Thursday, September 27, 2007

Beal Bank v. Arter & Hadden LLP (Cal. Supreme Ct. - Sept. 27, 2007)

Here's a win for lawyers today.

We all know that the statute of limitations on a legal malpractice claim is tolled during the attorney's representation of a client. So, for example, when Attorney X represents Client Y, the statute doesn't start running on Y's claim against X until after the representation terminates.

But here's the rub: What about when Attorney X works for Firm ABC but, during the representation, leaves Firm ABC and takes Client Y with him? Is the statute of limitations on Y's claims against ABC still tolled during X's continuing representation of Y? On the one hand, X continues to represent Y, and it's hardly likely that Y will sue X's old firm (complaining of X's misconduct) while X continues to represent him. So maybe the statute should be tolled. On the other hand, ABC doesn't, in fact, represent Y any longer, so maybe it shouldn't.

The California Court of Appeal, in a case involving (the now-defunct) Arter & Hadden, held that the staute was tolled. I commented on this decision when it came out back in January 2006, and argued that the case was one "that the California Supreme Court should take [] up." Which it promptly did. And, today, unanimously reversed.

So fear not. You may have lost an associate, alongside a paying client, when they walked out the door. But, on the upside, the clock started ticking. So you got that going for you. Which is nice.