New York Law Review

Tag: Continuous Representation Doctrine

  • Williamson ex rel. Lipper Convertibles, L.P. v. PricewaterhouseCoopers LLP, 9 N.Y.3d 1 (2007): Continuous Representation Doctrine in Accounting Malpractice

    9 N.Y.3d 1 (2007)

    The continuous representation doctrine does not toll the statute of limitations in accounting malpractice claims where the services are discrete annual audits and there is no mutual understanding for continued representation regarding specific problems.

    Summary

    This case addresses whether the continuous representation doctrine applies to toll the statute of limitations for accounting malpractice claims related to annual audits. The Court of Appeals held it does not apply when the accounting services are discrete annual audits performed without a mutual understanding for ongoing representation regarding specific issues. The plaintiff, as liquidating trustee of hedge funds, sued the defendant accounting firm for malpractice related to audits from 1995-2000. The court found the claims for 1995-1999 time-barred because the audits were annual, discrete engagements, and there was no explicit agreement or understanding for continued representation to address specific problems with those audits.

    Facts

    Lipper Convertibles and Lipper Fixed Income Fund (the Funds) hired PricewaterhouseCoopers (defendant) annually to audit the Funds’ year-end financial statements from 1990 onwards. The defendant issued unqualified opinions each year, stating the financial statements fairly represented the Funds’ financial position. In 2002, after key officers resigned, management discovered an improper valuation method had been used, overstating securities holdings from 1995-2000. The Funds dissolved, and a liquidating trustee (plaintiff) was appointed. The last audit by defendant was completed in early 2001 for the year 2000.

    Procedural History

    The plaintiff sued the defendant in July 2004 for malpractice related to the 1995-2000 audits. The defendant moved to dismiss, arguing the claims were time-barred. The Supreme Court granted the motion in part, but the Appellate Division reversed, finding the plaintiff should have the opportunity to prove the audits were a continuous service. The Court of Appeals reversed the Appellate Division and reinstated the Supreme Court’s order, dismissing claims for 1995-1999.

    Issue(s)

    Whether the continuous representation doctrine tolls the statute of limitations for accounting malpractice claims arising from discrete annual audits, where there was no explicit agreement or understanding for continued representation to address specific issues.

    Holding

    No, because the audits were discrete annual engagements, and there was no mutual understanding or explicit agreement for the defendant to provide ongoing representation regarding specific problems or errors in the prior audits.

    Court’s Reasoning

    The Court applied the principles of the continuous representation doctrine, drawing parallels to the continuous treatment doctrine in medical malpractice. It emphasized that the doctrine tolls the statute of limitations only when there is a mutual understanding of the need for further representation on the specific subject matter underlying the malpractice claim. Here, the Court found the annual audits were separate engagements. The Funds did not engage the defendant to correct or re-examine prior years’ audits, nor were they aware of any specific problems requiring further representation. The Court distinguished this case from Shumsky v. Eisenstein, where the attorney failed to act on a case he was retained for and the client was clearly expecting continued representation. The court stated, “Plaintiffs allegations make clear that for the years in question, the Funds entered into annual engagements with defendant for the provision of separate and discrete audit services for the Funds’ year-end financial statements, and once defendant performed the services for a particular year, no further work as to that year was undertaken.” Because there was no mutual understanding for continued representation, the purpose of the continuous representation doctrine—to allow clients to rely on their professional without interrupting the relationship to file suit—would not be served by applying it. Therefore, the malpractice claims for the 1995-1999 audits were time-barred. The key is that the client must be aware of a problem and the accountant must be engaged to address it for the tolling doctrine to apply.

  • Glamm v. Allen, 5 N.Y.3d 93 (2005): The Continuous Representation Doctrine in Legal Malpractice

    Glamm v. Allen, 5 N.Y.3d 93 (2005)

    The continuous representation doctrine tolls the statute of limitations in a legal malpractice action when there is a mutual understanding of the need for further representation on the specific subject matter underlying the malpractice claim.

    Summary

    This case addresses the application of the continuous representation doctrine to toll the statute of limitations in a legal malpractice claim. The plaintiff, Glamm, sued his attorneys, Allen, for malpractice related to a divorce proceeding. The New York Court of Appeals held that the continuous representation doctrine applied because the attorneys continued to represent Glamm after the divorce judgment was entered, and there was a mutual understanding that further representation was needed regarding the divorce. Therefore, the malpractice claim was not time-barred. The court remitted the case for consideration of other issues raised in the motion to dismiss.

    Facts

    Glamm retained Allen to represent him in a divorce proceeding. A judgment of divorce was entered on December 4, 1997. Allen’s representation of Glamm continued at least until June 1998. Glamm commenced a legal malpractice action against Allen in May 2001, alleging negligence in the handling of the divorce case.

    Procedural History

    The defendants moved to dismiss the complaint, arguing that the legal malpractice claim was barred by the statute of limitations. The Supreme Court initially ruled on the motion. The Appellate Division reversed, holding that the malpractice claim was time-barred. The Court of Appeals reversed the Appellate Division’s order, reinstating the legal malpractice cause of action and remitting the case to the Supreme Court for consideration of other issues raised by the defendants’ motion to dismiss.

    Issue(s)

    Whether the continuous representation doctrine tolled the statute of limitations for Glamm’s legal malpractice claim, considering the ongoing representation by Allen after the divorce judgment.

