Tolling Agreements, The Savings Statute and Tennessee Law

The Tennessee Court of Appeals recently issued an important decision regarding the interplay between the savings statute and tolling agreements. The facts of Circle C Const., LLC v. Hilson, M2013-02330-COA-R3-CV (Tenn. App. Jul. 29, 2014), are a bit convoluted but critical to understanding the case.

Plaintiff had a judgment entered against it by a trial court. While appealing the judgment, Plaintiff entered a tolling agreement on a potential legal malpractice claim against Defendant, who was Plaintiff’s attorney in the underlying case. The tolling agreement specified the date that the statute of limitations would run – one year from the trial court’s judgment – but gave Plaintiff until 120 days after an appellate ruling in order to file any legal malpractice claim. In pertinent part, the tolling agreement stated, “[i]f Plaintiff desires to assert claims for professional negligence, it must do so on or before” 120 days after the appellate court issued its opinion.

After the tolling agreement was entered, things get strange:

·        March 2011: The original statute of limitations on the legal malpractice claim expires.

·        Sept. 2011: Plaintiff files legal malpractice lawsuit.

·        April 2012: Plaintiff nonsuits legal malpractice lawsuit.

·        Oct. 2012: Appellate court issues its opinion in the underlying case.

·        Jan. 2013: The 120 day deadline to file suit under the tolling agreement expires.

·        April 2013: Plaintiff re-files its legal malpractice lawsuit.

(It is unclear from the opinion why Plaintiff filed and nonsuited the first legal malpractice lawsuit while still awaiting the appellate ruling in the underlying case.)

So the first legal malpractice lawsuit was filed after the original statute of limitations, but within the tolling agreement period. The re-filed legal malpractice lawsuit was filed after the original statute of limitations, after the tolling agreement period, but within one year of nonsuiting the first legal malpractice lawsuit. 

Plaintiff attempted to rely upon the savings statute at Tenn. Code Ann. § 28-1-105(a). The trial court dismissed the case as untimely under the tolling agreement, and the Court of Appeals affirmed.

The Court of Appeals looked to the contractual language of the tolling agreement, focusing on the language “If Plaintiff desires to assert claims for professional negligence, it must do so” within 120 days of an appellate opinion in the underlying case. The Court of Appeals held this language was mandatory and set a “specific time limit for bringing claims agreed upon by the parties.”

The Court of Appeals then considered whether Tenn. Code Ann. § 28-1-105(a), the savings statute, would apply to a deadline for filing suit established in a tolling agreement. The court reasoned:

Subsection (a) of Tenn. Code Ann. § 28-1-105 applies “[i]f the action is commenced within the time limited by a rule or statute of limitation . . . .” By its terms, therefore, subsection (a) applies to periods of limitation established by “rule or statute of limitation.” In this case, the applicable time limitation is established by contract, not by “rule or statute of limitation.” Tenn. Code Ann. § 28-1-105(a). We must conclude that the savings statute of Tenn. Code Ann. § 28-1-105(a), by its terms, does not trump the deadline established by the parties in the tolling agreement.

The takeaway from this case? If a tolling agreement sets an absolute deadline for filing suit, the savings statute will not save a case re-filed after that deadline.