Callahan v. Gibson, Dunn & Crutcher LLP: Court of Appeal Reverses Summary Judgment in Favor of Law Firm Based on Statute of Limitations “Actual Injury” Issue

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In a published decision, the California Court of Appeal (Second Appellate District, Division Seven) has reversed a summary judgment obtained by a defendant law firm after concluding that the trial court had erred in its application of the ”actual injury” provision of the one-year legal malpractice statute of limitations. The decision is Callahan v. Gibson, Dunn & Crutcher LLP, 2011 Cal. App. LEXIS 451, filed April 19, 2011.

The firm had prepared a limited partnership agreement for the plaintiff realty company which contained allegedly defective succession and termination provisions. More particularly, the agreement allegedly omitted any method for replacement of the general partners if they became incompetent or retired.

In California, a cause of action for legal malpractice must be filed “within one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first.” (§ 340.6(a).) However, section 340.6(a) further provides, “[I]n no event shall the time for commencement of legal action exceed four years except that the period shall be tolled during the time that any of the following exist: [¶] (1) The plaintiff has not sustained actual injury . . . .”

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