LAW OFFICES
OF
ANDREA LYNN RICE
A Professional Corporation
12100 Wilshire Boulevard
Suite 780
Los Angeles, California 90025
Telephone (310) 207-3717
Facsimile (310) 207-6785
LIABILITY UPDATE
April 4, 2008
In Nielsen v. Beck 2007 Daily Journal D.A.R 18193, the Second Appellate District of the California Court of Appeal held that subdivision (a)(2) of Code of Civil Procedure section 340.6, that tolls the statute of limitations if an attorney “continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred,” may apply where an attorney continues to perform services for a client even after a substitution of attorney is filed and where the attorney continued to represent the client in an unlawful detainer action which arose from advice given in a prior bankruptcy proceeding.
Robert Nielsen and William Nielsen (“the Nielsens”) owned PrimePapers, Inc. (PrimePapers), a company that cuts rolls of paper used by other commercial interests. Attorney Paul A. Beck was hired by PrimePapers and its affiliate entity, PrimePapers Louisiana (PPL) to represent PrimePapers and PPL “in connection with a number of pending legal issues, including but not limited to the defense of claims brought against the Company by various creditors and the resolution of the Company’s outstanding obligations to its creditors through a workout or Chapter 11 or Chapter 7 bankruptcy filing.” Bankruptcy proceedings were filed and on March 23, 2004, the bankruptcy court entered an order closing the case.
PrimePapers leased a building from ProLogis California I, LLC (ProLogis). The lease for that premises contained a provision whereby ProLogis would waive a large amount of rent. However, in the event of default, this “free rent” had to be paid. The Nielsens personally guaranteed the lease. Beck advised the Nielsens to stop making rent payments to ProLogis. ProLogis then filed an unlawful detainer action against plaintiffs. Beck represented plaintiffs in connection with the unlawful detainer action. On September 2, 2003, the San Bernardino trial court found against PPL on the issue of possession and against the Nielsens in the amount of $394,840.42. Beck continued to provide professional services to PrimePapers, PPL, and the Nielsens in attempts to settle the unlawful detainer case and to avoid enforcement proceedings by ProLogis, the judgment creditor.
On August 26, 2004, the Nielsens and Beck executed a substitution of attorney form to replace Beck with attorney Slates. The substitution of attorney form was returned to attorney Slates and then filed with the Superior Court on September 3, 2004. According to Robert Nielsen, at the time the substitution of attorney form was signed, he “felt very uncomfortable for [Beck] to do any more work for [him]. Everything that [Beck] touched, it continued to get worse and worse and worse.” However, after August 26, 2004, Beck continued to work for the Nielsens. In September 2004, Robert Nielsen contacted Beck by telephone concerning appropriate tactics and procedures in resolving the ProLogis claims. On October 14, 2004, Beck mailed a bill to Robert Nielsen for professional services, requesting payment of $350 for one hour of “professional services rendered.”
On September 2, 2005, the Nielsens filed this legal malpractice action against Beck. The complaint sought damages for representation with regard to the bankruptcy and ProLogis cases. Beck filed a motion for summary judgment contending that the lawsuit was barred by the one-year statute of limitations contained in Code of Civil Procedure section 340.6. In opposing the motion, the Nielsens argued that the statute of limitations was tolled under the “continuous representation” rule codified in subdivision (a)(2) of section 340.6. The trial court granted the motion for summary judgment. The Nielsens appealed from the subsequently entered judgment, and the Court of Appeal reversed.
The court observed that “Code of Civil Procedure section 340.6 does not expressly state a standard to determine when an attorney’s representation of a client regarding a specific subject matter continues or when the representation ends, and the legislative history does not explicitly address this question. (Gonzalez v. Kalu (2006) 140 Cal.App.4th 21, 28 (Gonzalez ).) However, a number of recent cases have addressed this standard.”
The court pointed out that in its recent case of Gonzalez, supra, 140 Cal.App.4th 21, an attorney abandoned a client. “[T]he crucial inquiry in abandonment cases is “when the client actually has or reasonably should have no expectation that the attorney will provide further legal services. [Citation.]” “In Gonzalez, we did not mean to suggest that the standard, which is to be viewed by the client’s perspective, is to be applied universally, in all cases. Rather, we compared abandonment cases to other types of malpractice lawsuits.”
The court found that there were triable issues of fact with regard to tolling the statute of limitations. “To satisfy the one year provision of Code of Civil Procedure section 340.6, the Nielsens’ legal malpractice case had to be filed within one year after the Nielsens discovered, or through reasonable diligence should have discovered, the negligence of Beck, unless the statute was tolled pursuant to subdivision (a)(2) because Beck continued to represent the Nielsens.”
