Shifren v. Spiro: Legal Malpractice Statute of Limitations Does Not Begin to Run Until Judgment or Settlement of Underlying Case Establishes Attorney Breach of Duty

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[author: Mark Hancock]

The California Court of Appeal (Second Appellate District, Division 3) reversed a trial court’s grant of summary judgment in favor of a defendant law firm after concluding that the action was not time-barred by the running of the statute of limitations.  The published decision is Shifren v. Spiro, 2012 Cal. App. LEXIS 622, filed May 24, 2012.

The client and his wife hired the defendant law firm and attorneys in 2001 to amend their family trust agreement.  The client sought to ensure that a gift of commercial property from his mother would remain his separate property, rather than becoming a community asset between himself and his wife.  In 2007, after separating from his wife, the client began proceedings for dissolution of marriage.  On August 31, 2009, the court entered judgment of dissolution and determined that the commercial property was jointly owned because the trust did not effectively shield it from becoming a community asset.

In California, the one-year statute of limitations for a legal malpractice action begins to accrue after the plaintiff sustains an actual injury.  The Court of Appeal focused on the specific question of whether the client suffered actual injury prior to a judicial determination of the validity of the trust.

The court concluded that because the validity of the trust formed the underlying claim for the attorney malpractice action, the client did not suffer an actual injury until the judge ruled on the effect of the trust. Prior to that judicial determination, the client had not suffered an actual injury that triggered the running of the statute of limitations.

The Court of Appeal rejected the law firm’s argument that the actual injury occurred either in 2002 when the client’s mother transferred the property or in 2007 when the client incurred attorney’s fees for the dissolution action.  The court distinguished this case from Jordache, holding that settlement or adjudication may not be necessary to determine actual injury.  See Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal. 4th 739, 759 (holding that the client sustained actual injury at the time the law firm failed to properly defend the client in an insurance coverage action, rather than upon settlement of the action).  In this case, unlike Jordache, the underlying action determined whether the attorneys had breached a duty to the client.  In determining that the actual injury occurred when the dissolution action was decided on August 31, 2009, the court held that the complaint was timely filed within one year of the client’s injury.