South Carolina Court of Appeals Affirms Dismissal of Legal Malpractice Case for Failure to Comply with the Statute of Limitations

The South Carolina Court of Appeals recently issued an Opinion in Personal Care, Inc. v. Jerry N. Theos, et al., affirming the Circuit Court’s dismissal of a legal malpractice case for failing to comply with the statute of limitations. The Court of Appeals considered two arguments by Appellants: (1) whether the Circuit Court erred in denying the Motion to Restore and (2) whether the Circuit Court erred in concluding the discovery rule, and not the date the underlying case was resolved, applied to determine the applicable statute of limitations.

Personal Care retained attorney Jerry Theos to investigate claims against a former employee. Personal Care directed Theos to send a letter to the former employee demanding she refrain from certain wrongful activity, including soliciting its clients. Theos also sent the letter, dated September 14, 2009, to a third-party medical services provider frequently employed for Personal Care’s business. Theos ultimately filed suit on behalf of Personal Care against the former employee. The former employee asserted a counterclaim for defamation stemming from the September 2009 letter.

On March 8, 2013, prior to resolution of Personal Care’s case against the former employee, Personal Care commenced a legal malpractice lawsuit against Theos (and others) for the handling of the underlying lawsuit. In the legal malpractice Complaint, Personal Care claimed Theos’ September 2009 letter exposed the company to liability and forced it to incur additional legal costs in defending the counterclaim, among other allegations of negligence. Theos filed an Answer generally denying the allegations and moved to dismiss the claims based on the expiration of the statute of limitations. Shortly thereafter, the parties executed a Consent Order pursuant to Rule 40(j) SCRCP, striking the case from the docket pending resolution of the underlying case between Personal Care and its former employee.

Rule 40(j), SCRCP provides for tolling of the statute of limitations if the claim is restored upon motion made within one year of the date stricken. Here, Personal Care did not move to restore the legal malpractice case until more than one year after the Order dismissing it pursuant to Rule 40(j). Respondents opposed the Motion to Restore, asserting the statute of limitations had run on the legal malpractice claims. The Court agreed, essentially holding that the case was dismissed, and therefore, Respondents could only raise this statute of limitations defense at this motion (as opposed to a motion for summary judgment).

In response, Appellants cited Stokes-Craven Holding Corp. v. Robinson, 416 SC 517, 787 S.E. 2d 485 (2016) to argue the statute of limitations did not begin to run until an “adverse verdict, judgment or a ruling” was entered against the client in the underlying lawsuit. In this case, the Court of Appeals disagreed and held Stokes-Craven did not eliminate the discovery rule in favor of a bright-line rule that all legal malpractice claims accrue on the date an adverse judgment is entered against the client. Rather, it found that Stokes-Craven dealt with the “particular scenario” in which a client’s injuries are predicated on an adverse judgment that is then appealed. Here, Personal Care’s cause of action for legal malpractice was predicated on the September 2009 letter, and therefore, Personal Care first suffered a financial injury when it was forced to spend additional funds and commit time and other resources to mitigate the damages caused as a direct and proximate result of Respondent’s errors.

While Stokes-Craven dealt a blow to the statutes of limitations defense available in legal malpractice cases in South Carolina, Personal Care has narrowed Stokes-Craven and reinforced the applicability of the discovery rule.

The entire Opinion can be found here.

 

5 Takeaways from CLM 2018 Annual Conference, March 14-16, 2018 in Houston, TX

I was fortunate to attend and speak on a panel at the CLM Annual Conference in Houston last week. I thought I would pass along a few takeaways from the professional liability sessions I attended.

  1. The increase in autonomy for “Physician Extenders” (CRNA, NP, PA, midwives) likely comes with increased liability risk to them. Analyzing contracts with the supervising physician, actual supervision of the physician extender, whether the extender’s liability insurance coverage matches the realities of their practice, and whether the extender will be held to the physician standard of care are all important considerations in advising and defending a physician extender.
  2. Lawyers must embrace Artificial Intelligence in analyzing cases and use it to their advantage. They must be prepared to discuss why the data is or is not accurate and how it can be applied to a specific case.
  3. Don’t forget about paper and unsaved emails in the “high-stakes” insurance broker case. The tendency may be to focus on ESI due to the vast amount of documentation in a multi-million dollar claim. But a hand-written note documenting a meeting or phone call, or an email that was not saved to the client file could be the key piece of evidence to support the broker’s position that a coverage was refused or a particular risk was discussed.
  4. High exposure does not necessarily translate to the existence of a special relationship with an insurance broker. Key factors to address in opposing a special relationship finding are:
    • Other brokers involved/seeking competing bids
    • Criticism or questioning of the broker by the client
    • The sophistication of the client and autonomy in decision-making
  5. Cyber-attacks and data breaches pose an increasing risk to professionals such as lawyers, accountants, insurance agents, and medical professionals, who possess a significant amount of potentially valuable data.
    • As the sophistication of the attacks has increased, so has the variety in available insurance coverages.
    • Make sure that your firm and your clients have adequate coverages to address the wide range of cyber risk to you and your clients.
    • The sooner you respond to a cyber-attack, the better, starting with reporting it to your insurance carrier who likely has the resources to assist with addressing the issue.

South Carolina Supreme Court holds Association Management Company Engaged in the Unauthorized Practice of Law

In its recent Opinion No. 27707, Rogers Townsend & Thomas, P.C. v. Peck, et al., Appellate Case No.: 2011-199626, the South Carolina Supreme Court found that Community Management Group (“CMG”), a management company for homeowners associations and condominium associations, engaged in the unauthorized practice of law when it (1) represented its association clients in Magistrate’s Court; (2) filed judgments in Circuit Court; (3) prepared and recorded liens to recover unpaid assessments and other charges; and (4) advertised that it could perform the services the Supreme Court now deems the practice of law.

CMG argued that the administrative order In re Unauthorized Practice of Law Rules Proposed by South Carolina Bar, 309 S.C. 304, 422 S.E.2nd 123 (1992), allowed a non-lawyer officer, agent, or employee to represent a business, and that it, as an agent of its association clients, could therefore represent them.  The Supreme Court disagreed and clarified In re Unauthorized Practice, finding that non-lawyer third-party entities or individuals, such as CMG, are not “agents” because they have no nexus or connection to the business arising out of its corporate structure.

CMG further argued that suing in Magistrate’s Court on behalf of associations to collect unpaid assessments was not the unauthorized practice of law because it did not require specialized legal skill or knowledge.  The Court disagreed.  Likewise, the Court found that filing judgments from Magistrate’s Court in Circuit Court constituted the unauthorized practice of law, as did preparing and recording liens and other legal instruments.  The Court chose not to rule on whether (1) interpreting covenants for homeowners; (2) addressing disputes between homeowners and associations; and (3) advising the associations on remedies to collect unpaid assessments constituted the unauthorized practice of law because petitioner did not include specific facts or details about CMG performing those services.

This Opinion offers some clarity on what can be a blurred line between performing legal and non-legal services on behalf of community associations.  As management companies continually offer and perform expanded services to community associations, they must remain diligent in considering the implications of their conduct.  Similarly, community associations and their lawyers must ensure legal tasks are appropriately assigned to, and performed by, lawyers.  The convenience or financial benefit of allowing a non-lawyer to address these tasks is outweighed by the risks it may be completed improperly, the Court could deem it the unauthorized practice of law, and it could lead to a criminal charge . The unauthorized practice of law in South Carolina is a felony requiring a fine of up to $5,000 or imprisonment for up to 5 years, or both, once the Supreme Court has deemed the charged activity is the practice of law.