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June 25, 2015 | Law Alert

Shaoxing City Maolong Wuzhong Down Products, LTD. et al., v. Keehn & Associates, APC et al. 2015 WL4452801

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The Second District rules the legal malpractice one-year limitations period was triggered when an attorney missed a deadline, not when the underlying case settled. 

Shaoxing City Maolong Wuzhong Down Products, LTD, (“Shaoxing”), a creditor in a bankruptcy proceeding, retained Keehn & Associates (“Keehn”) to challenge another creditor’s lien. Keehn failed to timely challenge the lien. Shaoxing terminated Keehn, and retained Ian Landsberg (“Landsberg”) who facilitated a settlement with the debtor for substantially less than the full debt. Shaoxing sued Keehn for malpractice. The trial court granted Keehn’s motion for summary judgment on statute of limitations grounds.

On appeal Shaoxing argued the statute of limitations, CCP § 340.6, was tolled under subsection (a)(1) because it had not sustained “actual injury” until it settled with the debtor for less than the full value of its claim. The Court of Appeal disagreed, and held missing the lien-challenge deadline, not the settlement, was “actual injury” that triggered the statute of limitations. Once the bankruptcy judge denied the extension, it was definitively confirmed that Shaoxing lost its right to challenge the lien.

The Court rejected Shaoxing’s argument that the statute was tolled because it did not subjectively believe it suffered injury since Landsberg advised it could attack the lien despite the Bankruptcy Court’s ruling. Subjective belief is not relevant to whether actual injury has been sustained.

Plaintiffs also claimed tolling under subsection (a)(2), arguing Keehn’s offer to assist Landsberg was continuous representation. Keehn’s representation ended as a matter of law when he formally substituted out, and took no further actions on behalf of the Plaintiff.

Comment: This case highlights the risk management advantage to attorneys of definitively terminating representation.

Practice Area: Lawyers & Judges Defense Group

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