*1 July S056954. 1998.] [No. ENTERPRISES, INC., al.,
JORDACHE et Plaintiffs and Appellants, BROBECK, al., PHLEGER & HARRISON et Defendants and Respondents.
Counsel Olesten, Conkle, Conkle & William C. John A. Conkle and Eric S. Engel Plaintiffs Appellants. Ochoa, Klein, Coté, Larkin, Coté, T. Alan M. & Lance R.
Tyler Sainick Hoffman, Robbins, Brown, & Ronn B. C. Brent Daly Lindgren, Krepps, Beeman, Todd & Arthur S. Fletcher & Adair and John R. Fletcher Heybum, *4 as Amici Curiae on behalf of Plaintiffs and Appellants. Nest, Keker, Chanin, Gasner,
Keker & Van John W. R. Stuart L. Jeffrey Hirsch, Steven A. & Caldwell and G. Caldwell for Hedges Christopher Defendants and Respondents. Miller, Wilke, Hoffelt,
Richard I. & Fleury, Gould Thomas G. Bimey, Powell, Redmon, Smith, Willkie, Matthew W. Matthew J. Farr & Gallagher, Klein, Finnell, Foerster, Richard L. B. & D. Morrison Raoul Jeffrey Kathleen M. Wardlaw and Frederick S. Amici Curiae on Kennedy, Chung as behalf of Defendants and Respondents.
Opinion case,
CHIN, In this we address the of “actual again meaning injury” J. limitations, under the statute of Code of Civil Procedure legal malpractice section 340.6.1 That statute commences the limitations with the period 340.6, (a)(1), “(a) against 1Code of Civil Procedure section An action subdivision states: omission, fraud, wrongful arising performance act or other than for actual in the discovers, year professional services shall be commenced within one after the or discovered, through diligence constituting the use of reasonable should have facts omission, omission, wrongful years wrongful act or or four from the date of the act or whichever occurs first. In no event shall the time for commencement action exceed years except during following that the shall be tolled the time that of the exist: four (1) injury; has not sustained actual . . .” [H] Procedure, statutory except All further references are to the Code of Civil as otherwise noted. omission, act or or with the actual or con-
attorney’s wrongful plaintiff’s However, several cir- structive error. discovery attorney’s specified that “The has not including cumstances toll the prescriptive period, (§ (a)(1).) sustained actual . . . .” subd. the actual in Adams
This court most
considered
recently
injury provision
(1995)
(Adams).
P.2d
v. Paul
We conclude that actual occurred injury before the client’s settlement with conclusion, the insurer. In this we reaffirm the reaching basic principles established in Budd and reiterated in Adams. Actual occurs when injury the client suffers loss or in a injury legally cognizable damages legal Adams, (See action based on the asserted errors or omissions. Arabian, Budd, (lead 11 Cal.4th at J,); 588-589 Budd, 200-202.) 6 Cal.3d at Under the codification of Legislature’s section (a)(1), subdivision not toll the limitations once the will client can that could establish a cause of action for plead damages malpractice.