The court acknowledged that a strong argument could be made that the statute of limitations could not extend any later than August 26, 2004, when the substitution of attorney form was executed because it demonstrated that the ongoing relationship between Beck and the Nielsens had ended and Beck would no longer be rendering legal advice. “However, there is contrary evidence from which a trier of fact could conclude that the relationship between Beck and the Nielsens had not been severed at the time the substitution of attorney form was signed, but rather, the statute was tolled through September 18, 2004. . . . On September 9, 14, and 18, 2004, Robert Nielsen placed telephone calls to Beck asking for advice. There is evidence that during these three telephone calls, Beck rendered professional services. Beck’s October 2004 billing statement requested payment for ‘professional services rendered’ and described the services Beck rendered as ‘negotiations, options and strategy. . . .’ Thus, there is evidence from which a trier of fact could conclude that there was an ongoing mutual relationship and activities in furtherance of that relationship through September 18, 2004. If the trier of fact so concludes, then the statute of limitations would not have expired because the lawsuit was filed on September 2, 2005.”
The court also rejected Beck’s contention that even if the statute was tolled with respect to the ProLogis litigation, it was not tolled with respect to the earlier representation involving the bankruptcy and reorganization of PrimePapers.
Beck’s representation in the bankruptcy case and Beck’s representation in the unlawful detainer proceedings can be seen to be intertwined and related, having overlapping purposes. The advice given by Beck in the bankruptcy case resulted in the unlawful detainer proceeding. Beck advised the Nielsens and PrimePapers to stop paying ProLogis. (Gold v. Weissman (2004) 114 Cal.App.4th 1195 [representation to file medical malpractice case continued with attorney’s agreement to file complaint with Board of Medical Quality Assurance as both had a shared, common purpose]; Baright v. Willis (1984) 151 Cal.App.3d 303 [retaining attorney to sue for damages as a result of workplace injury would include third party lawsuit as well as workers’ compensation case]; contra, Panattoni v. Superior Court (1988) 203 Cal.App.3d 1092.) Thus, even though the bankruptcy case was in a different forum than the unlawful detainer proceedings and involved different parties, from the above stated facts, a trier of fact could conclude that the representation of the Nielsens with regard to the unlawful detainer action involved the same specific subject matter as the bankruptcy action.
----Andrea Lynn Rice
OF
ANDREA LYNN RICE
A Professional Corporation
12100 Wilshire Boulevard
Suite 780
Los Angeles, California 90025
Telephone (310) 207-3717
Facsimile (310) 207-6785
LIABILITY UPDATE
April 4, 2008
In Nielsen v. Beck 2007 Daily Journal D.A.R 18193, the Second Appellate District of the California Court of Appeal held that subdivision (a)(2) of Code of Civil Procedure section 340.6, that tolls the statute of limitations if an attorney “continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred,” may apply where an attorney continues to perform services for a client even after a substitution of attorney is filed and where the attorney continued to represent the client in an unlawful detainer action which arose from advice given in a prior bankruptcy proceeding.
Robert Nielsen and William Nielsen (“the Nielsens”) owned PrimePapers, Inc. (PrimePapers), a company that cuts rolls of paper used by other commercial interests. Attorney Paul A. Beck was hired by PrimePapers and its affiliate entity, PrimePapers Louisiana (PPL) to represent PrimePapers and PPL “in connection with a number of pending legal issues, including but not limited to the defense of claims brought against the Company by various creditors and the resolution of the Company’s outstanding obligations to its creditors through a workout or Chapter 11 or Chapter 7 bankruptcy filing.” Bankruptcy proceedings were filed and on March 23, 2004, the bankruptcy court entered an order closing the case.
PrimePapers leased a building from ProLogis California I, LLC (ProLogis). The lease for that premises contained a provision whereby ProLogis would waive a large amount of rent. However, in the event of default, this “free rent” had to be paid. The Nielsens personally guaranteed the lease. Beck advised the Nielsens to stop making rent payments to ProLogis. ProLogis then filed an unlawful detainer action against plaintiffs. Beck represented plaintiffs in connection with the unlawful detainer action. On September 2, 2003, the San Bernardino trial court found against PPL on the issue of possession and against the Nielsens in the amount of $394,840.42. Beck continued to provide professional services to PrimePapers, PPL, and the Nielsens in attempts to settle the unlawful detainer case and to avoid enforcement proceedings by ProLogis, the judgment creditor.
