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October 12, 2016

GoTek Energy, Inc., v. SoCal IP Law Group, LLP (2016) 3 Cal.App.5th 1240

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The Second District holds a client has no reasonable expectation of further services when a law firm announces it must withdraw.  Further ministerial acts transferring the file to new counsel do not constitute continuing representation to toll the statute of limitations.    

When SoCal IP Law Group, LLP represented GoTek Energy, Inc. it admittedly negligently failed to file foreign patent applications.  When GoTek’s legal malpractice counsel requested SoCal inform its carrier, SoCal immediately notified GoTek by email it had to withdraw as its counsel.  The next day, GoTek replied, agreeing to the withdrawal and instructing SoCal to transfer its files to another attorney.  One year and one week after SoCal notified GoTek it had to withdraw as counsel, GoTek filed its malpractice action.

SoCal asserted a statute of limitations defense, arguing GoTek’s email agreeing to the withdrawal and demanding transfer of the files signaled the end of the attorney-client relationship.  GoTek’s officer testified he believed the relationship terminated later, when the file transfer to new counsel was complete.  It asserted the action was timely because it was filed one day short of the one year anniversary of the completed file transfer. The Court of Appeal upheld the trial court’s grant of summary judgment.  The legal malpractice statute of limitations, C.C.P. § 340.6, is tolled while the attorney continues to represent the client regarding the specific subject in which the alleged wrongful act or omission occurred, called the continuous representation exception.  The GoTek-SoCal relationship terminated as a matter of law on the date the client demanded the transfer of its files and provided a signed request.

For § 340.6, representation ends when the client actually has or reasonably should have no expectation that the attorney will provide further legal services. Tolling terminates because the client is not hindered by a potential disruption of an ongoing attorney-client relationship.  The relationship ended on the date SoCal notified GoTek it must withdraw; GoTek could not reasonably have expected SoCal would provide further legal services after this date.

The Court of Appeal would not consider GoTek’s argument that the language announcing SoCal’s withdrawal was ambiguous, because it was not raised in the trial court.  But the acts, withdrawing as attorneys of record and advising foreign attorneys of new patent counsel, are not legal services.  Ministerial withdrawal steps are not continuous representation and cannot toll the statute of limitations.

The file transfer was not legal services, and GoTek’s asserted belief it was is unreasonable as a matter of law. Continuous representation ultimately depends on evidence of an ongoing mutual relationship and activities to further the relationship, not on a client’s unwarranted subjective belief.  SoCal’s brief possession of GoTek’s files after it announced it must withdraw is not evidence of an ongoing mutual relationship and does not constitute activities to further the relationship.

The Court also rejected as untimely the argument that SoCal’s ethical obligation to allow for a reasonable time for the employment of replacement counsel extended the relationship.  Substantively, GoTek’s consent to the withdrawal eviscerated the argument.

Adding to GoTek’s tribulations, the court awarded SoCal attorney’s fees under the retainer agreement’s prevailing party attorney fee provision.  The clause applied to “any dispute,” which covers both tort and contract actions.  Legal malpractice claims inherently sound in both tort and contract.

Comment: SoCal acted immediately to document its withdrawal.  This clarity inured to its benefit when GoTek’s counsel failed to timely file the malpractice action.

 

 

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