A legal malpractice action may be brought for negligence and breach of contract, as in Coleman v. Duane Morris, 58 A.3d 833 (Pa.Super. 2012). At least arising from underlying civil actions, these separate causes of action are not mutually exclusive and do overlap. A legal malpractice breach of contract cause of action does not require a breach of a specific contractual term (such as in the fee agreement) but, rather, arises from the implicit duty to act within the standard of care arising in every attorney-client relationship. Thus, the statute of limitations for legal malpractice in Pennsylvania is essentially four years (the breach of contract statute of limitations is four years; the negligence statute of limitations is two years).
But when does this statute of limitations commence?
In legal malpractice negligence cases, Pennsylvania uses the occurrence rule to determine when the statute of limitations begins running, as in O'Kelly v. Dawson, 62 A.3d 414 (Pa.Super. 2013). Under this rule, "the statutory period commences upon the happening of the alleged breach of duty." Said differently, contrary to traditional tort claims, the statute of limitations for legal malpractice negligence begins running when the misconduct occurs — not when the damages occur.
While we will discuss the application of the occurrence rule, it seems antithetical to the long-held legal malpractice negligence element requiring damages to render the statute of limitations to have commenced upon the breach (prior to the effect of that breach — damages).
Thus, a legal malpractice negligence action would properly lie prior to the underlying action's adverse result, which leads one to wonder its ultimate propriety. The occurrence rule is even more illogical given Pennsylvania's preclusion of speculation.
For example, let's say malpracticing counsel engages in a conflict of interest in joint representation in representing business purchasers that have different and competing interests. That conflict becomes known to the purchasers well prior to the transaction falling apart. Under the occurrence rule, the purchasers would maintain a cause of action upon their discovery of the conflict of interest notwithstanding the prospect that that conflict of interest would not result in their adversity until the transaction cannot be realized. Therefore, the purchasers bring a legal malpractice negligence action against their conflicted counsel. Simultaneously, the purchasers each hire individual new counsel who collectively attempt to obviate the conflict of interest by attempting to successfully complete the transaction.
The purchasers' legal malpractice negligence action then proceeds to trial while the underlying transaction is intended to proceed to closing. The purchasers then hire both a legal malpractice expert and a forensic economist. The legal malpractice expert easily identifies the conflict of interest but speculates the conflict may cause the transaction's failure. The forensic economist opines as to the purchasers' possible damages if the transaction were to fail.
At trial, the malpracticing counsel seeks a directed verdict for the failure of the purchasers to prove damages given the transaction has not yet failed. The malpracticing counsel also brings a motion in limine to preclude both liability and damages experts' speculation as to that transaction's failure and damages arising therefrom.
What is the trial court to do?
The purchasers were required to bring their legal malpractice negligence action against their prior conflicted counsel upon the occurrence that could potentially have given rise to their harm. However, Pennsylvania precludes speculation, especially in legal malpractice actions. There are not yet any damages.
The occurrence rule not only creates an impossible situation for the court but more so for the clients. While the legal malpractice breach of contract (four-year) statute of limitations seems to practically obviate that paradox by allowing a greater statute of limitations period toward the underlying matter's finality, ultimate disposition is likewise not required of the underlying action.
If the purchasers were to wait until damages were to reach finality (the failure of the transaction because of the conflict of interest), they risk their rightful claim of liability, causation and damages being time-barred.
While the occurrence rule may give attorneys relief from emotional concerns — if not practical insurance concerns — by effectively allowing malpracticing counsel to violate the standard of care and hope that damages (which generally trigger claim inquiry) do not eventualize within the statute of limitations periods, the occurrence rule is contrary to traditional negligence/legal malpractice requisite elements requiring both causation and damages prior to the institution of an action.
Aside from being illogical, counterintuitive and effectively impractical (if not impossible) to reconcile, it appears to be an anti-public policy exception made in favor of attorneys and against their clients (which is contrary to our base standards of ethics and duties to the public we represent).
Contrarily, the occurrence rule actually encourages disgruntled clients to bring actions immediately upon hearing bad news notwithstanding that news may not be ultimately adversely dispositive. Further, the occurrence rule precludes the prospect that counsel may be able to undo (or, if not, mitigate) toward a mutually beneficial attorney-client relationship (instead, encouraging an adversarial posture).
All of the above concerns have caused reviewing courts to take a relaxed view of the discovery rule — which, if otherwise strictly construed, would exacerbate the above difficulties. However, in this author's experience, this relaxed posture is applied case-by-case and fact specifically.
