Beal Bank, SSB v. Arter & Hadden, LLP, et al., 135 Cal. App. 4th 643 (2d Dist. 2006)

In a development that is being watched closely by law firms and insurers, on April 19, 2006, the California Supreme Court granted review of a second appellate district decision which held that the limitations period for a legal malpractice claim is tolled as to a law firm while one of the firm's former attorneys continues to represent that firm's former client in the same matter at a new law firm. In today's legal environment, with lawyers commonly moving laterally to different law firms, the decision has been viewed as a negative development for law firms and their insurers.

The Court of Appeal's ruling, issued on January 10, 2006 (for our prior Alert on the ruling see, reversed a superior court's judgment and held that pursuant to California Code of Civil Procedure section 340.6, the one-year statute of limitations for a legal malpractice claim against a law firm was tolled while a former attorney continued to represent the firm's former client at the attorney's new firm. The Court of Appeal reasoned that because the malpractice occurred while the former attorney was a member of the original firm, that firm should share in the liability and should not be able to shirk responsibility simply because the attorney left the firm. However, the court noted that if the malpractice occurred after the attorney left his former firm, the same rule would not necessarily apply.

The California Supreme Court has accepted this case for review and may take up to six months to render a decision. In the interim, pursuant to California Rules of Court 976(d) and 977, the Court of Appeal decision cannot be cited as controlling law in California while the case is under consideration by the Supreme Court.

We will provide updated information as soon as it is available regarding the California Supreme Court's ruling.

For more information about this Alert, please contact Joan D’Ambrosio or Jessica L. Kelly in the San Francisco office of Duane Morris LLP or any other member of Duane Morris' Professional Liability Group, or the attorney in the firm with whom you are regularly in contact.

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