Tennessee Legal Malpractice Statute of Limitations

In a recent legal malpractice case, the Tennessee Court of Appeals held that the one-year statute of limitations had run and that the case should accordingly be dismissed in total.

In Story v. Bunstein, No. E2015-02211-COA-R3-CV (Tenn. Ct. App. June 9, 2016), plaintiffs had previously been represented by defendant lawyers in a lender liability suit against three defendants. The timeline of the underlying litigation included the following:

  • On May 7, 2013, the trial court granted summary judgment to two defendants.
  • Lawyer “allegedly advised [plaintiffs] that he would fie a motion to correct what he perceived was the erroneous grant of the motion for summary judgment.”
  • Layer filed a motion to alter or amend, but no hearing was ever set for that motion.
  • “Shortly before trial on the remaining claims, [lawyer] allegedly informed [plaintiffs] that their damages evidence was not ready for trial” and recommended voluntary dismissal.
  • Underlying suit was voluntarily dismissed on November 13, 2013, and was not re-filed.

This legal malpractice claim was filed on September 3, 2014.

Defendants filed a motion to dismiss based on the statute of limitations. In response, plaintiffs argued that “the statute of limitations did not begin to run until the order of dismissal as to [plaintiff’s] remaining claims was entered on November 13, 2013.” The trial court held that the statute of limitations barred some of plaintiffs’ malpractice claims, but that plaintiffs’ “allegations with respect to the November 2013 voluntary dismissal of their remaining claim in the underlying case is a discrete allegation of alleged legal malpractice which is not barred by the statute of limitations.” The Court of Appeals disagreed, holding that the entire case was in fact time-barred.

Quoting well-settled Tennessee law, the Court noted:

In legal malpractice cases, the discovery rule is composed of two distinct elements: (1) the plaintiff must suffer legally cognizable damage—an actual injury—as a result of the defendant’s wrongful or negligent conduct, and (2) the plaintiff must have known or in the exercise of reasonable diligence should have known that this injury was caused by the defendant’s wrongful or negligent conduct. …Under the theory of constructive knowledge, however, the statute may begin to run at an earlier date—whenever the plaintiff becomes aware or reasonably should have become aware of facts sufficient to put a reasonable person on notice that an injury has been sustained as a result of the defendant’s negligent or wrongful conduct.

(quoting John Kohl & Co., P.C. v. Dearborn & Ewing, 977 S.W.2d 528 (Tenn. 1998) (internal citations omitted)).  Further, the Court noted that “the most easily identifiable time when rights, interests, and liabilities become fixed is when a court enters a judgment,” pointing out that “most courts have made the entry of an adverse judgment the starter pistol for the running of the statute of limitations on litigation malpractice.” (citations and quotations omitted).

In the present matter, the Court determined that the statute of limitations began to run when summary judgment was granted to two defendants in the underlying suit in May 2013. Despite the allegations that the lawyer said he would remedy the summary judgment, the Court noted that a lawyer’s “rosy characterization of an order adverse to the client” does not change the application of the discovery rule. “For statute of limitations purposes, [awareness of an adverse judgment] is not negated by the lawyer’s assurances that the court rendering the adverse order got the law wrong. Nor does it matter that the lawyer states that he or she believes that an appellate court will reverse the adverse order.” (internal citation omitted).

The Court also disagreed with the trial court that the final voluntary dismissal should be looked at as a separate malpractice claim with a separate statute of limitations. The Court held that “finality and exhaustion of all remedy is not the gravamen of discovery in legal malpractice cases.” Since plaintiffs had knowledge of the adverse summary judgment ruling in May 2013, the Court held that the legal malpractice claim filed more than one year later was barred by the applicable statute of limitations and that the case should have been dismissed in its totality.

While it may seem harsh, the Court correctly analyzed this case. The trial court’s reasoning, looking at each adverse finding or occurrence in a case as a separate timeline for malpractice, would be untenable. What exactly would restart the statute of limitations clock?  Would a denial of a motion to alter or amend give rise to a new action? An appellate court’s refusal to hear the case? Such a system would set a different statute of limitations rule for lawyers than it does for other professionals.