No matter how diligent an attorney is, there will always be that one case that leaves an attorney feeling unsettled after it is completed.
Perhaps a client had unreasonable expectations and appears willing to blame his or her counsel for the less-than-desired result. Perhaps there was a term in the release that, upon a second reading, might be interpreted differently.
In these kinds of situations, it is helpful to think about how long the “problem” might be a ticking time bomb for you and your practice.
Legal Malpractice Claims: Tort, Contract, or Both?
When a closed file has the potential to be a problem, the attorney should consider whether the client will bring a legal malpractice claim.
In recent tort reform legislation, Wis. Stat. section 893.53 was amended. Often called the “residual clause,” section 893.53 applies to many types of professional malpractice, including legal malpractice.
The time period contained in the statute of limitation was shortened in 2018 from six years to three years:
Effective April 5, 2018: An action to recover damages for an injury to the character or rights of another, not arising on contract, shall be commenced within three years after the cause of action accrues, except where a different period is expressly prescribed, or be barred.1
Prior to April 5, 2018: An action to recover damages for an injury to the character or rights of another, not arising on contract, shall be commenced within six years after the cause of action accrues, except where a different period is expressly prescribed, or be barred.2
However, this new statute of limitation does not automatically reduce the amount of time an attorney needs to worry.
Legal malpractice actions can sound in either tort or contract.3 The tort of legal malpractice is the result of an attorney’s breach of his or her common-law duty, and is controlled by the statute of limitation found in Wis. Stat. section 893.55.
Most litigation matters involve a contractual relationship between the client and counsel. As such, a contract claim may arise if the attorney breaches the contractual agreement.4 The contract claim is controlled by the six-year statute of limitation found Wis. Stat. section 893.43.
To further complicate matters, a tort claim can accrue at various different points – when the negligence occurs, when an injury is sustained, or when the injury is discovered.5
In contrast, a claim for breach of contract accrues at the time of the breach. There is no discovery rule for contract claims.6
A litigation matter typically has a solid end point, such as signing a release, paying a settlement, receiving a verdict, or dismissing an action. Nevertheless, the interplay between the possible contract and tort actions can lead to some interesting results.
Assume that a minor was injured in an automobile accident, and the minor’s 20th birthday was Dec. 1, 2018. Further assume that a plaintiff’s personal injury attorney had represented the minor, collected the policy limit, released the tortfeasor, and paid out the settlement proceeds in 2010.
To complete the hypothetical, the minor recently discovered that the tortfeasor had an umbrella policy, and alleges the attorney committed malpractice by failing to properly explore the insurance coverage or advise the client regarding potential coverage before concluding the claim.
The ability to bring a contract claim for legal malpractice likely would have expired in 2016, but the tort claim for legal malpractice may still exist for three years after discovery of the umbrella policy.
Complaints to the Office of Lawyer Regulation
In addition to worrying about ticking time bombs becoming malpractice claims, there is the concern that a disgruntled former client might file a complaint with the Office of Lawyer Regulation (OLR).
Not long ago, my office received a letter from the OLR stating that a person filed a complaint that an attorney refused to take her case 20 years ago and did not adequately advise her of her legal rights. We had no internal records of this person.
The same letter stated the complaint had been dismissed, and cited SCR 21.18:
(1) Information, an inquiry, or a grievance concerning the conduct of an attorney shall be communicated to the director within 10 years after the person communicating the information, inquiry or grievance knew or reasonably should have known of the conduct, whichever is later, or shall be barred from proceedings under this chapter and SCR Chapter 22 (emphasis added).
(2) The time during which a person who knew or should have known of the attorney's conduct is under a disability as provided in Wis. Stat. § 893.16 and the time during which the attorney acted to conceal the conduct from or mislead the person who knew or should have known of the conduct regarding the conduct are not part of the time specified in sub. (1).
Files: Keep or Destroy?
Fearing potential disasters, we may be tempted to keep the full file forever, but this is often impractical. A recent ethics opinion, EF-17-01 Retention and Destruction of Closed Client Files, addresses this topic. This new ethics opinion withdrew two previous opinions on file retention and destruction.
A lawyer is not required to preserve all client files on a permanent basis. The updated opinion recommends that closed files be preserved for a minimum of six years after the last act.
However, the opinion cautions that six years is a floor, not a ceiling, and some files may need to be preserved for longer periods of time.
Conclusion: A Limited Effect
While recent statutory amendments have shortened the statute of limitations for legal malpractice tort claims, the practical effect for attorneys is limited in terms of potential exposure.
The most important take away is that any practitioner filing or defending legal malpractice claims must be aware of these changes before a file becomes a ticking time bomb.
This article was originally published on the State Bar of Wisconsin’s Litigation Section Blog. Visit the State Bar sections or the Litigation Section web pages to learn more about the benefits of section membership.
1 Wis. Stat. § 893.53 (emphasis added)
3 Boehm v. Wheeler, 65 Wis. 2d 668, 676, 223 N.W.2d 536 (1974)
4 Smith v. Long, 178 Wis. 2d 797, 802, 505 N.W.2d 429 (Ct. App. 1993)
5 Hansen v. A.H. Robins, Inc., 113 Wis. 2d 550, 554, 335 N.W.2d 578 (1983)
6 CLL Assocs. Ltd. P’ship v. Arrowhead Pac. Corp., 174 Wis. 2d 604, 607, 497 N.W.2d 115 (1993)