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Beesley et al v. Van Doren (5/13/94), 873 P 2d 1280
<![CDATA[
Notice: This is subject to formal correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501.
THE SUPREME COURT OF THE STATE OF ALASKA
EARLE BEESLEY, EULAS FISH, )
ELTON GREENE, ROBERT HILL, )
ROBERT NEW, VERNON PHILLIPS, )
ARTHUR SMITH and JAMES SMITH, ) Supreme Court File No. S-5374
)
Plaintiffs, ) U.S. District Court File No.
) A-91-507 Civil
v. )
)
WILLIAM O. VAN DOREN, ) O P I N I O N
)
Defendant. ) [No. 4079 - May 13, 1994]
)
Certified Question from the United
States District Court for the District of
Alaska,
H. Russel Holland, Judge .
Appearances: Paul L. Davis, Law Offices
of Paul L. Davis & Associates, Anchorage for
Plaintiffs. Mark Rindner and Terisia K.
Chleborad, Lane, Powell, Spears, Lubersky,
Anchorage, for Defendant.
Before: Moore, Chief Justice,
Rabinowitz, Matthews and Compton, Justices.
[Burke, Justice, not participating].
COMPTON, Justice.
RABINOWITZ, Justice, dissenting.
Pursuant to Alaska Rule of Appellate Procedure 407, the
United States District Court for the District of Alaska certified
the following question to this court: In a legal malpractice
action, is the statute of limitations tolled until final
resolution of the litigation underlying the malpractice claim?
I. FACTUAL AND PROCEDURAL BACKGROUND
In April 1983 the eight plaintiffs (collectively,
Beesley) and other truck drivers for Mukluk Freight Lines, Inc.
(Mukluk) hired William Van Doren to represent them in a wage
dispute. Mukluk sent Beesley checks accompanied by letters
indicating that signing and cashing the checks "shall constitute
a complete release by you of all claims you now have against
Mukluk." Van Doren allegedly advised Beesley to endorse the
checks for deposit into a court-supervised account. Van Doren
later filed a complaint against Mukluk and its parent company,
Crowley Maritime Corp. (Crowley), on behalf of the drivers.
The drivers dismissed Van Doren and retained other
counsel in December 1983. In March 1984 Crowley and Mukluk filed
a motion for summary judgment based on the affirmative defense of
accord and satisfaction. The trial court granted the motion in
August. The case was appealed to this court, which reversed the
trial court's decision. Phillips v. Mukluk Freight Lines, 721
P.2d 1143 (Alaska 1986). We held that there was sufficient
evidence of bad faith in Mukluk's settlement offer to defeat
summary judgment. Id. at 1146.
The case was litigated for four more years in state and
federal courts. While in federal court, defendants Crowley and
Mukluk filed another motion for summary judgment based on accord
and satisfaction, which was not granted. The case finally
settled in September 1990.
Beesley filed the complaint in the present case in
federal court in October 1991. Beesley alleges that Van Doren's
advice to sign the checks amounted to gross negligence and a
reckless disregard for the rights of his clients. Beesley
asserts that Van Doren's advice (1) added time and expense to the
litigation, (2) caused Beesley to settle for far less than if the
defense of accord and satisfaction had not existed, and (3)
caused Beesley to suffer "great anxiety and worry causing
emotional distress, fear, unhappiness and depression."
Van Doren responds that the statute of limitations
began to run in March 1984, when Beesley was forced to defend
against Mukluk's motion for summary judgment, or at the latest by
August 1984, when the trial court ruled against Beesley. United
States District Court Judge H. Russel Holland agreed, concluding
that under Wettanen v. Cowper, 749 P.2d 362 (Alaska 1988), the
statute of limitations began to run upon the initial adverse
judgment at the trial court level. On reconsideration, however,
Judge Holland decided that Wettanen was distinguishable because
Beesley had continued to pursue the merits of the underlying
litigation. Simultaneous litigation of the underlying case and
the malpractice case might have forced Beesley to take
inconsistent positions. Judge Holland certified the question
whether the statute of limitations in a legal malpractice case is
tolled until the litigation underlying the malpractice claim has
been resolved. This court granted the certificate.