Here, the the allowed insurers to raise an attorneys’ alleged neglect viable defense under the The insurers’ objectively coverage policies. of this assertion defense increased the client’s costs to its necessarily litigate Laird, (Cf. claims and reduced those claims’ settlement coverage value. Moreover, of the alleged 2 Cal.4th at because attorneys’ action for the client its own defense in third neglect, provided party lost a benefit of several client not years. primary Consequently, (1993) (see Corp. Superior insurance Montrose Chemical Court liability 1153]), P.2d it also lost Cal.Rptr.2d 295-296 [24 costs. for the sums it in defense paid alternative uses substantial profitable contin- were not attorneys’ alleged neglect These detrimental effects Further, that action could not coverage on the outcome of the action. gent or a either of a insurance advice duty timely establish a breach to provide and the damages. causal between claimed alleged neglect relationship Instead, reflected client’s action settlement coverage simply preex- omissions had diminished attorneys’ isting predicament—the insurance client’s its benefits. right liability damage. The loss or of a constitutes or right remedy injury diminution (Adams, Neither J.).) renders that difficulty amount nor uncertainty proof speculative was first realiza- (Ibid.) or inchoate. action settlement not the resolved tion of the settlement alleged malpractice; simply from Atta (See v. Van mitigate Foxborough one alternative means to that injury. 525].) Accordingly, Cal.Rptr.2d Cal.App.4th than that the client sustained actual more facts established undisputed one before it commenced this suit. year Background
Factual Procedural Inc., Avi, Joe, (the Na- and Ralph Jordache Nakash Enterprises, Brobeck, (Brobeck) & kashes), retained the law firm Harrison Phleger (the to defend et al. v. Joe et al. Georges them in Marciano Nakash filed Court.2 The action), Angeles Superior Marciano a lawsuit in Los claims, several was mar- including Marciano action involved Guess?, Inc., action was Two weeks after that keting “knockoffs” of apparel. broker, insurance Advocate filed in November Jordache contacted its on insurance (Advocate advice Brokerage Brokerage), requested Corp. *6 insur- for Advocate informed Jordache its Brokerage the action. coverage Advocate ance for lawsuit. Neither Jordache nor coverage no provided Jordache’s insurers notice of Marciano action. Brokerage gave Brobeck, offer, any did from and Brobeck did not Jordache not request did insurance for the Marciano Brobeck coverage advice concerning action.. officers, directors, Enterprises, Inc. and shareholders of Jordache 2The Nakashes were California, Inc., company, Apparel another Ditto Together company with related their collectively in this they plaintiffs plaintiffs are the this action. We refer to the as Jordache opinion. not ask about Jordache’s insurance or otherwise investigate whether for an insurer’s to defend the Marciano potential coverage might trigger duty action. 1987, Jones,
In Reavis & Day, Brobeck as Jor- April Pogue replaced dache’s counsel of record in the Marciano action. Its new counsel advised Jordache there was insurance for that action. In potential coverage August 1987, Jordache instructed its counsel to demand that its insurers defend the Marciano action and related two cases then in Delaware and pending Hong Counsel sent of the fifth Kong. amended in the Marciano copies complaint action and the Delaware and Hong Kong Advocate complaints Brokerage and asked it to submit the claims to Jordache’s insurers.
In December Jordache retained the law firm of Conkle & Olesten gave “exclusive to make and authority” claims prosecute concerning the Marciano action against Jordache’s insurers. liability By December Jordache had discovered Brobeck’s in not or alleged negligence notifying Jordache advising its insurers of the notify Marciano action. outset,
At the Jordache and its new counsel discussed the predicament which Jordache found itself because of Brobeck’s omissions. A issue” “big in these discussions early was the that the probability insurers would raise a late instance, notice defense to Jordache’s claim. For one of Jordache’s insurance liability Jordache to the insurer policies required notify “whenever has information from which [Jordache] reasonably [it] conclude that an Occurrence covered . . . involved injuries damages which, in the event that should be held liable is likely to involve [Jordache] . . . .” policy [the]
More than three years after Marciano action Conkle & Olesten begin, tendered formally defense of the action to Jordache’s directly liability after, insurance insurers, carriers. Soon in February Jordache sued its failed to alleging they a defense and provide refused to acknowl- wrongfully edge coverage. sought $30 reimbursement for million it had alleg- edly fees and costs in paid the Marciano action. Jordache also asserted the Nakashes and their lost millions of dollars in companies profits because the funds on fees would have spent otherwise been used for investments. profitable
One of the insurers Jordache sued was National Union Fire Insurance (National Company Pittsburgh, Pennsylvania Union). Its answer to the and its November 1988 complaint interrogatory answers denied any liability, *7 alleging Jordache’s notice untimely of Marciano action had caused it substantial prejudice. 1990, and National Union the Marciano action settled. Jordache
