes. In the opinion, Hankinson listed five rulings in which courts of appeals have held that Murphy limited the application of the Hughes rule. Some appellate courts have applied Hughes without mentioning Murphy or without noting any tension between the two decisions, Hankinson wrote. The Dallas appeals court ruled in Underkofler that the Hughes rule tolled the statute of limitations until the underlying litigation had been resolved. Hankinson, who also wrote the opinion in Underkofler, noted that Vanasek hired Underkofler and his firm to pursue recovery on a promissory note but became dissatisfied with Underkofler’s representation. Vanasek alleged that Underkofler agreed to recess the trial on the case and submit the dispute to mediation without his consent, causing delays that led to an unsatisfactory settlement after two of the defendants in the suit filed for bankruptcy. The opinion said Vanasek had concerns about Underkofler’s representation during the spring and fall of 1991 and outlined his complaints in a letter to the firm on April 7, 1992. Underkofler filed a motion to withdraw from the case, which was granted by the trial court on May 22, 1992, according to the opinion. Vanasek hired another lawyer but the trial was recessed and reset several more times before he settled with some of the defendants for $12,500. On Sept. 23, 1994, a judgment worth about $858,260 was rendered against the defendants who had filed for bankruptcy. Rob Gilbreath of Dallas, a Jenkens & Gilchrist partner who represents Underkofler, says the defense essentially was asking the supreme court to change the law but that the court opted to stick with the rule adopted in Hughes. “We knew it was an uphill battle to get the court to change a fairly recent doctrine,” he says. Gilbreath says questions still may exist regarding when the statute of limitations is tolled, even though the supreme court believes it has drawn a “bright-line” rule. The problem, he says, will be determining how the rule should apply to certain fact patterns because there is so much variation in these kinds of cases. Glover says that Hankinson’s thinking regarding when the statute of limitations begins to run in a malpractice case appears to have changed slightly. In 1997, while a member of the 5th Court in Dallas, Hankinson wrote the opinion in Dear v. Scottsdale Insurance in which the appeals court held that the statute of limitations began running on Sept. 19, 1991, the date an insurer agreed to settle a claim against private investigator William C. Dear. One of the dates that Dear had argued could be the end of the tolling period was Sept. 20, 1991, when the trial court entered an agreed order of dismissal. In Apex, Hankinson said the underlying case was finally concluded when a settlement was reached with the injured worker and the court of appeals issued its order dismissing the towing company’s appeal. Furlow still sees some “gray area” in the tolling rule. For example, he questions whether an argument could be made that an appeal is exhausted on the deadline for filing a petition with the state supreme court if a party decides not to appeal a ruling by an appeals court.

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