II. DISCUSSION
The issue before us is a question of law, to which we
will apply our independent judgment. On questions of law, our
"duty is to adopt the rule of law that is most persuasive in
light of precedent, reason, and policy." Guin v. Ha, 591 P.2d
1281, 1284 n.6 (Alaska 1979).
In Wettanen we held that the statute of limitations for
attorney malpractice begins to run when
the client discovers or reasonably
should have discovered the existence of all
the elements of his cause of action.
Moreover, if the client discovers his
attorney's negligence before he suffers
damages, the statute of limitations will not
begin to run until the client suffers actual
damages.
Wettanen, 749 P.2d at 364 (citing Greater Area, Inc. v. Bookman,
657 P.2d 828, 829 & n.3 (Alaska 1982)); see also Thomas v.
Cleary, 768 P.2d 1090, 1094 (Alaska 1989) (holding that because
plaintiffs "have incurred no damages, no [professional
malpractice] has occurred.").
Van Doren argues that this court's decision in Wettanen
is indistinguishable from the present case and is controlling.
In Wettanen the attorney had stipulated to settle the underlying
case without the client's knowledge or authorization. Wettanen,
749 P.2d at 363. The court entered its judgment pursuant to the
stipulation in March 1982. The client hired a new attorney who
moved to set aside the judgment. The motion was denied. An
appeal was dismissed because it was not then from a final
judgment. Final judgment was entered in December 1985. Id. The
client filed a malpractice action the same day. Id. at 364.
Applying the two-year statute of limitations, we held that the
client's claim was barred because he "knew of his cause of action
against [his attorney] and suffered actual damages more than two
years before this case was filed." Id. at 365. A client need
not suffer all of the damages caused by his or her attorney's
malpractice before the statute of limitations begins to run. Id.
"[T]he guiding principle is that the statute of limitations
commences to run when one is actually damaged as a result of the
alleged malpractice, and that the commencement of the statute
will not be put off until one learns the full extent of his
damages." Id.
Beesley argues that this court should follow the lead
of some jurisdictions and adopt an "exhaustion of appeals" rule
because, in the words of the Arizona Supreme Court, "the injury
or damaging effect on the unsuccessful party is not ascertainable
until the appellate process is completed or is waived by a
failure to appeal." Amfac Distribution Corp. v. Miller, 673 P.2d
792, 794 (Ariz. 1983). Van Doren responds that an "overwhelming
majority of courts" hold that the statute of limitations
applicable to a claim for legal malpractice is not tolled pending
resolution of the underlying litigation.1
We reject the "exhaustion of appeals"rule. Wettanen
holds that a statute of limitations begins running when a party
suffers actual damages, without regard to whether the full extent
of the damages is known at the time.2 Wettanen, 749 P.2d at 365.
In the alternative, Beesley argues that Wettanen is
inapplicable because the case did not address the situation where
the underlying litigation continued after the discovery of
attorney malpractice. The client in Wettanen did not appeal from
the final judgment. Therefore, this court did not have occasion
to consider the situation in which a legal malpractice plaintiff
might have to take inconsistent positions in separate
proceedings. Beesley contends that this situation may compromise
his chances of success in both matters.3
In Wettanen we did not consider the problem of forcing
the client to assert inconsistent positions in the underlying and
malpractice cases. We do not do so in this case. We are not
persuaded that Beesley's positions in the underlying and
malpractice cases are inconsistent. The question whether the
defense of accord and satisfaction existed is different from the
question whether Van Doren's actions created the possibility of
such defense. Even if Beesley ultimately overcame the defense,
Beesley still has a cause of action against Van Doren, whose
actions damaged him by extending the length and expense of the
litigation. Furthermore, courts often deal with seemingly
inconsistent positions. An argument that the defense of accord
and satisfaction did not exist, and if it did, that the attorney
was responsible for its creation, is certainly tenable in the
legal arena.
