Articles & Publications
How Late is Too Late?
Aug 25, 2015
This article originally published in Knoxville Bar Association DICTA magazine, August 2014
Life is full of themes. Lawyers use them in jury trials. Songwriters use them. Themes are everywhere.
“Too Late” is a common theme and is contained in the title of many songs. Carole King’s “It’s Too Late” is truly a timeless classic. “Too Late” by Journey. Oh yeah. Def Leppard’s “Too Late for Love”? Okay, you get the point.
The theme is also reflected in the law in the form of statutes of limitation and repose. Chancery courts apparently apply an equitable doctrine called “laches.” I haven’t seen that one in a while.
I was contemplating writing an article about the statute of limitations and application of the “discovery rule” to attorney malpractice cases. A cause of action for legal malpractice accrues when a client has suffered a legally cognizable or actual injury as a result of an attorney's negligence and either knew or should have known that the injury was caused by the attorney's negligence.[1]
In legal malpractice cases, the discovery rule is composed of two distinct elements: (1) the plaintiff must suffer legally cognizable damage as a result of the defendant's wrongful or negligent conduct, and (2) the plaintiff must have known or in the exercise of reasonable diligence should have known that this injury was caused by the defendant's wrongful or negligent conduct.[2] An actual injury occurs when there is the loss of a legal right, remedy or interest, or the imposition of a liability.[3] An actual injury may also take the form of the plaintiff being forced to take some action or otherwise suffer “some actual inconvenience,” such as incurring an expense, as a result of the defendant's negligent or wrongful act. [4]
That was the law. The theme of my article was basically going to be, “It’s Never Too Late”, like the song by Three Days Grace. Then, something completely changed the landscape. David Long recently sent me a link to Jason A. Lee’s blog, Tennessee Defense Litigation, which reports: “The Tennessee legislature recently passed a law that now provides a five year statute of repose for any malpractice claims against accountants or attorneys.” [5]
That stopped me in my tracks. Apparently, the 2014 Tennessee Legislative Session spawned Public Chapter Number 618, amending Tennessee Code Annotated section 28-3-104, which dramatically impacts alleged acts or omissions by accountants or attorneys that occur on or after July 1, 2014.[6]
The Act provides a new subsection (c) to Tennessee Code Annotated section 28-3-104, which provides: (c)(1) Actions and suits against licensed public accountants, certified public accountants, or attorneys for malpractice shall be commenced within one (1) year after the cause of action accrued, whether the action or suit is grounded or based in contract or tort. (2) In no event shall any action or suit against a licensed public accountant, certified public accountant or attorney be brought more than five (5) years after the date on which the act or omission occurred, except where there is fraudulent concealment on the part of the defendant, in which case the action or suit shall be commenced within one (1) year after discovery that the cause of action exists.
So the one year statute of limitations for malpractice suits against accountants and attorneys still applies. The discovery rule also applies, and can extend the statute of limitations beyond one year from the actual act or omission. But the “game changer” is the new five year statute of repose found in subsection (c)(2) above. Once five years passes from the date of the act or omission which constituted malpractice, no claim can be brought against the accountant or attorney. [7]
Subsection (c)(2) has an exception for “fraudulent concealment.” This exception is similar to the fraudulent concealment exception in construction cases.[8] Tennessee Code Annotated section 28-3-205(b) provides a fraud exception that prevents a defendant from being protected under the four year statute of repose when that party has fraudulently concealed the cause of action. When such concealment is claimed, the suit still must be commenced within one year after the discovery that the cause of action exists.
I would suggest there is another “exception.” Tennessee Code Annotated section 28-1-114 states that “a counterclaim or third-party complaint or cross-claim is not barred by the applicable statute of limitations or any statutory limitation of time, however characterized, if it was not barred at the time the claims asserted in the complaint were interposed” (emphasis added). Although I have yet to see an appellate opinion applying this statute, for this to truly be an “exception”, it would be a situation where a party is alleging legal malpractice in a counterclaim or third-party claim after the five year period.
The blog further illustrates an example of an attorney who drafts a will incorrectly and more than five years passes before the decedent’s death. It is unlikely anyone will even know of the mistake before the potential claim is barred by operation of Tennessee Code Annotated section 28-3-104.
So before I could even finish my article, the law changed. This new protection is most obviously significant to estate planners, both attorneys and accountants.
Footnotes [1]John Kohl & Co v. Dearborn & Ewing, 977 S.W.2d 528 (Tenn. 1998). [2]Carvell v. Bottoms, 900 S.W.2d 23, 28-30 (Tenn. 1995). [3]John Kohl & Co., 977 S.W.2d at 532. [4]See State v. McClellan, 113 Tenn. 616, 85 S.W. 267, 270 (1905). [5]Jason A. Lee, Tennessee Adds Five Year Statute of Repose for Attorney and Accountant Malpractice Claims, TENNESSEE DEFENSE LITIGATION (June 29, 2014, 9:22 PM), http://www.tennesseedefenselitigation.com/BlogEntry.aspx?id=165. [6]Act of Apr. 4, 2014, 2014 Tenn. Laws Pub. Ch. 618 (S.B. 1506). [7]I hear the song “It’s Too Late to Turn Back Now” by Cornelius Brothers and Sister Rose. I wish I knew how to add YouTube links. [8] See TENN. CODE ANN. § 28-3-205(b).
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