In May of issues in their insur- for summary adjudication then filed cross-motions 1990, 26, on those ruling The trial court’s July ance coverage litigation. within (1) liability Marciano action potential motions found: presented and thus the insur- triggered advertising liability coverage National Union’s defend; of the claim (2) did not National Union notify er’s to Jordache duty and months after eight after the Marciano action began, until three years filed, a matter of was notice as untimely fifth amended was which complaint law; National Union (3) substantially the late notice prejudiced whether 31, 1990, its fact. Jordache settled July a triable issue of material On was $12.5 suits for million. insurance of limitations from August
Jordache and Brobeck to toll statute agreed 15, 1990, 15, 1991, had against claims Jordache to February Brobeck, result, action Brobeck. As a Jordache’s 14, 1991, on 1990. August was deemed to have been filed filed February (1) omissions Brobeck: by alleged only Jordache’s malpractice complaint Jor- to investigate—whether to to advise Jordache investigate—or failing action, (2) to failing recognize the Marciano dache’s insurance cover might action, the Marciano insurance covered liability that Jordache’s potentially liability Jordache to (3) notify—the to advise notify—or failing the Marciano action. covered insurers whose policies potentially that section 340.6 asserting for summary judgment, Brobeck moved because, than Jordache discovered claims no later barred Jordache’s (1) lost actual in the form of omissions and sustained the alleged in the monies diverted to defense costs from business investment profits action, benefits for defense costs in- insurance forgone Marciano of the Marciano action. Jordache before Jordache tendered defense curred December Brobeck’s omissions 1987. alleged by that it discovered agreed actual that it did not sustain the motion on the ground Jordache opposed than the full amount of its National Union for less until it settled with claim.3 one It found that more than summary judgment.
The trial court granted filed, Jordache sustained suit was deemed before Jordache’s year Marciano action represent continued to asserted that Brobeck 3Jordache also 340.6, under section subdivision tolling period thus the limitations through November “(2) represent (a)(2). during the time continues provision tolls the That alleged wrongful act or subject in which the regarding specific matter (§ (a)(2).) Brobeck no The trial court concluded . . . .” subd. omission occurred by “subject regarding the matter” longer represented Jordache authority insurance & exclusive over gave Conkle Olesten December coverage matters. *8 within the of section injury meaning 340.6 because it claimed it lost millions of dollars of business before it tendered the Marciano profits action’s defense to its insurers. The court stated this was an immediate injury 26, 1990, and was not on deprivation property contingent July ruling in the National Union action. reversed,
The Court of that Jordache suffered no actual Appeal holding within the of section meaning 340.6 until it settled the National Union action in The Court of July 1990. concluded that whether Brobeck’s Appeal omissions Jordache’s impaired interests in the benefits of its insurance was on the policies contingent outcome of the National Union action. The court said the resolution of that action included a “necessarily determination Thus, the effect regarding of Brobeck’s the .causal purported malpractice. connection between Brobeck’s negligent advice and Jordache’s damages, both of which are components rise to necessary give was injury, established when Jordache settled the insurance lawsuit after the trial court found both the for potential and late notice of the Marciano claims.”4
We granted Brobeck’s petition review limited the issue “to 340.6, whether (. ‘actual . . subd injury’ (a)(1)) from [Jordache’s] § allegedly negligent failure to tender [Brobeck’s] defense of a third party action to insurers occurred settlement of the upon [Jordache’s] subsequent coverage actions against insurers.”
Discussion This case presents relatively narrow When does question: former client—having discovered the facts of its attorneys’ malpractice— sustain actual so as to commencement require action attorneys within one year?5 differences in Superficial this answering ques tion unavoidable, in different cases bemay given vast of circum range stances legal malpractice claims can involve. Clients employ attorneys throughout affairs, spectrum personal commercial and attorney errors do not Nevertheless, always produce simple under consequences. standing function of the actual facilitates injury provision its consistent to the application factual specific circumstances of the case. particular 4Having found that Jordache did not year filing sustain actual more than one before suit, raised, the Court Appeal unnecessary found it to address the other issues Jordache including applicability tolling provision. other terms, 5By phrasing the issue in these we do not decide the merits of Jordache’s claim that representation” tolling (a)(2), “continuous provision of section subdivision also applies to this case. The Appeal Court of did not ruling reach the merits of the trial court’s on issue, point. grant Our of review did not include this and we do not resolve it. We assume tolling provisions other apply purpose focusing do not for the injury” on the “actual question. *9 in actual analyzing on Budd’s disagree significance
Brobeck and Jordache
Budd. A
that section 340.6 codifies
In
Jordache disputes
injury.
