State Supreme Court reverses lawyer's malpractice win

Malpractice suit originated in a real estate transaction that led to litigation

By Deborah Elkins
BridgeTower Media Newswires

RICHMOND, VA - A recent Supreme Court of Virginia opinion leaves one lawyer facing a malpractice lawsuit while a colleague from the same firm avoided liability exposure. The decision shows that legal malpractice claims against different lawyers can have different limitation deadlines, even when the lawyers worked at the same firm for the same client.

A trial judge had tossed a legal malpractice action against both attorneys, but the Supreme Court revived claims against one in its decision last month.

Condo sale followed by litigation

The malpractice suit had its origin in a 2008 real estate transaction that led to litigation with a condo association two years later.

One lawyer worked on the property sale, another worked primarily on the 2010 litigation. Both prevailed with statute-of-limitations defenses at the trial court.

On appeal, the second lawyer argued that his representation had ceased, and the statute of limitations began to run, when he sent a final order to opposing counsel to sign and forward to the court for entry. He had even emailed the client confirming that their attorney-client relationship "was now at an end."

The second lawyer's subsequent actions communicating with the clerk's office about two versions of the order and emailing the client's newly retained appellate lawyer to check the order's entry date on the court's website were mere courtesies to his former client, the lawyer said.

But a unanimous Supreme Court said the lawyer continued to act on behalf of the client until the order finally was entered by the court, keeping the malpractice claim alive against that second lawyer.

The March 30 decision in Moonlight Enterprises LLC v. Mroz (VLW 017-6-020) should prompt lawyers to think carefully about any additional steps they may take on behalf of a client they think they no longer represent, lawyers said.

Lawyers who view malpractice liability as a matter of firm exposure should now think individually, not just collectively, about when the statute starts to run on a possible malpractice claim, the lawyers commented.

Different lawyers, different roles

The lawyers' sequential involvement may sound familiar to firm lawyers accustomed to seeing clients shifted from transactional lawyers to litigators, according to attorneys familiar with the case.

Typically, "the statute of limitations doesn't run against the law firm until the last act of the last attorney," said Fairfax lawyer David L. Duff, who frequently handles legal malpractice cases.

That approach can pull in everybody who is counsel of record in the case, according to Richmond malpractice lawyer H. Aubrey Ford III. That "last professional service performed may be minimal just a phone call to the clerk's office and a phone call with the other side" can be enough to pull a lawyer back into the "web" of an attorney-client relationship, he said.

Client was handed off

In 2008, Moonlight Enterprises LLC retained Francis E. Mroz to provide legal services in Moonlight's purchase of three retail condo units. Moonlight said Mroz failed to obtain or review, before closing, a required resale disclosure package, according to the opinion by Justice D. Arthur Kelsey.

Moonlight alleged that Mroz negligently misrepresented that the three units included 15 parking spaces for retail tenants, and the missing disclosure package included useful information about condo fees and assessments for parking, trash and other services.

Two years after the sale, Mroz sued the condo association on behalf of Moonlight, objecting to parking and trash removal fees. Another member of Mroz's firm, Stephen P. Zachary, signed Moonlight's responsive pleading to the association's counterclaim. Prior to trial, Zachary took over primary responsibility for the litigation.

The judge ruled against Moonlight on all counts on Jan. 12, 2012, but it took a month to get a final order entered.

A week after the judge ruled, Zachary emailed Moonlight to confirm it had hired new counsel for an appeal.

After Zachary learned the court had misplaced the Jan. 12 proposed final order, he drafted a replacement on Jan. 26 and sent it to opposing counsel, who signed it and sent it to the court.

The judge's law clerk ended up with two versions of the order. At Zachary's suggestion, the court entered the second order on Feb. 10.

Malpractice suits

In 2013, Moonlight filed a malpractice suit against both Mroz and Zachary. The complaint alleged Mroz was negligent in his handling of the 2008 condo purchase and Zachary was negligent in his handling of the 2010 litigation against the condo association.

The trial court dismissed the claim arising from the purchase transaction on statute-of-limitations grounds, and Moonlight nonsuited the malpractice claim against Zachary.

On Feb. 10, 2015, three years to the day after entry of the final order in the condo litigation, Moonlight again sued both lawyers on six counts of legal malpractice associated with the 2010 litigation.

Continuous representation

Although the trial court focused on Jan. 26 as the date the statute began to run, Kelsey said Zachary actually did work on Moonlight's behalf after January 26.

"He tracked the entry date of the final order on the court's website, drafted a new order, conferred with opposing counsel, coordinated with the circuit court's law clerk about entry of the preferred draft order, and reported his activity to his client and appellate counsel," Kelsey recounted.

The limitation period begins on the date when the attorney renders his "last professional services" related to the particular undertaking, the court said.

As of Feb. 10, Zachary "continued to perform legal work on Moonlight's behalf in an effort to bring the litigation to closure," and the circuit court erred in holding that the three-year limitation period began to run before that date, the court said.

The court did not need to impute the actions of one lawyer to the other member of the firm since the client did not argue that Mroz had performed any legal services after the trial ended, according to Roanoke lawyer Phillip V. Anderson. In fact, Kelsey said Mroz provided no "legal services" in the condo litigation after August 2011.

The court endorsed examination of lawyer involvement in a matter on an individual basis, according to McLean lawyer Matthew W. Lee, who represented the appellee lawyers.

Kelsey said the court had never held that the continuous-representation rule indefinitely extends the tolling period for all members of a litigation team, even those no longer working on the litigation, so long as any one of them continues to do so.

Two lawyers, same firm

The differentiation between the two lawyers is a significant point in the case, said Duff. Courts often have tended to hold multiple lawyers in a firm to the same tolling date based on the last action of one of the involved attorneys.

As a practical matter, "it's the law firm that carries the insurance, and the law firm that remains on the hook," Duff said.

"I think clearly if you are the attorney handling the case and you are going to turn over responsibility" to another lawyer in your firm, it would help "if you let the client know that," Duff said.

But just saying you are withdrawing from representation "doesn't make it so," Duff said. You also have to be circumspect about even minimal involvement in the matter after that point.

When looking at the beginning or end of an attorney-client relationship, the matter is "always going to be determined by the Supreme Court in favor of the client," Ford said.

With the hindsight of iiiMoonlight,iii it might have been better for a lawyer in Zachary's position to respond to the law clerk's query about the two orders by simply saying, "I no longer represent the client," and advise the client and the clerk to contact new counsel, according to Ford.

"You can't just say, 'I'm out of the case,' and it's not sufficient to communicate that to the client," Anderson said. "You have to be careful what activities you undertake" related to the matter after those actions, he said.

Arlington lawyer Ernest P. Francis, who represented Moonlight, declined comment on the case.

Published: Mon, Apr 17, 2017