The Federal Circuit has issued a decision addressing the application of the California doctrine of equitable tolling in the context of a legal malpractice case.
The client, Landmark, invented an electronic billboard and asked the law firm, Morgan Lewis, to prepare and file a patent application. The application was allegedly mishandled, resulting in the loss of the patent claim. The client alleged that when the firm advised it of the problem it actively misled the client by telling it there was a possibility of fixing the problem.
On November 30, 2005, the client filed a legal malpractice claim against the firm in California state court. However, on May 21, 2008, the state court dismissed the claims for lack of subject matter jurisdiction, citing Immunocept, LLC v. Fulbright & Jaworski, LLP, 504 F.3d 1281 (Fed. Cir. 2007), and Air Measurement Technologies, Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P., 504 F.3d 1262 (Fed. Cir. 2007). The state court reasoned that the federal courts had exclusive jurisdiction over the case as its resolution depended on a substantial question of patent law.
The client re-filed in the United States District Court for the Northern District of California, and included in its complaint a claim for fraud based on the alleged concealment of facts relating to the patent application process. The District Court dismissed the non-fraud claims as barred by the one-year statute of limitations, and dismissed the fraud claim as barred by the three-year statute of limitations.
The Federal Circuit appeal concerned the dismissal of the fraud claim. After discussing California’s equitable tolling doctrine, including cases describing the circumstances in which courts “will toll the limitation period of a second action during the pendency of a first action later found to be defective,” the Federal Circuit held that equitable tolling should apply and that the fraud claim should go forward. The court found that the client had “reasonably and in good faith pursued a remedy in the state courts, only to learn that the state courts lacked jurisdiction over its legal remedy.”
The decision is Landmark Screens, LLC v. Morgan, Lewis & Bockius, LLP (Fed. Cir., 2011-1297) and it is dated April 23, 2012.