Houshang Momenian v. Michael Davidson
878 F.3d 381
| D.C. Cir. | 2017Background
- The Momenians sued the Interdonatos in D.C. Superior Court in 2009 over alleged miscredits on a promissory note; Davidson represented them and they settled on October 12, 2010 via a praecipe dismissing the action "with prejudice."
- Plaintiffs allege Davidson failed to explain that dismissal "with prejudice" barred all claims, failed to retain an accountant despite requests, and continued to reassure them he was "working on" the matter after settlement.
- Plaintiffs called Davidson about every three months in 2011–early 2012; an invoice shows post-settlement communications with an accountant through May 2011.
- On May 7, 2012 the Interdonatos issued a foreclosure notice claiming a large balance; Plaintiffs hired new counsel June 14, 2012 and settled the foreclosure by paying $85,000 in November 2012.
- Plaintiffs filed malpractice and breach-of-fiduciary-duty claims on May 6, 2015; Davidson moved to dismiss as time-barred under the three-year statute of limitations and for failure to state a claim; the district court dismissed with prejudice but the D.C. Circuit reversed and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When did malpractice claim accrue under D.C. discovery rule? | Accrual did not occur until May 7, 2012 foreclosure notice (or later) because Davidson’s reassurances lulled them. | Accrual occurred no later than Oct 12, 2010 (settlement praecipe) or sometime before May 6, 2012 because plaintiffs knew facts (no accountant) and could have discovered closure earlier. | Reversed dismissal: plausible that claim did not accrue before May 6, 2012 given fiduciary relationship and quarterly check-ins with counsel. |
| Did plaintiffs exercise reasonable diligence (inquiry notice standard)? | Reliance on counsel’s repeated assurances and trimonthly check-ins satisfied reasonable diligence under these facts. | Plaintiffs were unreasonable; public records or other steps in 18 months would have revealed the claims. | Court held it is plausible that quarterly calls and reliance on counsel met reasonable diligence; statute-of-limitations dismissal inappropriate at pleading stage. |
| Were plaintiffs entitled to tolling (lulling/continuous representation)? | Alleged continuous representation and lulling justify tolling of limitations. | No tolling — plaintiffs had notice or could have discovered malpractice. | Court did not decide tolling; remanded for district court to consider after finding accrual not conclusively prior to cutoff. |
| Can appellate court affirm on alternative merits ground? | N/A (plaintiffs argue merits exist and malpractice caused damages). | Davidson urged dismissal on merits (malpractice had no proximate cause because original suit lacked merit). | Court declined to resolve alternative merits issue and remanded for district court to address it in the first instance. |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard for motions to dismiss)
- Ashcroft v. Iqbal, 556 U.S. 662 (application of plausibility standard)
- Byers v. Burleson, 713 F.2d 856 (malpractice accrual at moment of injury precedent)
- Diamond v. Davis, 680 A.2d 364 (D.C. discovery rule for latent malpractice claims)
- Jung v. Mundy, Holt & Mance, P.C., 372 F.3d 429 (three-part test for accrual under discovery rule)
- BDO Seidman, LLP v. Morgan, Lewis & Bockius LLP, 89 A.3d 492 (objective reasonable-diligence standard and role of fiduciary relationship)
- Ray v. Queen, 747 A.2d 1137 (client reliance on attorney considered in inquiry notice analysis)
- Drake v. McNair, 993 A.2d 607 (fiduciary relationship can diminish significance of plaintiff’s lack of diligence)