In O'Kelly, the Superior Court found that counsel began representing the husband in a divorce proceeding in 2001. In May 2002, counsel and the wife began negotiating toward a spousal- and child-support agreement. The parties tentatively agreed that the husband would pay alimony for three years at a rate of $1,750 per month for the first year, $1,550 per month for the second year and $1,350 per month for the third year. Thereafter, the husband began making payments consistent with this agreement, according to the opinion.
This agreement was memorialized in a May 3, 2002, letter, according to the opinion. However, the letter additionally proposed that alimony should be nonmodifiable. Counsel told the husband that this new term was contrary to law and should be rejected. The final alimony agreement was never signed.
The master issued a June 13, 2004, report and recommendation awarding the wife alimony of $1,000 each month for 10 years. This recommendation deviated sharply from the terms of the above agreement notwithstanding the new term. Counsel advised the husband that the master's recommendation was totally incorrect and would be reversed on appeal.
The trial court adopted the master's recommendation on March 29, 2005.
In 2007, the husband commenced a professional negligence action against counsel predicated on counsel's failure to effectuate the tentative alimony agreement set forth in the May 2002 correspondence. Throughout litigation, counsel claimed the occurrence rule favored the legal malpractice negligence action being dismissed on statute of limitations grounds.
The Superior Court held that whether the statute of limitations has run on a claim for legal malpractice is usually a question of law unless the issue involves a factual determination. The negligence statute of limitations is two years. The occurrence is upon the happening of the alleged breach of duty. Equitable tolling is permitted under the discovery rule when the injured party is unable to know of the injury or its cause despite the exercise of due diligence.
Counsel argued that the occurrence was on June 13, 2004 — the date the husband received the adverse recommendation from the master. The husband argued the date of discovery was March 29, 2005 — the trial court's affirmance of the master's recommendation. The action was initiated February 28, 2007.
On counsel's assurance that the trial court would reject the master's report, the Superior Court affirmed the trial court's finding that the equitable tolling caused the action to become timely.
In dissent, reversal and vacatur was opined as the otherwise proper conclusion in light of the strict application of the occurrence rule with the discovery rule's requirement of diligence claimed making it indisputable that the master's recommendation triggered the commencement of the statute of limitations notwithstanding the husband's reliance on counsel's assurance of reversal.
O'Kelly is a perfect illustration of the discovery rule's relaxation toward sympathetic legal malpractice plaintiffs in light of the otherwise harsh effect of the occurrence rule. However, this author believes the occurrence rule's off-set by the relaxed discovery rule in legal malpractice negligence actions is incompatible with a "one-size-fits-all" approach that should otherwise be applied to statute of limitations review (e.g., the statute of limitations is intended for clarity).
This author finds the majority's approach to be good public policy in light of the illogic of the occurrence rule; nonetheless, it does create a discovery rule exception that swallows the occurrence rule.
As O'Kelly was reviewed following a trial court's factual determination subsequent to a judicial determination — both regarding the facts surrounding the application of the discovery rule — one wonders whether the Superior Court would have been unanimous in favor of affirmance if the underlying legal malpractice case was dismissed pretrial on statute of limitations grounds. The Superior Court credited the trial court and jury's fact-finding per that standard of appellate review.
Because the application of the statute of limitations in legal malpractice actions is not only meant to be clear but of paramount concern, this author finds the above mish-mash of legal principles likewise applied. The occurrence rule should be eliminated. With Coleman's holding that an action in legal malpractice may lie for four years (as that court opined has been held long-time), perhaps the O'Kelly paradox will be practically eliminated (as it has by New Jersey's six-year statute of limitations); that is to say, a longer statute of limitations practically eliminates the necessities for discovery rule applications to the occurrence rule.
Public policy should favor clients' preservation of the attorney-client relationship through the ups and downs of representation.
To that end, this author believes that the statute of limitations should not commence running until: (1) all avenues of cure — including but not limited to appeal — have been exhausted; and (2) damages are fixed. While this proposal may on its surface seem to create an unending statute of limitations, its adoption will, in fact, necessarily decrease legal malpractice claims while preserving the attorney-client relationship even in light of adverse events that may be cured.
In this author's experience, courts' distaste for legal malpractice claims give rise to such legal malpractice principles as the occurrence rule — which are not only claim-producing but undermine our public duties and the public's confidence in our courts — that a legal malpractice claimant can have his or her adverse event resolved or will be given a fair shake in the courts, which now seem to bend toward attorney absolution, except in the rarest of cases. This trend of immunizing otherwise negligent counsel through statute of limitations technicalities is opposed to our disciplinary system, which takes a more severe approach. •
Matthew Weisberg is the managing partner of Weisberg Law. He focuses the firm's practice on consumer and individual rights throughout Pennsylvania and New Jersey. Weisberg Law represents victims of legal malpractice and other professional negligence resulting in financial injury, fraud, civil rights violations, consumer abuse and foreclosure actions.