    Holding

    Yes, because the continuous representation doctrine applies where there is a mutual understanding of the need for further representation on the specific subject matter underlying the malpractice claim, and such representation existed in this case.

    Court’s Reasoning

    The Court of Appeals relied on the established precedent that a legal malpractice action must be commenced within three years of accrual, subject to tolling by the continuous representation doctrine. The court cited McCoy v. Feinman, 99 N.Y.2d 295 (2002), stating that “[t]he continuous representation doctrine tolls the statute of limitations . . . where there is a mutual understanding of the need for further representation on the specific subject matter underlying the malpractice claim.” The court determined that Glamm’s cause of action accrued no later than December 4, 1997, when the divorce judgment was entered. However, because Allen’s representation continued until at least June 1998, and the action was commenced in May 2001, the malpractice claim was not time-barred. The Court emphasized the importance of ongoing attorney-client relationships in determining the applicability of the continuous representation doctrine, noting that it prevents disruption of the attorney-client relationship and avoids forcing a client to sue their attorney prematurely. The court did not address other causes of action as they were not raised before the Court of Appeals. The court’s decision ensures that clients who reasonably rely on their attorneys’ continued representation are not unfairly penalized by the statute of limitations, balancing the need for timely claims with the realities of ongoing legal engagements.

  • Shumsky v. Eisenstein, 96 N.Y.2d 164 (2001): Tolling Statute of Limitations in Legal Malpractice Cases

    96 N.Y.2d 164 (2001)

    The continuous representation doctrine tolls the statute of limitations in legal malpractice cases where the ongoing representation pertains specifically to the matter in which the attorney committed the alleged malpractice, and the client is not informed or put on notice of the attorney’s withdrawal.

    Summary

    David Shumsky and Marjorie Scheiber hired attorney Paul Eisenstein to sue a home inspector, Charles Fleischer, for breach of contract. Eisenstein failed to file the lawsuit within the statute of limitations and avoided communicating with his clients. After a grievance was filed, Eisenstein admitted his error. Shumsky and Scheiber then sued Eisenstein for legal malpractice. The court addressed whether the continuous representation doctrine tolled the statute of limitations. The court held that it did because the plaintiffs reasonably believed Eisenstein was still working on their case and they were not notified he had withdrawn from representation, making their malpractice claim timely.

    Facts

    In April 1993, Shumsky and Scheiber retained Eisenstein to commence an action against Fleischer for breach of contract regarding a home inspection. Eisenstein failed to file the action before the statute of limitations expired in March 1994. He then avoided the clients’ inquiries about the case status. In September 1997, the clients filed a disciplinary grievance. Eisenstein admitted he had failed to file the action on time and was too embarrassed to discuss it with them.

    Procedural History

    On December 5, 1997, Shumsky and Scheiber sued Eisenstein for legal malpractice. The Supreme Court denied Eisenstein’s motion for summary judgment, holding that the continuous representation doctrine tolled the statute of limitations. The Appellate Division reversed, granting Eisenstein’s motion and dismissing the complaint. The Court of Appeals granted leave to appeal.

    Issue(s)

    Whether the continuous representation doctrine tolls the statute of limitations in a legal malpractice action when the attorney fails to take action on the client’s case, but the client reasonably believes the attorney is still representing them.

    Holding

    Yes, because the plaintiffs retained the defendant for a specific contract claim, reasonably believed the representation was ongoing, and were not informed of the attorney’s withdrawal until shortly before they filed the malpractice claim. The continuous representation doctrine tolls the statute of limitations in such cases.

    Court’s Reasoning

    The court reasoned that a legal malpractice claim accrues when the malpractice is committed. Here, it was when the statute of limitations expired on the underlying breach of contract claim in March 1994. Although CPLR 214(6) was amended in 1996 to shorten the limitations period to three years, the plaintiffs had until September 4, 1997, one year from the amendment’s effective date, to bring suit. The action commenced on December 5, 1997, was therefore time-barred, unless the continuous representation doctrine applied.

    The court discussed the continuous representation doctrine, stating that it “recognizes that a person seeking professional assistance has a right to repose confidence in the professional’s ability and good faith, and realistically cannot be expected to question and assess the techniques employed or the manner in which the services are rendered.” The court emphasized that the doctrine applies only to the specific matter in which the malpractice occurred. It distinguished this case from situations where an attorney fails to act, but the client is unaware of the need for further services. Here, the plaintiffs were aware of the need for further representation and were left with the reasonable impression that the attorney was addressing their legal needs. The court highlighted that the plaintiffs’ attempt to contact the defendant in October 1996, inquiring about the status of their case, confirmed this understanding. The court concluded that the continuous representation continued at least until the plaintiffs were put on notice that the representation had ceased, which was no earlier than October 1996. Therefore, the malpractice claim filed less than 14 months later was timely. Even though the attorney was not actively working on the case, the client’s reasonable belief that he was, coupled with his failure to notify them of his withdrawal, triggered the tolling provision. As the court noted, “where the physician and patient reasonably intend the patient’s uninterrupted reliance upon the physician’s observation, directions, concern, and responsibility for overseeing the patient’s progress, the requirement for continuous care and treatment for the purpose of the Statute of Limitations is certainly satisfied”. The same principle applies to attorney-client relationships.