73 The Alabama Lawyer 50 (2012). Legal Malpractice Actions under the Alabama Legal Service Liability Act: Alleged Involuntary Attorney-Client Relationships and Attendant Statute Of Limitations Issues.

• Author: By Max Cassady

Alabama Bar Journal

2012.

73 The Alabama Lawyer 50 (2012).

Legal Malpractice Actions under the Alabama Legal Service Liability Act: Alleged Involuntary Attorney-Client Relationships and Attendant Statute Of Limitations Issues

Legal Malpractice Actions under the Alabama Legal Service Liability Act: Alleged Involuntary Attorney-Client Relationships and Attendant Statute Of Limitations IssuesBy Max CassadyLegal malpractice actions in Alabama

are governed by the Alabama Legal Services Liability Act ("LSLA" or 'Act"), which provides that "[t]here shall be only one form and cause of action against legal service providers in courts in the State of Alabama and it shall be known as the legal service liability action ..." Ala. Code § 6-5-573. Thus, where the Act applies, all other tort, contract and statutory causes of action are foreclosed and the action must be brought within the ALSLA's statute of limitations. Id. § 6-5-570.

The Act governs "[a]ny action against a legal service provider in which it is alleged that some injury or damage was caused in whole or in part by the legal service provider's violation of the standard of care ..." Ala. Code § 6-5-573. "Legal service providers" includes lawyers who are licensed by the Alabama State Bar, foreign attorneys "engaged in the practice of law in the State of Alabama" and their law clerks, legal assistants, legal secretaries, investigators, paralegals, and couriers.(fn1) The "standard of care" required is the "reasonable care, skill, and diligence as other similarly situated legal service providers in the same general line of practice in the same general locality ordinarily have and exercise in a like case." Id. § 6-5-572(3).

The ALSLA Limitations Period vs. Common Law Limitations

In creating a cause of action against legal service providers, the Alabama legislature also "provide[d] for the time in which a legal service liability action may be brought and maintained." Ala. Code § 6-5-570. In general terms, the ALSLA provides for a two-year limitations period for cases not involving fraud, but that period is extended by a six-month discovery rule in non-fraud actions if the "cause of action is not discovered and could not reasonably have been discovered within such period."(fn2) In cases alleging fraud, the limitations provision runs two years from the date of discovery of the facts constituting fraud.(fn3) In all cases, however, a four-year absolute bar applies.(fn4)

This statute of limitations perhaps may be the most important of the Act's protections for attorneys. In Kinney v. Williams, 886 So. 2d 753 (Ala. 2003), for example, a lawyer explaining a deed allegedly negligently misrepresented that a road passing through a parcel of property was private and not public. The lawyer explained the deed to four persons-two were his clients, and two were not his clients. All four filed suit when the road was declared to be public, contrary to the attorney's opinion. The ALSLA applied to the claims of the clients and resulted in summary judgment on limitations grounds under the more rigorous statute of limitations in the ALSLA. The two non-clients asserted common law claims of fraud based on the defendant attorney's knowledge that he was making professional representations they would rely upon, even though they relied upon the attorney's opinion outside of the attorney-client context. The two non-clients avoided summary judgment under the common law limitations period.

In cases where the ALSLA limitations provision does apply, the statute of limitations analysis remains difficult because of uncertainty on whether the "act or omission" constituting alleged malpractice commences the running of the limitations period, or the resulting "injury or damage" caused by the alleged malpractice. The Acfs definition of a "[l]egal service liability action" as "[a]ny action against a legal service provider in which it is alleged that some injury or damage was caused," Ala. Code. § 6-5-572, led to early ALSLA cases holding that "injury or damage" had to be objectively apparent to the client for the ALSLA limitations period to commence. In 1991, Michael v. Beasley, 583 So. 2d 245 (Ala. 1991), held that a legal malpractice action accrued when the client suffered "a legal injury" which was "sufficient to maintain an action." The opinion further held that the period ran "from the date of the accrual of a cause of action and not from the date of the occurrence of the act or omission." Applied to the facts, the court held that an adverse jury verdict against a client caused the action to accrue and commenced the running of the statute of limitations, not the "act or omission" occurring before the verdict itself

The "injury or damage" rule was applied again in Cantrell v. Stewart, 628 So.2d 543 (Ala. 1993) in which the lawyer missed a statute of limitations but continued litigating the matter in the underlying action in an effort to save the client's cause of action. After the underlying action was lost and the client sued for legal malpractice, the lawyer contended that the statute of limitations for the legal malpractice action had expired even as the lawyer continued litigating the underlying action. The court again held that the trial court's dismissal of the underlying action was the injury or damage that gave rise to the ALSLA claim and commenced the running of the statute.

While the phrase "injury or damage" appears in the definition of an "action" under the Act, the phrase does not appear limitations provision of the Act, § 6-5-574, which requires that "[a]ll legal service liability actions against a legal service provider must be commenced within two years after the act or omission or failure giving rise to the claim." That language-and not "injury or damage"-became the focus of a 1999 plurality decision in Ex Parte David R. Panell, 756 So.2d 862 (Ala. 1999), which held that the Alabama legislature had "intended to replace" the "damage rule" with an "act or omission" rule. In Panell the client alleged that his attorney in the underlying action had settled his case without his consent. The court concluded that "[i]t is immaterial for purposes of the statute of limitations whether the client knows the full extent of the damage resulting from the tortious act or omission."

Three of the nine members of the court agreed with the rationale(fn5), part of which was that the legislature had inserted the "ameliorative discovery provision" in Section 6-5-574(a), which provides a six-month extension to the two-year limitations period where "the cause of action is not discovered and could not reasonably have been discovered within such period."(fn6) Applying the "act or omission" rule, the court held that the client's ALSLA claim was time barred because the limitations period ran from the date of the alleged wrongful settlement of the underlying action, not date of the dismissal of the action (i.e., the "injury"), which came some time later.

The Panell "act or omission" rule has been subject to criticism.(fn7) A Cumberland Law Review article written by attorneys who "typically act as advocates for defendants in suits for professional negligence," concluded that the Panell decision produces "illogical" results when read literally.(fn8) An Alabama Law Review commentary viewed Panell as suggesting that "that a client's statute of limitations could run before a cause of action accrues" when "[l]egal representation is often a long and protracted process" in which the damage of the act or omission only becomes apparent to a reasonable person when the case is dismissed.(fn9)

Decisions following Panell have not resolved the confusion on whether to apply an "act or omission" occurrence test or an "injury or damage" test. In Sirote and Permutt, PC. v. Bennett, 776 So. 2d 40,45 (Ala. 2000), just one year after Panell, the court noted that "our decision is based on the...