On August 26, 2004, the Nielsens and Beck executed a substitution of attorney form to replace Beck with attorney Slates. The substitution of attorney form was returned to attorney Slates and then filed with the Superior Court on September 3, 2004. According to Robert Nielsen, at the time the substitution of attorney form was signed, he “felt very uncomfortable for [Beck] to do any more work for [him]. Everything that [Beck] touched, it continued to get worse and worse and worse.” However, after August 26, 2004, Beck continued to work for the Nielsens. In September 2004, Robert Nielsen contacted Beck by telephone concerning appropriate tactics and procedures in resolving the ProLogis claims. On October 14, 2004, Beck mailed a bill to Robert Nielsen for professional services, requesting payment of $350 for one hour of “professional services rendered.”
On September 2, 2005, the Nielsens filed this legal malpractice action against Beck. The complaint sought damages for representation with regard to the bankruptcy and ProLogis cases. Beck filed a motion for summary judgment contending that the lawsuit was barred by the one-year statute of limitations contained in Code of Civil Procedure section 340.6. In opposing the motion, the Nielsens argued that the statute of limitations was tolled under the “continuous representation” rule codified in subdivision (a)(2) of section 340.6. The trial court granted the motion for summary judgment. The Nielsens appealed from the subsequently entered judgment, and the Court of Appeal reversed.
The court observed that “Code of Civil Procedure section 340.6 does not expressly state a standard to determine when an attorney’s representation of a client regarding a specific subject matter continues or when the representation ends, and the legislative history does not explicitly address this question. (Gonzalez v. Kalu (2006) 140 Cal.App.4th 21, 28 (Gonzalez ).) However, a number of recent cases have addressed this standard.”
The court pointed out that in its recent case of Gonzalez, supra, 140 Cal.App.4th 21, an attorney abandoned a client. “[T]he crucial inquiry in abandonment cases is “when the client actually has or reasonably should have no expectation that the attorney will provide further legal services. [Citation.]” “In Gonzalez, we did not mean to suggest that the standard, which is to be viewed by the client’s perspective, is to be applied universally, in all cases. Rather, we compared abandonment cases to other types of malpractice lawsuits.”
The court found that there were triable issues of fact with regard to tolling the statute of limitations. “To satisfy the one year provision of Code of Civil Procedure section 340.6, the Nielsens’ legal malpractice case had to be filed within one year after the Nielsens discovered, or through reasonable diligence should have discovered, the negligence of Beck, unless the statute was tolled pursuant to subdivision (a)(2) because Beck continued to represent the Nielsens.”
The court acknowledged that a strong argument could be made that the statute of limitations could not extend any later than August 26, 2004, when the substitution of attorney form was executed because it demonstrated that the ongoing relationship between Beck and the Nielsens had ended and Beck would no longer be rendering legal advice. “However, there is contrary evidence from which a trier of fact could conclude that the relationship between Beck and the Nielsens had not been severed at the time the substitution of attorney form was signed, but rather, the statute was tolled through September 18, 2004. . . . On September 9, 14, and 18, 2004, Robert Nielsen placed telephone calls to Beck asking for advice. There is evidence that during these three telephone calls, Beck rendered professional services. Beck’s October 2004 billing statement requested payment for ‘professional services rendered’ and described the services Beck rendered as ‘negotiations, options and strategy. . . .’ Thus, there is evidence from which a trier of fact could conclude that there was an ongoing mutual relationship and activities in furtherance of that relationship through September 18, 2004. If the trier of fact so concludes, then the statute of limitations would not have expired because the lawsuit was filed on September 2, 2005.”
The court also rejected Beck’s contention that even if the statute was tolled with respect to the ProLogis litigation, it was not tolled with respect to the earlier representation involving the bankruptcy and reorganization of PrimePapers.
Beck’s representation in the bankruptcy case and Beck’s representation in the unlawful detainer proceedings can be seen to be intertwined and related, having overlapping purposes. The advice given by Beck in the bankruptcy case resulted in the unlawful detainer proceeding. Beck advised the Nielsens and PrimePapers to stop paying ProLogis. (Gold v. Weissman (2004) 114 Cal.App.4th 1195 [representation to file medical malpractice case continued with attorney’s agreement to file complaint with Board of Medical Quality Assurance as both had a shared, common purpose]; Baright v. Willis (1984) 151 Cal.App.3d 303 [retaining attorney to sue for damages as a result of workplace injury would include third party lawsuit as well as workers’ compensation case]; contra, Panattoni v. Superior Court (1988) 203 Cal.App.3d 1092.) Thus, even though the bankruptcy case was in a different forum than the unlawful detainer proceedings and involved different parties, from the above stated facts, a trier of fact could conclude that the representation of the Nielsens with regard to the unlawful detainer action involved the same specific subject matter as the bankruptcy action.
----Andrea Lynn Rice
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