NY: Underlying corporate and commercial transaction
Facts: Plaintiff retained Defendant law firm to: (1) create a new corporation comprised of the assets of a financially failing pipeline inspection company (PES) and (2) to draft an employment agreement between Company’s former owner (McNulty) and the new corporation. Since PES was so deeply in debt, Plaintiff sought to ensure that he would not be personally held liable its debts. After the closing, McNulty: (1) used the new company’s assets to satisfy his old debt; (2) McNulty’s son left the company and formed a new competitive company; (3) McNulty bad-mouthed the new company to former clients and diverted business to his son’s company. After suspending McNulty, Plaintiff contacted defendant regarding terminating its relationship with McNulty. Instead of terminating McNulty pursuant to the terms in the employment agreement, Defendant claimed that McNulty resigned. McNulty sued plaintiff for breach of contract and prevailed.
Issue: Whether the acts which allegedly constituted malpractice which occurred at the latest August 3, 1999, were time barred when a suit was commenced on August 2004, or whether the continuous representation doctrine applied to toll the statute of representation?
Ruling: Plaintiff’s action is time-barred because defendant’s additional work on plaintiff’s behalf did not constitute continuous representation- it was instead “ an extended general relationship between parties.”
Lesson: For the continuous representation doctrine to apply both plaintiff and defendant must have a mutual understanding to that effect, and (2) plaintiff must be under the impression that defendant was actively addressing [its] legal needs" with respect to the subject of the alleged malpractice.