Legal Malpractice

Continuous Representation in Transactional Work and Legal Malpractice

By (Andrew Lavoott Bluestone)

We continue from yesterday in an examination of the statute of limitations in legal malpractice.  It's three years, pursuant to CPLR 214(6). It is a "bright line" rule,  but it can have exceptions. Beyond the exceptions there is always a question as to when the statute begins to run. For example, there is a line of cases which hold that the statute does not begin to run until all elements of a case are in place. 

However, A recent US District Court case, in Southern District of New York, authored by Judge Sullivan has an excellent discussion of the traditional rule, the origins of the rule, of continuous representation and its relation to the continuous treatment concept of medical malpractice, and how it impacts transactional work, which has negative results years later. We'll discuss this case today and tomorrow.

MIG, INC., v. PAUL, WEISS, RIFKIND, WHARTON & GARRISON, L.L.P., No 09 Civ. 5593 (RJS)UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK;2010 U.S. Dist. LEXIS 29548; March 29, 2010. While the facts of the case are somewhat complicated and deal with corporate documents and share holding issues, the legal malpractice issue is simpler. It is alleged that Paul Weiss made mistakes in the drafting of corporate documents in 1997 that had real world consequences in 2009.
 

From the opinion: "The alleged drafting malpractice occurred in September 1997, the date when the COD was filed. (See FAC P 2.) Clearly, the cause of action accrued at the same time. Absent the continuing representation doctrine, then, the claim would have expired in September of 2000. Accordingly, the Court must determine whether there was "a mutual understanding of the need for further representation on the specific subject matter underlying the malpractice claim." McCoy, 99 N.Y.2d at 306. Of course, a plaintiff cannot simply make conclusory allegations that such an understanding existed, but must plead facts that support such an understanding. See W. Vill. Assocs., 854 N.Y.S.2d at 341 ("[F]acts are required to demonstrate [*20] continued representation in the specific matter directly under dispute."); cf. Iqbal, 129 S. Ct. at 1949. Therefore, the Court must evaluate the specific allegations in the Complaint that support Plaintiff's conclusion.

Plaintiff offers two theories of how the continuing representation doctrine tolls the statute of limitations until 2007. First, Plaintiff argues that it has alleged specific representations related to the COD in each year from 1997 through 2007. (Pl.'s Opp. 11-18.) In the alternative, Plaintiff argues that it need not describe specific instances of continuing representation each year because the parties' "mutual understanding" suffices to toll the statute of limitations. Neither of these arguments is persuasive.

a. Continuing Representations

Plaintiff first argues that specific work done by PW for MIG each year from 1997 through 2007, mostly in the form of SEC filings, is sufficient to satisfy the continuing representation doctrine. Thus, Plaintiff alleges that after the COD was filed in 1997, "PW consistently monitored the COD . . . [and] represented MIG in connection with each and every development concerning the COD through March, 2008." (FAC P 19.)

To support this claim, [*21] MIG alleges that "PW advised, reviewed, commented, edited and wrote MIG's 10Ks, 10KAs, 10Qs, 10QAs and other SEC filings that concerned both the Preferred Stock and the COD." (Id. P 20.) For example, in 1998, PW prepared MIG's 10K for 1997, which "recites that the sum of 199.4 million dollars was raised by the preferred stock public offering." (Id. P 21.) In addition, the 1997 10K provides, inter alia, a summary of the Company's outstanding equity, including the amount of preferred shares and their principal rights. (Glanc Decl. Ex. 15 (Form 10K filed by Metromedia International Group, Inc. on March 31, 1998) at F-37.) The 10K did not, however, address the Preferred Holders' conversion rights under section 8 -- the provision containing the alleged malpractice. (Id.)

Plaintiff's memorandum also argues that a 1999 bond offering in connection with a merger is further evidence of a continuing representation with respect to the 1997 COD. (Pl.'s Opp. 15-16.) Plaintiff contends that PW's opinion letter in that offering, incorporated into the Registration Statements of those notes (Form S-4s), brings this representation within the continuing representation doctrine. (FAC P 21.) In the opinion [*22] letter, PW states that, "[i]n connection with this opinion . . . we have examined . . . those corporate records of the Company as we have considered appropriate, including copies of its Amended and Restated Certificate of Incorporation." (See Gluckow Supp. Ex. D (Form S-4, filed by Metromedia International Group, Inc. on Aug. 31, 1999) & Ex. E (Form S-4/A, filed by Metromedia International Group, Inc. on Sept. 24, 1999).) Plaintiff concludes that, because the COD "amends" the Certificate of Incorporation, "Defendant flatly admitted it 'examined' the COD in connection with the merger." (Pl.'s Opp. 15-16.) Similarly, Plaintiff alleges that PW analyzed the effects of the new issue on the Preferred Stock: "a 10K405 filing states that the indenture for the senior discount notes limits the ability of MIG and certain of its subsidiaries to, among other things, incur additional indebtedness or issue capital or preferred stock." (FAC P 21.) 8
 

Full post as published by New York Attorney Malpractice Blog on April 13, 2010 (boomark / email).