particular,
starting
of Budd’s role thus is an appropriate
point.
recapitulation
Budd and Actual Injury
the
holdings
not
a mechanical
of
transcription
Section 340.6 is
simply
(1971)
The Legislature the Committee on (1977-1978 Sess.). Assembly When the bill went to Reg. for the time the had it contained a tolling Judiciary, provision 1, 4.) The noted Digest not sustained “significant injury.” (Digest, supra, pp. the detailed analysis that the committee members had been “provided of limitations recently published recommended statutes legal malpractice to toll 3.) That analysis proposed the State Bar Journal.” (Digest, on Budd’s that holding until occurred based statute “significant” accrual harm” sufficed for a cause of action’s and actual any “appreciable (Budd, commencement 6 Cal.3d of the limitations period. Mallen, 201; Limitations Panacea or Pandora’s Box? A Statute see for Smith, 22, 24; 2 (1977) Legal Bar J. Mallen & Malpractice State Lawyers Limitations, 21.11, (4th 1996) ed. Statutes of § history legislative mate requested judicial notice of various 6Both Brobeck and Jordache is grant requests respect with to a document rials and other documents. We both language—the Assembly Commit adoption injury” of the “actual contemporaneous with the Sess.) (1977-1978 Reg. amended Digest Assembly Judiciary tee Bill No. 298 on 452, 9, Code, (Evid. (c).)
May (Digest). subd. § legislative copies materials and judicial notice included other parties’ requests The for However, judicial for which notice of requests present decisions. no issue other courts’ deny judicial Accordingly, request we for necessary, helpful, items or relevant. these is and-federal legislative history and the various sister state notice of the additional materials 1057, (See Reynolds 1063- Mangini R. J. Tobacco Co. court decisions. 73].) deny request judicial for notice We also Jordache’s Cal.Rptr.2d 875 P.2d data, directory popular national biographical extracted from a partners’ three Brobeck case, to decide this attorneys require do not that information and law firms. We under directory requirements judicial notice satisfies has not demonstrated (h). Code section subdivision Evidence Neel, Budd, The referred Digest 6 Cal.3d decisions, Cal.3d when it stated: “In two landmark 1971 the California Court Supreme modified rule to that in an substantially prior] provide [the action for cause of action does not accrue until the malpractice, knows or should know the material facts in issue for a legal action sustains and the damage.” (Digest, supra, 2.) alluded Digest again to Budd in commencement discussing *10 limitations “The court has period: recognized only when the negligent act results in an actual injury will action for exist. legal malpractice Bill Assembly that the statute provides of limitations is tolled until the sustains plaintiff significant 4.) The committee injury.” (Digest, supra, p. amended the to “actual provision rather than specify injury” “significant (Id., 1.) at injury.” p.
Therefore, noted, as we have the Legislature’s choice of “actual injury” for the tolling provision was intended to plainly (See, invoke Budd. e.g., Adams, Laird, supra, 11 Cal.4th at p. 1); supra, 612.) Cal.4th at p. from import change “significant” to “actual” also is clear: The reasonably used the term Legislature “actual” to focus on the fact of inquiry it omitted other damage; qualifiers, preclude into digressions whether various quantities the limitations damage trigger Laird, (See 613; period. Atta, supra, Cal.4th at v. Van p. Foxborough 226; Smith, at see also 2 Mallen & Cal.App.4th Legal Malprac- tice, Limitations, Statutes of 784-785.) pp. §
Budd’s basic was that a premise could not a plaintiff assert cause of action for commence, and hence the malpractice, limitations should not until the sustained plaintiff some damage occasioned by attorney’s (Budd, negligence. 200-201.) 6 Cal.3d at Budd recognized that “actual loss or damage from the resulting was professional’s negligence” an essential element of a cause of action in tort for professional negligence. (Id. Thus, at Budd held that the statute of limitations to run began when the sustained loss or from the damage attorney’s negligence that allowed the to assert a (Id. cause of action. 200-201.) terms, In section 340.6’s the one-year limitations period that commences when the plaintiff actually discovers the constructively act or attorney’s wrongful omission is no tolled longer after the plaintiff i.e., sustains actual when the injury, can plead legal malpractice cause of action.
