Suing for Legal Malpractice? Designate the Plaintiff(s) CarefullyJan 23, 2024
An opinion recently published by California’s Second Appellate District, Engel v. Pech, 95 Cal.App.5th 1227 (2023), reinforces that when counsel for a corporate entity commits malpractice, it is the entity itself – not the owners – that must bring the malpractice claim.
The Facts: An Individual Sues in Place of an LLP
A partnership, Engel & Engel LLP (LLP), hired an attorney (Pech) to represent it in litigation. The retainer agreement between Pech and the partnership was signed by both the LLP and one of its partners (Engel), in his individual capacity. The agreement specified the scope of the attorney’s work was limited to the representation of the LLP itself in litigation.
When the LLP lost the case, Engel personally, not the LLP, timely sued Pech for malpractice. The LLP was not a party to the lawsuit Engel filed. Later, after the LLP’s statute of limitations on malpractice claims had lapsed, Engel attempted to amend his complaint and add the LLP as a second plaintiff.
Pech filed a demurrer challenging the amended complaint, stating that Engel had no basis for filing for malpractice because the LLP was Pech’s sole client in the litigation and thus only the LLP itself had standing to sue for malpractice. Further, although the LLP was later added as a plaintiff, its statute of limitations had expired.
The trial court agreed with both points and dismissed the case.
Court of Appeal: LLP’s Claim Time-Barred and Distinct from Individual Claim
Though Engel appealed, the California Court of Appeal affirmed the lower court’s decision. After confirming the statute of limitations for the LLP’s malpractice claim had run, the court ruled Engel’s attempt to amend the complaint and add the LLP as a plaintiff was invalid because it did not meet the requirements for relating back to the filing date of the original complaint. Though amended complaints may in some instances relate back to the date of filing of the original complaint, they must rest on the same general set of facts and the same injury. Amendments involving a new plaintiff (the LLP) do not automatically relate back because in many instances they do not seek vindication of the same rights asserted by the original plaintiff.
Affirming the trial court’s ruling, the Court of Appeal held Pech’s legal liability or obligation to the LLP was distinct from his legal liability to Engel. Specifically, the retainer agreement stated Pech represented only the LLP in the underlying litigation. Therefore, only the LLP could have suffered damages attributable to Pech’s malpractice, stating” only the partnership has potentially viable claims for malpractice” (2) and “because the LLP’s potentially viable claims for malpractice are a property acquired by the partnership and not of the partners individually . . . the LLP’s malpractice claims belong solely to the LLP and not to Engel.” Id. at 1241.
Engel v. Pech reinforces the important concept of the legal distinction between a business entity and its owners. This is of particular importance pursuing claims against attorneys for malpractice when there are both legal entities and individuals involved. Any claims arising from a lawyer’s errors may belong to the entity alone, the individuals alone, or some combination of the two, depending upon the structure of the retainer agreement and how the case was originally filed. Due to the waiver of the attorney client privilege that comes with the filing of any malpractice lawsuit, other cases hold that the right to bring a malpractice claim cannot be assigned or transferred. Coupled with the short statute of limitations for legal malpractice claims, it is critically important to take care to ensure the right party is designated as the plaintiff.
If contemplating a legal malpractice action, it is crucial to review the retainer agreement between all parties, as well as the complaint in the underlying case. to determine how to properly file a claim within the allowed timeframe. For questions regarding any potential legal malpractice issue, contact the attorneys at the Maloney Firm.