Both of Beesley's arguments would require us to
overrule Wettanen. Under the rule of stare decisis, this court
will overrule precedent only "where the court is 'clearly
convinced that the rule was originally erroneous or is no longer
sound because of changed conditions, and that more good than harm
would result from a departure from precedent.'" State v. Souter,
606 P.2d 399, 400 (Alaska 1980) (quoting 1B J. Moore, Moore's
Federal Practice 0.402 at 154-55 (1974)) (other citations
omitted), overruled on other grounds by State v. Dunlop, 721 P.2d
604 (Alaska 1986); see also Dunlop, 721 P.2d at 620. In this
case, we choose not to disturb the rule in Wettanen, because we
are not persuaded that either changed conditions or a balancing
of the parties' interests favors overruling Wettanen.
Accordingly, we adhere to Wettanen and decline to adopt the
"exhaustion of appeals"rule.4 The statute of limitations begins
running when a client discovers or reasonably should have
discovered all the elements of the cause of action, and suffers
actual damages. Proper application of this rule will provide the
client with adequate opportunity to commence his cause of action
within the statute of limitations. Therefore, we find it
unnecessary to adopt a rule which tolls the statute of
limitations until all of a client's appeals are exhausted.
III. CONCLUSION
We hold that the statute of limitations in attorney
malpractice cases is not tolled pending the final resolution of
the litigation underlying the malpractice action. Under
Wettanen, the statute of limitations began to run on Beesley's
malpractice claim when Beesley suffered actual damages. It is
not necessary that all damages Beesley suffered be ascertainable
before the statute begins to run.
RABINOWITZ, Justice, dissenting.
I dissent from the majority's holding that the
applicable statute of limitations "is not tolled until all
appeals have been exhausted."
The majority concedes that "[i]f a party was forced to
take truly inconsistent positions and 'more good than harm would
result from [the] departure,' then we might be inclined to
re-examine Wettanen." (Alteration in original) (citation
omitted).5 Here Beesley was forced to take "truly inconsistent
positions" and thus I am led to the conclusion that in the
particular circumstances of this case the statute of limitations
was tolled until Beesley's appeal of the underlying action was
finally resolved.
First, this court has taken the position that although
the defense of the statute of limitations is a legitimate one, it
is generally disfavored. Lee Houston & Assocs., Ltd. v. Racine,
806 P.2d 848, 854-55 (Alaska 1991); Jenkins v. Daniels, 751 P.2d
19, 22 (Alaska 1988). We have also observed that "[w]here two
constructions as to the limitations period are possible, the
courts prefer the one which gives the longer period in which to
prosecute the action." Safeco Ins. Co. of Am. v. Honeywell, 639
P.2d 996, 1001 (Alaska 1981).
Second, our jurisprudence has de-emphasized the
traditional policies advanced in support of statutes of
limitations, namely, fairness to the defendant (notice), concern
that witness memories will fade over time, avoidance of witness
unavailability, and the avoidance of loss of evidence in general.
Adoption of the discovery rule, for example, undermined most of
these policies since some claimants do not discover their
injuries until many years after the applicable period of
limitations.6
Third, Van Doren had actual notice early on, as did his
errors and omissions insurance carrier, of his alleged legal
malpractice in representing Beesley against Mukluk and Crowley.7
Depositions were taken and Van Doren had the opportunity to
perpetuate testimony.
Fourth, although I agree that the applicable statute of
limitations commences when a party discovers or reasonably should
have discovered his or her cause of action and suffers actual
damages, here the statute of limitations should be tolled for the
reasons advanced by Beesley in his briefing to this court. I
find particularly compelling Beesley's argument--not raised,
briefed, or addressed in Wettanen--that the majority's rule would
force him to assert inconsistent positions in the underlying
litigation against Mukluk and Crowley and in the legal
malpractice action against Van Doren. In this regard I disagree
with the majority's statement that "[w]e are not persuaded that
Beesley's positions in the underlying and malpractice cases are
inconsistent."
