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NJ Statute of Limitations: When Does it Begin to Run?

Ricca v. Anastasio, D.N.J., August 2, 2010

Facts:  Plaintiff filed for Chapter 7 bankruptcy in 1988 after having a judgment entered against him.  Defendant represented him in the Chapter 7 proceeding.  The Bankruptcy Court found that the judgment entered against Plaintiff was non-dischargeable, since it had been entered for fraud and defalcation while serving in a fiduciary capacity.

In 1994, Plaintiff filed bankruptcy again stemming from a default judgment that had been entered against him in 1988.  Plaintiff acknowledged that, in 1994, he knew that Defendant had allegedly failed to represent him in a previous adversary proceeding in connection with Plaintiff’s 1988 bankruptcy which resulted in the default judgment.

In 2007, nineteen years after the original non-dischargeable judgment had been entered against Plaintiff, the creditor sought to renew and enforce it against Plaintiff.  Plaintiff alleges that it was then that he learned from his new attorney that the judgment could have been discharged had Defendant proceeded for bankruptcy under Chapter 13 instead of Chapter 7. 

Two years later, in 2009, and more than twenty-one years after Defendant had represented Plaintiff, Plaintiff sued him for legal malpractice.

Issue:  Did the six-year statute of limitations for legal malpractice start running in 1994 when Plaintiff discovered Defendant’s negligence with regard to another issue (the default judgment), or did it start to run in 2007 when Plaintiff discovered Defendant’s negligence with regard to the issue that he complains of in the instant action — Defendant’s failure to file a Chapter 13 bankruptcy? 

Ruling:  1994.

The Court first noted that the statute of limitations does not begin to run until the client suffers actual damage and discovers, through the use of reasonable diligence, the facts essential to the malpractice claim.  Without explaining how Plaintiff should have known of Defendant’s negligence before learning of it from his new attorney, the Court stated "In 1994…Plaintiff should have reasonably known that Defendant was allegedly negligent in the course of [his] representation…"  The Court further provided: 

 Even if the Plaintiff was unaware of the attorney’s alleged malpractice in 1988 — that a conversion of Plaintiff’s prior Chapter 7 bankruptcy proceeding to a Chapter 13 would purportedly have protected him from the non-dischargeable debt — in 1994, approximately six years later, Plaintiff should have reasonably known that Defendant was allegedly negligent in the course of Defendant’s representation of Plaintiff in 1988. Indeed, Plaintiff retained new counsel for an adversary proceeding in his 1994 bankruptcy. Importantly, the 1994 adversary proceeding stemmed from a default judgment entered in another adversary proceeding during Plaintiff’s 1988 bankruptcy, which, Plaintiff alleges, resulted from Defendant’s failure to defend him. Because of Defendant’s alleged failure, Plaintiff expressed dissatisfaction with Defendant’s legal representation to his then-attorney. While mere expression of dissatisfaction may not trigger the duty of reasonable diligence to discover facts, as Plaintiff argues, Plaintiff was not merely dissatisfied; indeed, Plaintiff knew that Defendant may have committed malpractice for failing to defend him in a separate adverse proceeding in 1988. Clearly, Plaintiff was on notice of Defendant’s alleged negligence and had a duty of inquiry as to Defendant’s overall representation.

In closing, the Court noted that "a system that would permit a plaintiff to commence a malpractice claim fifteen years after an attorney renders allegedly negligent advice is simply unacceptable."

Lesson:  It is the client’s duty to investigate his attorney’s representation thoroughly when he first discovers any act of negligence.  Failure to do so may bar a legal malpractice suit at a later date.

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Posted in: Discovery Rule, Statute of Limitations