Legal Malpractice Tolling Decided by Supremes

It’s always nice to see a split of authority resolved.  Code of Civil Procedure section 340.6 provides that the limitations period for legal malpractice against “an attorney” is tolled while “[t]he attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred.”  Before yesterday’s Supreme Court decision (just its second this month) in Beal Bank, SSB v. Arter & Hadden, LLP, case no. S141131(Sept. 27, 2007), the court of appeal had split on the question of whether the statute of limitations for legal malpractice is tolled against the former firm of an attorney who continues to represent the client after leaving the former firm (here is the similar case by Robert Norris Alabama asbestos lung cancer lawyer).

The Supreme Court decides unanimously that the limitations period is not tolled as to the former firm.  Though there are competing policy considerations, the legislative history of section 340.6 indicates that the legislature intended that attorneys are entitled to repose after a certain time.  Tolling would submit the former firm to potential liability for an undetermined time beyond its control.

Initially, I read this the same way as Professor Martin at California Appellate Report, who says “Here’s a win for lawyers today.”  But its important to remember that it’s only a win for the former firm.  The departing lawyer who continues to represent the client may be left “holding the bag” alone.

UPDATE (9/28/07): As far as whether this is a “win” for lawyers, its telling to see that amicus briefs were filed on behalf of Arter & Hadden (the former firm) by the Los Angeles County Bar Association,  the Association of Southern California Defense Counsel, and a host of “Big Law” firms: Bingham McCutchen, Cooley Godward Kronish, Farella Braun + Martel, Howard Rice Nemerovski Canady Falk & Rabkin, Morrison & Foerster, Orrick Herrington & Sutcliffe, Pillsbury Winthrop Shaw Pittman and Thelen Reid & Priest.

So its undoubtedly a win for Big Law when they bleed associates and clients.  Not so much for the departing entrepreneurs.  Then again, there’s a good deal of lateral movement of partners among firms, and one or more of these amici may come to regret the holding when they find they can’t seek indemnification.

UPDATE (9/28/07 #2):  The case prompts an article at Law.com.  The article closes with this:  “Moscarino, who represented Arter & Hadden, noted that the ruling helps not only large firms, but solo practitioners and small-firm lawyers who might leave their practices for other law-related jobs or judgeships.”

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