While litigating the underlying action, Beesley
disclaimed the existence of an accord and satisfaction. Had
Beesley brought a legal malpractice action against Van Doren
during this time, he would have taken the inconsistent position
that Van Doren's alleged negligence gave rise to an accord and
satisfaction.8
Fifth, I am not persuaded that Wettanen must be
overruled to reach the holding that the statute of limitations is
tolled when the claimant is appealing in the underlying action,
and as a consequence is required to advance inconsistent
positions in the underlying litigation and in the malpractice
action. As noted previously the arguments raised in Beesley's
instant appeal were not raised in the Wettanen appeal. Further,
even if Wettanen must be overruled, under the governing
principles of stare decisis, I conclude that there is no
persuasive bar to modification of Wettanen for the purpose of
fashioning a tolling exception.
We will overrule one of our prior decisions only when
we are
"'clearly convinced that the rule was
originally erroneous or is no longer sound
because of changed conditions, and that more
good than harm would result from a departure
from precedent'. . . ." A decision may prove
to be originally erroneous if the rule
announced proves to be unworkable in
practice. Additionally, a prior decision may
be abandoned because of "changed conditions"
if "related principles of law have so far
developed as to have left the old rule no
more than a remnant of abandoned doctrine,
[or] facts have so changed or come to be seen
so differently, as to have robbed the old
rule of significant application. . . ."
Pratt & Whitney Canada, Inc. v. Sheehan, 852 P.2d 1173, 1176
(Alaska 1993) (citations omitted) (alterations in original).
The strength of stare decisis' command for respect for
precedent varies depending upon the precedent involved.
Wettanen, in my view, illustrates a type of decision in which the
command is not particularly compelling. Wettanen was decided
without the benefit of a clear adversarial presentation of the
"exhaustion of appeals"doctrine, or any adversarial presentation
of the inconsistent positions rationale. Justice Souter has
remarked that a precedent that "was not subject to 'full-dress
argument' prior to its announcement . . . is entitled to less
deference than one addressed on full briefing and argument."
Church of the Lukumi Babalu Aye, Inc. v. City of Hialeah, 113 S.
Ct. 2217, 2247 (1993) (Souter, J., concurring in part and
concurring in the judgment). This principle recognizes that
"[s]ound judicial decisionmaking requires 'both a vigorous
prosecution and a vigorous defense' of the issues in dispute."
Id.
Sixth, I note that Shaw v. State, Department of
Administration, Public Defender Agency, 816 P.2d 1358 (Alaska
1991), which was decided after Wettanen, undercuts Wettanen's
reliance on Hunt v. Bittman, 482 F. Supp. 1017 (D.D.C. 1980),
aff'd, 652 F.2d 196 (D.C. Cir.), cert. denied, 454 U.S. 860
(1981). Despite all the traditional rationales advanced in
support of statutes of limitations, we held in Shaw that in a
legal malpractice action arising out of a criminal proceeding the
statute of limitations for filing legal malpractice claims must
be tolled until the criminal defendant obtains post-conviction
relief. 816 P.2d at 1360. In reaching this conclusion, we noted
the uniqueness of criminal proceedings:
By adopting the date that post-
conviction relief is obtained as the trigger
to the statute of limitations, we establish a
bright line test which should significantly
assist courts in the resolution of statute of
limitations issues.
. . . Also of concern is the
attorney who, in the course of defending
against a malpractice action, might produce
privileged or other evidence in his or her
defense that might hurt a criminal defendant
with a legitimate basis for post-conviction
relief. Finally, we note the desirability of
allowing a criminal defendant with a valid
post-conviction relief claim to pursue that
remedy without the distraction of also filing
a legal malpractice claim.
Id. at 1361 (emphasis added).
