In Lee v. Hanley the California Court of Appeal for the Fourth District decided an issue concerning the interpretation of the one-year statute of limitations relating to allegations of wrongdoing in the performance of attorney services.

The plaintiff hired an attorney to represent her in a civil lawsuit. The case settled shortly after the case was filed. The attorney sent the plaintiff invoices for legal services. The plaintiff demanded a refund, claiming that she had advanced unearned attorney fees to counsel. The plaintiff did not receive a refund. The plaintiff hired new counsel and terminated the first lawyer.

More than a year after she fired her first lawyer, the plaintiff sued attorney number one for the return of the alleged unearned attorney fees.

The attorney responded to the complaint by filing a demurrer based on the one-year statute of limitations encompassed by Code of Civil Procedure Section 340.6. The statute sets forth a statute of limitations against attorneys based on a “wrongful act or omission, other than for actual fraud, arising in the performance of professional services.” The trial court granted the demurrer without leave to amend and dismissed the plaintiff’s case with prejudice.

The court of appeal reversed the decision of the lower court. The court of appeal noted that under Section 340.6, a lawsuit against an attorney for a wrongful act or omission based on his or her professional services must be filed within one year after the client “discovers the facts” alleging the misconduct. Here, the plaintiff argued that the attorney finished his legal work when the litigation he handled was resolved. The plaintiff argued that counsel’s act of keeping the unearned fees was not part of the professional services rendered and extended the time for bringing a lawsuit.

The court of appeal agreed with the plaintiff’s argument. The court of appeal concluded that Section 340.6 was not applicable as the allegations of the complaint could be construed as a claim unrelated to the performance of legal services, i.e. the retention of unearned attorney fees. The court reversed the lower court’s decision on this basis.