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January 11, 2016

Kelly v. Orr (2016) 243 Cal.App.4th 940

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The Fourth District holds a successor trustee’s suit against counsel was timely because it was filed within one year of termination of the attorney-client relationship with the predecessor trustee.

James Kelly was the successor trustee of the Beverly Snodgrass Clark Intervivos Trust. He sued attorneys Barbara Orr, Joseph Holland, Gretchen Shaffer and the law firm DLA Piper LLP, attorneys for the predecessor trustee, Rebecca Clark.  The attorneys demurred arguing the action was barred by the one year statute of limitations, Code of Civil Procedure § 340.6.

Clark had seized control of the trust from a prior trustee. To settle litigation over control of the trust, Clark resigned as trustee and Kelly replaced Clark.  Kelly sued Clark’s attorneys less than a year later, alleging they negligently advised Clark about her authority as trustee and trust tax obligations.   

The trial court sustained the attorneys’ demurrer based on the statute of limitations, finding that since Kelly was adverse to Clark in the underlying trustee battle, Kelly had discovered the attorneys’ alleged malpractice more than a year prior to filing suit. The trial court agreed Kelly was not entitled to continuous representation tolling pursuant to § 340.6(a)(2), because the attorneys never represented Kelly.

The Court of Appeal held the suit was timely under continuous representation tolling. The attorneys represented Clark as the trustee, not as an individual.  The legal services concerned trust administration, trust tax obligations, Clark’s ability to serve as trustee, and the effect of actions taken to remove her as trustee.

Although attorney malpractice suits typically require privity between the plaintiff and the attorney, the trustee context is different. A successor fiduciary exception to privity allows a successor trustee to pursue a malpractice claim on behalf of the estate.  This is consistent with precedent that establishes a successor trustee stands in the shoes of a predecessor regarding the attorney-client privilege.

The Court rejected the attorneys’ argument that tolling under § 340.6(a)(2) would be improper because Kelly had been adverse to Clark, and the attorneys could not represent Kelly and Clark either simultaneously or successively.  This argument conflates distinct legal issues: conflicts and tolling.  It is immaterial whether the attorneys had ever represented Kelly.  For statute of limitations analysis, it is sufficient to plead attorneys continuously represented Clark as trustee less than one year prior to filing suit.

Comment:  The Court rejected the attorneys’ novel argument that continuous representation tolling could not apply where an underlying dispute concerns the capacity of the client to act for an entity.  However, the Court focused on whether the attorneys’ services to a trustee harmed the trust, and applied rules covering an attorney’s obligation to the entity client, and not to an individual through whom the entity acts.  Thus the date through which the attorneys acted on behalf of the trustee was the proper measure to apply to determine the length of the representation, regardless of which individual spoke for the trust.

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