Legal Malpractice and the Statute of Limitations

Sometimes events take place long after the attorney - client relationship has ended.  There are two arguments over whether the statute of limitations has run.  One is that the statute commences when the mistake is made and might be tolled by the continuous representation doctrine.  The other is that  the statute cannot commence to run until all the elements of a case exist, including damage.  Plaintiff loses either way in Adeli v Ballon Stoll Bader & Nadler, P.C.  2013 NY Slip Op 32993(U)  November 22, 2013  Sup Ct, NY County  Docket Number: 154685/12  Judge: Saliann Scarpulla.

"Adeli commenced this action in or about July 2012. In her complaint, Adeli alleged that on or about December 17, 2003, Richard Sachs, an investor in her company and holder of a defaulted loan which Adeli had personally guaranteed, sued both Adeli and her company for breach of personal guarantee and fraud ("Sachs action"). In or about early 2004, Adeli retained BSBN to represent her in the Sachs action, and in or about April 2005, the First Department granted Sachs judgment against Adeli. 

BSBN sought an interim stay while it appealed the First Department's decision. Adeli alleged that BSBN advised her that Sachs' lawyers would not abide by a stay, and would nevertheless, seek to enforce the judgment against her. According to Adeli, BSBN then advised her to move her assets to friends of hers to protect them from judgment; Adeli transferred her assets in or about early summer of2005, and subsequently filed for bankruptcy in or about early September 2005. The bankruptcy court granted her bankruptcy discharge on or about March 27, 2008, but, based on her transfer of assets in 2005, the Bankruptcy Panel of the Ninth Circuit Court of Appeals reversed that
bankruptcy discharge on or about March 24, 2009.

Adeli asserted a legal malpractice claim, alleging that because she followed BSBN's advice and transferred her assets to her friends, she was denied a bankruptcy discharge and suffered monetary damages. BSBN now moves to dismiss the complaint. First, BSBN argues that the action should be dismissed because Adeli lacks legal capacity to bring suit. Second, BSBN
argues that the action should be dismissed because it was commenced beyond the applicable statute of limitations. Finally, BSBN argues that the action should be dismissed because Adeli's complaint fails to establish the damages element for legal malpractice. In support of its motion, BSBN provides a court document relieving BSBN as attorney for Adeli's company in 2006. BSBN also submits two affidavits from BSBN attorneys stating that the relationship between BSBN and Adeli ended in 2005.

Here, Adeli's legal malpractice claim accrued in or about April 2005 when BSBN allegedly told her to transfer her assets so that they would be protected from judgment in the Sachs matter, and thus the statute of limitations for this claim expired in or about April 2008.

Contrary to Adeli's assertions, the continuous representation doctrine does not apply here because her attorney-client relationship with BSBN ended in 2005. Her allegations of malpractice are predicated upon BSBN's advice in the Sachs matter, and are unrelated to the bankruptcy proceeding, thus it cannot be said that BSBN continued to represent her after 2005. Even if the continuous representation doctrine did apply, it only tolled the statute of limitations until March 24, 2009, when the Ninth Circuit reversed the bankruptcy court's decision and denied Adeli her bankruptcy discharge. Therefore, at the latest, the statute of limitations expired on March 24, 2012, months before Adeli filed this action in July 2012."

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