Budd remains instructive on the test for actual
“If the
injury:
allegedly
conduct does not cause
negligent
no
damage, generates
cause of action in
nomi-
duty, causing only
breach of a
tort.
The mere
professional
[Citation.]
harm,
real-
yet
threat of future harm—not
or the
nal damages, speculative
action for negligence.
to create cause of
[Citations.]
ized—does not suffice
Hence,
harm as a
suffers
consequence
[the]
until the client
appreciable
a cause of action
the client cannot establish
attorney’s negligence,
200,
“The cause of
omitted.)
fn.
6 Cal.3d at
(Budd,
malpractice.”
all,
arises, however,
or even the greater part,
before the client sustains
action
Any
attorney’s negligence.
occasioned
damages
by
[Citations.]
[the]
conduct
attorney’s negligent
flowing
and actual harm
appreciable
from
(Id.
client
sue.”
which the
upon
establishes a cause
action
added.)
italics
Thus, Davies
made
what Budd implied.
decisions have
explicit
Subsequent
535 P.2d
Cal.Rptr.
14 Cal.3d
v. Krasna
does not
existence of
held that the
appreciable
A.L.R.3d 807]
sum of
money
to attribute a
ability
quantifiable
on
depend
plaintiff’s
*11
that actual
Laird
the claims
damages. Similarly,
rejected
consequential
limitations
defined
amount and that the
aby monetary
should be
is,
(Laird,
in some
remediable.
way,
tolled if the injury
should be
period
611, 614-617;
(1995)
36
see Baltins
James
2 Cal.4th at
supra,
pp.
Atta,
1193,
896];
v. Van
Foxborough
1203
Cal.Rptr.2d
Cal.App.4th
[42
that actual
226-227.)
Adams recognized
at pp.
supra,
Cal.App.4th
diminution,
total loss or
as well as the
or
consist of
may
impairment
589-590,
extinction,
at
(Adams,
supra,
pp.
or
right
remedy.
Kennard,
J.);
591,
J.);
(cone.
at
id.
fn. 5
Atta,
at
Cal.App.4th
v. Van
Foxborough
[“[W]hen
see
interest, or in the
of a
or
right, remedy,
in the loss
results
malpractice
of whether
been actual injury regardless
of a
there has
liability,
imposition
the
or the amount
the
affect
permanency
events
future
Smith,
Mal-
incurred.”];
&
Legal
2 Mallen
monetary damages eventually
21.11,
Limitations,
782.)
at p.
Statutes of
§
practice,
there incurred
the
damages
plaintiff
Budd’s discussion of
possible
Budd, the defendant
actual
In
injury.
the nature of
further illuminates
against
in a third
suit
a crucial defense
party’s
failed to
attorney
allege
(Budd,
he
of which
was president.
and the corporation
plaintiff
the defendant’s
to
unsuccessfully
rectify
counsel tried
198.)
New
Cal.3d
omission;
personally.
entered
plaintiff
the trial court
judgment
could
after remand
the facts
198-199.) Budd said
(Id.
presented
at pp.
defendant
he
damage
paid
suffered
demonstrate
plaintiff
exceed
fees,
caused these payments
if the attorney’s negligence
attorney’s
201-202.) The court also observed
(Id. at
services.
the value of
that the
have had a
plaintiff might
viable tort
claim for the fees
damage
paid
to the second
the defendant’s error.
untangle
In
{Id.
the latter fees as a
characterizing
allows a
type
damage
accrue,
cause of action to
Budd
the established rule that
simply recognized
attorney fees incurred as a direct result of another’s tort are recoverable
(See
Brandt v.
damages.