Based on the foregoing, I would adopt the exhaustion of
appeals tolling rule in the particular circumstances of this
case.9 In the words of Justice Mosk,
To force malpractice plaintiffs to file
their actions before they know the outcome of
the case upon which their claim is based does
not promote judicial economy. The status of
the malpractice claim is uncertain until the
appeal in the underlying case is resolved,
because if it is ultimately decided in the
client's favor the malpractice suit may well
become moot for lack of damages.
Laird v. Blacker, 828 P.2d 691, 704 (Cal.) (Mosk, J.,
dissenting), cert. denied, 113 S. Ct. 658 (1992).
_______________________________
1 See Rhoades v. Sims, 692 S.W.2d 750, 752 (Ark. 1985);
Laird v. Blacker, 828 P.2d 691, 696 (Cal.), cert. denied,
U.S. , 113 S.Ct. 658-59 (1992); Jankowski v. Taylor, Bishop &
Lee, 273 S.E.2d 16, 18 (Ga. 1980); Belden v. Emmerman, 560 N.E.2d
1180, 1183 (Ill. App. 1990); Basinger v. Sullivan, 540 N.E.2d 91,
94 (Ind. App. 1989); Dearborn Animal Clinic P.A. v. Wilson, 806
P.2d 997, 1006 (Kan. 1991); Braud v. New England Ins. Co., 576
So. 2d 466, 469-70 (La. 1991); Hayden v. Green, 429 N.W.2d 604
(Mich. 1988); Sabes & Richman, Inc. v. Muenzer, 431 N.W.2d 916,
918-19 (Minn. App. 1988); Dixon v. Shafton, 649 S.W.2d 435, 438
(Mo. 1983); Suzuki v. Holthaus, 375 N.W.2d 126, 128 (Neb. 1985);
Zimmie v. Calfee, Halter & Griswold, 538 N.E.2d 398, 402 (Ohio
1989); Chambers v. Dillow, 713 S.W.2d 896, 898 (Tenn. 1986);
Richardson v. Denend, 795 P.2d 1192, 1195 n.7 (Wash. App. 1990);
Hennekens v. Hoerl, 465 N.W.2d 812, 818-19 (Wis. 1991).
2 The possible benefits of tolling a statute of
limitations until the exhaustion of appeals do not justify a
departure from the common law rule in negligence and legal
malpractice cases. The period begins running at the earliest
point there is knowledge of injury. Hunt v. Bittman, 482 F.
Supp. 1017, 1021-22 & n.22 (D.D.C. 1980), aff'd, 652 F.2d 196
(D.C. Cir.), cert. denied, 454 U.S. 860 (1981), cited in
Wettanen, 749 P.2d at 365. The California Supreme Court has
recently held that "the statute of limitations for legal
malpractice actions commences on entry of adverse judgment or
final order of dismissal." Laird, 828 P.2d at 696. First, the
court noted that the client sustains injury as soon as he or she
is forced to incur costs pursuing an appeal. Id. Second, a
successful appeal "does not necessarily exonerate the attorney,
nor does it extinguish the client's action against him for
negligence in the conduct of trial." Id. A recent Alaska case
supports this latter point. In Doe v. Hughes, Thorsness, Gantz,
Powell & Brundin, 838 P.2d 804 (Alaska 1992), this court noted
that although the clients' adoption decree was upheld on appeal,
the challenge to it was a "costly affair." Id. at 806.
3 See Peat, Marwick, Mitchel & Co. v. Lane, 565 So. 2d
1323, 1326 (Fla. 1990); United States Nat'l Bank & Higgens v.
Davies, 548 P.2d 966, 970 (Or. 1976); Hughes v. Mahaney, 821
S.W.2d 154, 157 (Tex. 1991).
4 If a party was forced to take truly inconsistent
positions and "more good than harm would result from [the]
departure,"Souter, 606 P.2d at 400 (citation omitted), then we
might be inclined to tailor Wettanen to this difficult situation.
Likewise, because Beesley retained a different attorney
before the motion for summary judgment against him was filed, we
are not asked to consider the adoption of the "continuous
representation" rule. Under that rule, the statute of
limitations is tolled as long as the client is represented by the
same attorney who committed the alleged malpractice. We have
opined that we might adopt the rule. Wettanen, 749 P.2d at 365.
