As their initial response to a Legal Malpractice Complaint, the Lipson Neilson team of Phillip E. Seltzer and Samantha Heraud challenged the timeliness of the lawsuit under the applicable statute of limitations, after plaintiff terminated a Tolling Agreement. Plaintiff entered into a consent judgment of divorce, which contained a forfeiture provision that allowed for the complete forfeiture of any asset not disclosed at the time of the entry of the judgment.
Plaintiff failed to disclose his ownership and beneficiary status of a 1.5 Million Dollar life insurance policy on his sibling, who died six weeks before the entry of Judgment. Plaintiff’s ex-wife filed a post-judgment motion to enforce the forfeiture clause and obtain the proceeds. Plaintiff then sued his divorce lawyer for including the forfeiture clause in the Consent Judgment. While the underlying litigation over the forfeiture clause played out over the next two years, plaintiff and his prior lawyer (represented by the Lipson, Neilson team) negotiated a limited Tolling Agreement.
A key provision of the Agreement limited the tolling of the legal malpractice claims to those “as currently alleged” in the filed Complaint. It also expressly prohibited the filing of any new claim during the duration of the Tolling Agreement, unless the Agreement was cancelled by providing a thirty-day notice. The Agreement also confirmed that other claims or defenses were not waived or diminished by the agreement.
After plaintiff lost the forfeiture battle to retain the life insurance proceeds, he cancelled the Tolling Agreement. Under Michigan’s two-year statute of limitations, plaintiff only had three untolled days to file a timely complaint, once the 30-day termination notice period expired. Plaintiff’s new counsel eventually filed a new Complaint, but did so five days after the untolled time expired. The new Complaint also contained brand new claims of legal malpractice and new claims of breach of fiduciary duty (which has a longer statute of limitations).
The Lipson Neilson team filed a Summary Disposition motion in response to the Complaint. The Trial Court granted the motion and dismissed the new Complaint with prejudice, based on three findings:
- All claims were time barred under Michigan’s two-year statute of limitations, which started accruing from the date the lawyer discontinued serving the client regarding the matter out of which the alleged malpractice arose. In this case, discontinuance occurred on the date the matter was completed via entry of the Consent Judgment, even though additional communications between Plaintiff and the lawyer continued for months concerning the prior completed divorce matter;
- The new legal malpractice claims that were added, beyond the original claim, were independently time barred because they were not tolled under the terms of the Tolling Agreement and plaintiff could have cancelled at any time to timely bring those claims and did not; and
- The new Breach of Fiduciary Duty claim was also never tolled under the limited terms of the Tolling Agreement, as was now time barred. This claim was also deemed legally redundant of and subsumed in the time barred legal malpractice claim.
This case highlights the importance of “thinking ahead” at all stages in the litigation, including during the negotiation of any pre-suit agreements.