(1985)
Court
37 Cal.3d
Superior
817-818 [210
796];
693 P.2d
Prentice
Cal.Rptr.
vi North Amer. Title Guar. Corp.
Cal.2d
645];
381 P.2d
cf. 2 Mallen &
Cal.Rptr.
Smith,
19.10,
Legal Malpractice, supra, Damages,
610-612 [attorney
atpp.
§
fees as mitigation
recoverable in
expenses
action].)7
340.6,
“actual injury”
in section
provision
(a)(1),
subdivision
effec-
Budd,
continues the
tively
accrual rule Budd established. Under
the cause of
action could not accrue until the
suffered
plaintiff
actual loss or damage
resulting from the
{Budd,
conduct.
allegedly negligent
The test for therefore, actual under injury section is whether the has sustained plaintiff action, any damages in an compensable other than one fraud, for actual against an for a wrongful act or omission in arising of performance professional services. This is consistent interpretation with the of the plain language statute and the manifest Legislature’s intent in section enacting 340.6. As the lead and concurring in Adams opinions emphasized, when actual determining occurred is a predominantly {Adams, factual Arabian, inquiry. supra, (lead Cal.4th at of p. opn. J.); Kennard, id. at (cone. p. J.).) opn. When the material are facts the trial court can undisputed, resolve the a matter as of law in question with conformity summary judgment át (lead principles. pp. 592 opn. {Id. Arabian, J.).) respect said, 7With plaintiff’s proposed to the damage, date of plaintiff’s court “If accrued, action in tort had not earlier it at entry judgment least matured on because he
clearly obligated then became pay a party] considerable sum to the post or to a bond [other {Budd, appeal. Thus, on supra, omitted.) [Citation.]” 6 Cal.3d at fn. Budd considered judgment adverse underlying in the action to possible injuries be the last of the actionable discussed in that case. Negligence and Brobeck’s Alleged
Actual Injury an established that actual injury requires suggested The Court Appeal of the and an invasion acts negligent nexus between the attorney’s causal establishing The court also suggested interests. client’s legally protected therefore, and, litigation, the outcome of related often will turn on this nexus concludes. until related litigation does not occur Actual However, Budd and Adams. this from approach departs the cause of to assert damage necessary the legally cognizable refers only must first or settlement that an adjudication action. There is no requirement injury. error and the asserted the attorney’s a causal nexus between confirm analysis a factual of actual injury requires The determination is more necessarily qualita- error and its consequences. inquiry claimed amount, is rather than the the fact of damage, tive than because quantitative at 11 Cal.4th (Adams, the critical factor. Laird, Kennard, at J.); (cone.
J.); id. at 612, 613; Budd, 200-201.) 6 Cal.3d 340.6’s course, not end the of section tolling nominal will damages
Of Thus, concern for Jordache’s expressed there is no basis limitations period. dollar” sustains the “first run once the that the will statutory period Instead, to a have developed concerns whether “events of injury. inquiry merely symbolic not legal remedy, is entitled to where point Krasna, (Davies damages.” of nominal such as award judgment harm, However, neither suffers actual 513.) once 14 Cal.3d at p. tolls the as to their amount uncertainty nor damages difficulty proving (Id. limitations period. ac
Here, Jordache sustained facts established that the undisputed later than December no alleged neglect as a result of Brobeck’s tual injury then, insur of dollars—both unpaid Jordache had lost millions 1987. By and in lost Marciano action profits defense costs in the ance benefits for *13 As Brobeck these defense costs. funds to pay from diversion of investment manifest, and ma asserts, sufficiently nonspeculative, these were damages coverage in its insurance damages to recover them ture that Jordache tried suits. defense of the delay tendering that the years
Brobeck also asserts would they them a defense payment the insurers gave Marciano action to Jordache’s insurance policies had been made as have had if the tender not Jordache’s diminished alleged neglect Brobeck’s required. Consequently, did and National Union the insurers could Because rights. insurance contract claims, assert an viable “late objectively notice” defense to Jordache’s defense, Jordache incurred additional necessarily costs to meet that litigation Laird, and the (Cf. settlement value of its claims decreased.