Such a rule would resolve the concern for the attorney-client
relationship raised by some courts which have rejected the
"exhaustion of appeals"rule. See Amfac, 673 P.2d at 798-99;
Neylan v. Moser, 400 N.W.2d 538, 542 (Iowa 1987).
5 Note, the precise question certified to this court by
the federal court:
In a legal malpractice action in which
the plaintiff claims that the attorney's
negligent representation of the plaintiff in
a prior case resulted in the creation of a
new defense for the defendant in the prior
case, and that plaintiff could not initiate
an action against the attorney prior to final
resolution of the prior case because to do so
would require plaintiff to asset [sic] a
position that would be directly and
materially adverse to plaintiff's claims
against defendant in the prior case, when
does plaintiff's right of action against the
attorney accrue for purposes of commencing
the applicable period of limitation?
6 Under Racine, 806 P.2d at 855, and Pedersen v.
Flannery, 863 P.2d 856, 857 (Alaska 1993), the applicable statute
of limitations is six years. Here Beesley filed his legal
malpractice claim against Van Doren within one year after the
expiration of the six-year limitations period, assuming that no
tolling occurred.
7 Van Doren concedes as much. He acknowledges that in
December 1983 Van Doren's replacement, Paul Davis, wrote Van
Doren the following:
I have recently reviewed the enclosed
state Supreme Court case, Atlas Van Lines,
Inc. v. Jack Buster, et al, Op. No. 276 -
December 9, 1983, and believe that an accord
and satisfaction based upon the negotiations
of the checks in combination with the letters
that were written to your, now my, clients
may raise a legitimate issue of accord and
satisfaction that we are going to have to
deal with.
He also admits that in March of 1984 Davis wrote Van
Doren demanding an explanation of why he advised the truckers to
cash the checks, stating "that your determination to cash the
checks has greatly imperiled the drivers [sic] chance to seek the
correct compensation that they are owed by Mukluk." In this same
communication Davis advised Van Doren to "notify [his] errors and
omissions carrier of [the] situation immediately . . . ."
(Emphasis added).
Van Doren also concedes that
[o]n October 8, 1984, Davis wrote
to Van Doren's attorney, George Hayes, that
"[i]t is our belief, based upon the
statements that were made by Mr. Van Doren in
his deposition, along with those statements
made to his (now my) clients, Mr. Van Doren
engaged in an act of malpractice when he
advised the clients and caused their checks
to be cashed." Davis requested financial and
legal assistance in filing appeal bonds,
meeting appeal costs and preparing the
necessary briefs. Davis concluded "But for
Mr. Van Doren's negligence, the Summary
Judgment Motion would not have been granted,
making an appeal unnecessary."
(Citations omitted) (alteration in original).
8 The majority's opinion forces an attorney and client to
take into account strategic considerations that would play no
role under other rules. Suppose that a client sues for legal
malpractice while the underlying suit is proceeding. Soon
thereafter, the malpractice court enters summary judgment against
the client, and the client appeals. The client's new attorney
might decide that making the best argument in the malpractice
action might result in an admission or ruling that would
undermine the viability of the underlying suit. If the
underlying suit seems more important, the attorney might decline
to make the argument, even when the actions proceed in different
courts.
9 See, e.g., Bonanno v. Potthoff, 527 F. Supp. 561, 565
(N.D. Ill. 1981) (applying Illinois law); Amfac Distrib. Co. v.
Miller, 673 P.2d 792, 794 (Ariz. 1983); Peat, Marwick, Mitchell &
Co. v. Lane, 565 So. 2d 1323, 1326 (Fla. 1990); Neylan v. Moser,
400 N.W.2d 538, 542 (Iowa 1987); United States Nat'l Bank v.
Davies, 548 P.2d 966, 970 (Or. 1976); Hughes v. Mahaney &
Higgins, 821 S.W.2d 154, 156-57 (Tex. 1991).
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