The California Supreme Court recently granted an attorney’s petition for review of a recent Fourth District Court of Appeal case, Lee v. Hanley (2014) 227 Cal.App.4th 1295, regarding application of the one-year legal malpractice statute of limitations.
Background Facts and Allegations of Case
Plaintiff hired the defendant attorney to represent her in an underlying civil lawsuit. Following settlement of the underlying case, Plaintiff sought a refund of unearned attorney fees and as well as expert fees she had advanced. Plaintiff hired a new attorney to represent her and terminated the services of defendant attorney. Although defendant attorney returned certain expert fees, he did not refund any attorney fees.
Over a year after hiring the new attorney, Plaintiff filed suit against defendant attorney seeking a refund of the attorney fees. Defendant attorney filed a demurrer based on the one-year statute of limitations provided for in Code of Civil Procedure section 340.6. The trial court sustained the demurrer, and dismissed Plaintiff’s action with prejudice. The Fourth District Court of Appeal reversed.
Opinion of Fourth District Court on Appeal
The appellate court noted that section 340.6 provides the statute of limitations for “a wrongful act or omission, other than for actual fraud, arising in the performance of professional services . . .,” and that the statute applies where the wrongful act or omission at issue arises “in the performance of professional services.” Defendant attorney argued Plaintiff’s claims fell within the one-year limitations period of section 340.6 as conduct “in the performance of professional services,” citing Levin v. Graham & James (1995) 37 Cal.App.4th 798 and Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105.
The appellate court distinguished Levin and Prakashpalan. In Levin, the plaintiff asserted causes of action for malpractice, identifying and requesting a refund of alleged unconscionable attorney fees as a remedy for the malpractice claims. The Levin court noted the plaintiff had not asserted any other causes of action, and rejected the claim that the allegation of unconscionable attorney fees was not a claim for malpractice covered by the one-year statute of limitations. The appellate court in Lee held the instant facts were distinguishable from Levin, as Plaintiff had actually expressed her satisfaction with defendant attorney’s performance of services, and sought return of the credit balance based on causes of action other than malpractice.
In Prakashpalan, plaintiffs alleged the defendant law firm settled a class action lawsuit but plaintiffs did not learn for several years that defendant had failed to properly distribute all of the settlement funds. Prakashpalan held the holding of settlement funds arises out of the provision of professional services and therefore the one-year statute of limitations applies. The appellate court in Lee court distinguished the instant case, reasoning that an “attorney’s receipt of a client advance for the future performance of legal services does not constitute the attorney’s performance of those services.”
The appellate court looked to the plain meaning of section 340.6 and concluded the words are plain and unambiguous that “[i]f the wrongful act or omission at issue does not arise ‘in the performance of professional services,’ the statute is inapplicable. . . an attorney does not provide a service to the client by stealing his or her money.” The court noted although Plaintiff’s complaint did not allege causes of action for theft, conversion, or fraud, she had set forth factual allegations sufficient to state a cause of action for conversion by alleging that after full completion of defendant attorney’s services he refused to release money belonging to Plaintiff. The appellate court therefore concluded it was premature to dispose of the action on demurrer.
The California Supreme Court granted respondent/defendant attorney’s petition for review. It therefore remains to be seen whether the Supreme Court will affirm the Fourth District’s interpretation of the application of the legal malpractice statute of limitations.
ABOUT THE AUTHOR: Mina Miserlis is senior counsel at Tyson & Mendes LLP. She specializes in personal injury and high net worth insurance issues. Contact Mina at 858.263.4108 or email@example.com.