Hayenga v. Gilbert, 706 Ariz. Adv. Rep 10 (App. Div. I, February 12, 2015) (J. Swann )

LEGAL MALPRACTICE CLAIMS THAT OCCUR “IN THE COURSE OF” LITIGATION DO NOT ACCRUE UNTIL LITIGATION FINALLY RESOLVED—FAILURE TO NAME/JOIN PARTY AND DISCOVER DEFENSE

Plaintiff purchased real estate from Gosnell based upon representations concerning the zoning that turned out not to be accurate. She sued Gosnell for claimed losses in the resale of the property due to the zoning. At trial Gosnell claimed it had fairly relied upon representations of the City regarding the zoning which turned out to be false. The jury found for Gosnell. Plaintiff then fired the defendants—her attorneys in the action against Gosnell.  Plaintiff then hired new counsel and filed post-trial motions and an appeal which was ultimately abandoned.  She also pursued claims against the City, all of which were dismissed as untimely or settled. Thereafter she brought this legal malpractice action.  Her legal malpractice claim was that the defendant lawyers had negligently failed to name or later join the City as a defendant in the underlying lawsuit and had negligently failed to learn that Gosnell's defense was its reliance upon the City.

Defendants moved for summary judgment claiming that the two year statute of limitations (A.R.S. §12-542) accrued at the time plaintiff fired defendant and hired new counsel unquestionably far more than two years before filing of suit. Plaintiff argued accrual did not occur until the underlying litigation was concluded, well within the statute.  The trial court granted defendant summary judgment and the Arizona Court of Appeals reversed and remanded.

[W]e hold that a claim for legal malpractice arising out of the alleged failure to timely commence an action, or to join a party in an existing

action, .  .  . is conduct [that] occurs “during the course of litigation”  and a malpractice claim based on that conduct does not accrue until the

underlying litigation is finally resolved by completion or waiver of the appellate process.

The court reasoned that even though the alleged failure to properly investigate the claim, discover defenses, and consider suing the City, all occurred before suit was filed, this was nonetheless all part of the “process of preparing litigation” therefore occurring in the  "course of litigation." Until the litigation runs its course plaintiffs' damages are too speculative to allow the statute to accrue. Continued litigation may change the result entirely. “The claim for malpractice arising from [defendants'] failure to preserve the claims against the City accrued when [plaintiff] settled with the City in December 2009, and the claim for malpractice arising from [defendants'] failure to anticipate Gosnell's defense accrued when [plaintiff] abandoned her appeal from the Gosnell judgment in April 2008. Her November 2009 malpractice action therefore was timely with respect to both claims.”