When does a cause of action for professional negligence accrue? In ISN Software v. Richards, Layton & Finger, No. 110, 2019 (Del. Feb. 17, 2020), reargument den. (March 30, 2020), the Delaware Supreme Court, sitting en banc, held that for tort claims, such as legal malpractice claims, the wrongful act occurs at the time of injury, however slight, and the statute of limitations can start to run before any actual or substantial damages occur.

As alleged in the complaint, ISN wanted to convert from a C corporation to an S corporation for tax purposes. However, four of its eight stockholders could not qualify as S corporation stockholders. ISN consulted its law firm, Richards, Layton & Finger (RLF), which advised that ISN could use a merger to cash out some or all of the four stockholders. The cashed-out stockholders could then accept ISN’s cash-out offer or exercise appraisal rights under Delaware law. ISN did not proceed with the conversion, but decided to use a merger to cash out three of the four non-qualifying stockholders. ISN completed the merger and reserved funds for the buyout or appraisal award based on the cash-out offer price.