Attorneys – Legal Malpractice – Statute of Limitations – Discovery Rule

Stokes-Craven Holding Corp. v. Robinson (Lawyers Weekly No. 010-045-16, 19 pp.) (Donald Beatty, J.) (Costa Pleicones, C.J., concurring) On petition for rehearing. Appealed from Clarendon County Circuit Court (George C. James, Jr., J.) S.C. S. Ct.

Holding:  This legal malpractice case is predicated on an injury or damage caused by the failure of an underlying suit due to an attorney’s alleged malpractice. Since the client has appealed in the underlying suit, and while that appeal is pending, there is no legally cognizable cause of action for the attorney’s alleged malpractice. If the appeal is resolved against the client, a cause of action for legal malpractice will accrue, triggering the statute of limitations.

The court grants a petition for rehearing in this case and substitutes these opinions for the opinions previously filed in this matter.

When plaintiff client filed a legal malpractice action against attorney after a verdict against plaintiff in a previous action was upheld on appeal, the trial court dismissed the malpractice action as being barred by the statute of limitations. The trial court found that client had notice of the claim on the date of the jury’s adverse verdict, rather than the date of the Supreme Court’s remittitur. The trial court relied on Epstein v. Brown, 363 S.C. 372, 610 S.E.2d 816 (2005), in its dismissal of client’s action.

We overrule Epstein, reverse the circuit court’s order, and remand the matter to the circuit court for further proceedings consistent with this opinion.

Client was represented by attorney in action that resulted in a jury verdict against client that was rendered on Aug. 16, 2006. Both parties filed cross-appeals to this court, which affirmed the trial court’s judgment and entered remittitur on April 21, 2010.

Client then filed this malpractice action against attorney. The trial court dismissed the action, based on client’s failure to file within the three- year statute of limitations for legal malpractice actions. The trial court found that, based on the deposition testimony, client was aware as of the date of the original jury verdict that he might have a legal malpractice claim against attorney, based on alleged deficiencies in the representation of which he had notice. Client appealed to this court, and filed a motion to argue against precedent pursuant to Rule 217, S.C.A.R. This court granted client’s motion to argue against Epstein.

In Epstein, a legal malpractice case, this court held that the statute of limitations commenced on the date of the jury’s verdict in the subject lawsuit, rather than upon the appellate court’s denial of certiorari in that case. In reaching that decision, the majority declined to adopt the continuous-representation rule, which permits the statute of limitations to be tolled during the period an attorney continues to represent the client on the same matter out of which the alleged legal malpractice arose.

In Epstein, this court also rejected Epstein’s argument that appealing the ruling in the subject claim while filing a legal malpractice claim would cause him to argue inconsistent positions in two different courts.

Ultimately, the majority in Epstein applied the discovery rule and found that Epstein knew or should have known that he might have had some claim against his attorney at the conclusion of the trial. The dissent, on the other hand, urged a “bright-line” rule that the statute of limitations does not begin to run in a legal malpractice action until an appellate court disposes of the action by sending a remittitur to the trial court.

In overruling Epstein, while we acknowledge the merit of the remittitur espoused by the dissent therein, we decide to adopt a position that is analogous to the remittitur rule, but is strictly based on existing appellate rules.

Pursuant to Rule 205, S.C.A.R., the service of a notice of appeal divests the trial court of jurisdiction over matters affected by the appeal. Rule 241(a), a corollary rule that governs matters stayed on appeal, provides a stay for “matters decided in the order, judgment, decree or decision on appeal” and automatically stays “the relief ordered in the appealed order, judgment, or decree or decision.”

The present case is a legal malpractice cause of action predicated on an injury or damage caused by the failure of an underlying suit due to an attorney’s alleged malpractice. In that particular scenario, there can be no legal malpractice cause of action without an adverse verdict, judgment or ruling. Thus, if a client appeals the matter, any basis for the legal malpractice cause of action is stayed by Rule 241(a) while appeal is pending.

Consequently, until the appeal is resolved against the client, there is no legally cognizable cause of action for an attorney’s alleged malpractice. Upon resolution of the appeal, a cause of action for legal malpractice accrues, triggering the statute of limitations.

While this approach may be perceived as impermissibly requiring a person to have actual knowledge of a potential claim before the statute of limitations begins to run, we find that it is mandated by our appellate court rules and, as a result, effectuates the objective standard provided by the Legislature.

Our decision warrants overruling Epstein because the holding in that case is contrary to Rules 205 and 241, S.C.A.R.

Client also claims that the trial court erred in denying a portion of its motion to compel production of attorney’s professional liability policy applications for previous years, all correspondence between attorney and its malpractice provider and billing records for computer research from any research provider during previous years. The trial court denied the motion finding that the correspondence sought was prepared in anticipation of or during litigation and that the client had not shown sufficient need for the information. Although the court ruled that the professional liability policy applications were discoverable, the court stated that issues of ultimate admissibility would be left to the trial judge.

We find that the lower court abused its discretion in denying the motion to compel because there was no evidentiary basis to support its conclusions. The court did not conduct an in camera hearing to review the information and stated in its summary ruling that it had not received a privilege log of the communications.

Therefore, we find the court lacked sufficient information to determine whether the requested documents were prepared in anticipation of litigation and that client had a substantial need of the materials in preparation of its case. We direct the circuit court on remand to conduct an in camera hearing to review the information and issue a ruling.

We hold that the statute of limitations may be tolled if the client appeals the matter in which the alleged malpractice occurred.

Reversed and remanded.

Concurring

(Pleicones, C.J.) I concur in the decision to reverse the trial court’s order granting summary judgment and to reverse the discovery order, but I would adhere to Epstein. I would not create a special statute of limitations for legal malpractice cases that is tied to the status of an appeal.

First, I believe the majority unnecessarily expands the meaning of the term “matters affected by the appeal” under Rule 205 to include inchoate and speculative collateral lawsuits. I do not understand how or why Rule 205 operates to deprive a trial court of jurisdiction over a nonexistent lawsuit.

The majority also interprets Rule 241 to include inchoate and speculative collateral lawsuits when, by its own term, the rule governs stays only in “matters decided in the order, judgment, decree or decision on appeal.” The majority reiterates that the rule permits a party to an appeal which is subject to an automatic stay to move the lower court, administrative tribunal, appellate court, or judge or justice of the appellate court to lift that stay. I do not understand what the majority contemplates would be the benefit of superseding such a stay vis-à-vis a future malpractice suit, since the majority holds that until the appeal is resolved against the client, there is no legally cognizable cause of action for an attorney’s alleged malpractice.

I would adhere to the discovery rule adopted in Epstein and reverse the trial court’s order granting summary judgment because there are unresolved genuine issues of material fact that make relief inappropriate. Further I concur in the majority’s decision to reverse the discovery order without prejudice.