CA Court of Appeal Clarifies Termination of Tolling Period for Legal Malpractice Statute of Limitations Under Code of Civil Procedure § 340.6 (a)(2)

By: Carl I. S. Mueller of The Maloney Firm, APC
 

On October 12, 2016, the California Court of Appeal filed its opinion in the matter styled as Gotek Energy, Inc. v. Socal IP Law Group, LLP. The central issue of law on appeal in this legal malpractice action was whether the trial court below correctly entered summary judgment in favor of the defendants, Socal IP Law Group, LLP (“firm one”), based on a statute of limitations defense. At a basic level, the appellate court reaffirmed the rule that the one year statute of limitations for legal malpractice actions is not tolled pursuant to Cal. Code of Civil Procedure § 340.6 (a)(2) once legal representation has terminated. However, the facts of the case make clear that the language of the communications is of the utmost importance in determining when the legal representation ends. Thus, the summary judgment ruling was affirmed and the legal representation found to have ended on the date that firm one sent a letter to its client stating that the attorney-client relationship “is terminated forthwith.”
 
To sum up the facts of the case, firm one represented Gotek Energy, Inc. (“client”) in relation to specific patent filings. Firm one admittedly failed to timely file for patent rights in Japan and Brazil, and informed client in August 2012 that it had been negligent. On September 26, 2012, client retained Parker Mills (“firm two”) to investigate firm one’s negligence. On November 5, 2012, firm one sent a fax to firm two stating that client was making a malpractice claim on firm one, and asking firm one to tender the claim to its insurance carrier. On November 7, 2012, firm one sent an email to client stating that it “must withdraw” and including the following language:
 

Consequently, the firm’s attorney-client relationship with [client] is terminated forthwith, and we no longer represent [it] with regard to any matters.[…] Please tell us immediately where we should send [client’s] files[…]. You should retain patent counsel to handle your patent matters.

 
Client requested that firm one release client’s files to a third law firm on November 8, 2012, requesting the transfer be complete by November 23, 2012. On November 15, 2012, firm one sent client a letter to “confirm” that the attorney-client relationship had been “terminated” and that the client’s files would be released pursuant to the request.
 
Firm two filed client’s complaint for legal malpractice against firm one on November 14, 2013. There is no dispute that the injury occurred at least by September 26, 2012, and likely before. However, client argued that the statute of limitations should be tolled until November 15, 2012, when firm one released client’s file.
 
The Appellate Court disagreed, stating that firm one’s representation of client ended by November 8, 2012:
 

[F]irm one’s representation of client ended on November 8, 2012, when client wrote a letter to firm one requesting that it “immediately make all necessary preparations and take all necessary action to deliver all [of client’s] filed to” Armstrong Teasdale, LLP. [Omitted]. By requesting that its files by immediately delivered to replacement counsel, client consented to firm one’s express withdrawal of the previous day.

 
The court further ruled that based on firm one’s letter to client on November 7, 2012 stating that it was terminating the attorney-client relationship, client had no reasonable expectation of firm one’s continuing representation after that date under the rule set out in Gonzalez v. Kalu (2006) 140 Cal.App.4th 21. As such, the statute of limitations stopped tolling on November 7, 2012:
 

Pursuant to this rule, firm one’s representation ended on November 7, 2012. On that date, firm one emailed client that it “must withdraw” as client’s attorney, that is “attorney-client relationship with [client] is terminated forthwith,” and that it “no longer represent[s] [client] with regard to any matters.” After receiving the email, client could not reasonably have expected that firm one would provide further legal service.

 
As such, it appears that the Appellate Court has used this opportunity to establish a bright line rule to end the ongoing representation tolling rule of a legal malpractice statute of limitations under Code of Civil Procedure § 340.6 (a)(2): when a client has already engaged replacement counsel, the ongoing representation ends upon a communication with the client that states the attorney-client relationship is ending. As stated by the court, any delay in releasing the client’s files does not continue the representation, as “the transfer of files was a clerical, ministerial activity,” and not legal representation.
 

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