Supreme Court Upholds Current Standard for When Statute of Limitations Begins to Run in Legal Malpractice Cases

December 11, 2017

The Tennessee Supreme Court extensively analyzed when the statute of limitations begins to run in legal malpractice cases. While the Court declined to change current Tennessee law or adopt a new doctrine, it held that both the trial court and appellate court were incorrect as to when the plaintiffs’ cause of action accrued, and it reversed the earlier summary judgment granted in favor of the defendant attorneys.

In the case, the plaintiffs were represented by the defendant lawyers in a lender liability lawsuit against two banks and one individual. In the underlying lender liability lawsuit, the trial court issued a summary judgment against one of the banks and the individual on May 7. The defendant attorneys voluntarily dismissed the complaint against the second bank on November 13, telling the client the damages evidence was not ready and the lawsuit could be refiled. The consequence of the voluntary dismissal was the finalization of the summary judgment order and the preclusion of any subsequent lawsuit against those defendants.

The plaintiffs sued the defendant attorneys on September 3 of the following year. The plaintiffs claimed the lawsuit against the individual was the only lawsuit that was ever viable and that they suffered damages when the summary judgment became final. The question before the courts was whether the statute of limitations began on May 7, when the motion for summary judgment was granted, or on November 13, when the voluntary dismissal was entered.

In its opinion, the Court reaffirmed its commitment to following the “discovery” rule for determining when the statute of limitations begins to run in legal malpractice cases, as originally set forth in Carvell v. Bottoms. Under the discovery rule, a cause of action accrues when the plaintiffs suffer an actual injury as a result of the defendants’ wrongful or negligent conduct and plaintiffs know or in the exercise of reasonable diligence should have known that this injury has been sustained as a result of wrongful or negligent conduct by the defendants. At the urging of the plaintiffs, the Court analyzed other possible methods for determining when a legal malpractice action accrues, including the continuous-representation rule, appeal-tolling doctrine, and final judgment rule, but concluded none was preferable to Tennessee’s current “discovery” standard.

In applying the current standard to the facts of the case, the Court held that the plaintiffs did not suffer a discoverable injury until after the voluntary dismissal was entered. Until that time, the summary judgment issued against one of the banks and the individual defendant was not a final order under Rule 54.02 of the Tennessee Rules for Civil Procedure and was subject to revision. The Court reversed the judgments of the trial court and Court of Appeals and remanded the case to the trial court for further proceedings.

To read the full opinion in John Howard Story, et al. v. Nicholas D. Bunstine, et al., authored by Justice Roger A. Page, please visit the opinions section of TNcourts.gov