at however, Ultimately, Jordache’s insurance could not coverage litigation determine the existence or effect of Brobeck’s As alleged negligence. notes, Brobeck failure to alleged advise Jordache on insurance matters Thus, was not at issue in the lawsuits. coverage resolution of that litigation would not determine whether Brobeck breached its to Jor- duty reason, dache. For the same could not determine the coverage litigation from Brobeck’s consequences resulting breach of duty. coverage litigation’s resolution was relevant to Brobeck’s alleged negligence only insofar as it affected the potentially amount of damages might recover from Brobeck.
The Court of nonetheless stated that Appeal Jordache sustained any injury was only until speculative settlement of the actions. The coverage court reasoned that if Jordache had on its claim that notice to prevailed Advocate insurers, Brokerage was notice to timely then Brobeck’s omissions would have caused no injury. the court said Similarly, that if Jordache’s were found policies no provide potential for the Marciano coverage action, then Brobeck’s failure to advise Jordache to tender the defense would not have affected Jordache’s rights. policy
However, the result confirm, of Jordache’s could coverage litigation create, but not Jordache’s actual from the injuries late tender of the Marciano action’s defense. Jordache’s right to an insurer-funded defense existed or not when that action first embroiled Jordache. The to that insurance right benefit, the of that impairment and Jordache’s right, while that expenditures unavailable, right was did not arise for the first time when Jordache settled with the insurers. As Brobeck suggests, in Jordache’s finding coverage litigation its policies no could provided have Brobeck at given best a defense to some of Jordache’s claims. damage Similarly, determi- nation that Jordache’s contacts with Advocate satisfied the Brokerage poli- cies’ notice would not requirements Brobeck’s preclude potential liability direct, certain, for not a more advising method of timely obtaining insurer-funded defense of the Marciano action. To an observation paraphrase from Laird: the outcome of the Although coverage litigation have reduced Jordache’s that action damages, could neither exonerate necessarily Brobeck, nor extinguish Jordache’s action Brobeck for failure to *14 {Laird, render advice on timely insurance issues. Cal.4th at until the trial court contingent not or Jordache’s were injuries speculative its Jordache and Jordache settled insurers had a to defend duty ruled the reiterated, and contingent injuries claims. As Adams coverage speculative exist, creates as when an error attorney’s are those that do not yet at {Adams, in the future. 11 Cal.4th 589-590 pp. for harm potential Kennard, J.).) (cone. An J.); id. at 597-598 because future events is not or contingent simply existing injury speculative monetary damages eventually or the amount of affect its permanency 227; Atta, see Van Cal.App.4th incurred. {Foxborough 52]; (1993) 15 617-618 Cal.Rptr.2d v. Sinnott Cal.App.4th Saftne Thus, Laird, 614-615.). distinguish we must cf. actual, reduced in the that be remedied or existing injury might between future, not arise in might or that or contingent injury might a speculative Here, millions of dollars to defend alleged expended the future. investments action and lost millions of dollars from profitable the Marciano actual, and the dimi- These existing injuries, defense costs. forgone pay occasioned, the late tender did nution of Jordache’s insurance policy rights settled. first arise was coverage litigation not ultimate The circumstances of this case highlight problems, rules to determine to formulate futility, categorical attempting The Court of classes of claims. Appeal for broad malpractice necessary of Jordache’s was coverage litigation believed the resolution and to establish determine the effect of Brobeck’s However, damages. its omissions and Jordache’s causal connection between issues determining without coverage litigation the settlement terminated event, litigation In any to the claims. pertinent long delay formally determined the cause of Jordache’s could not have Therefore, Marciano action to its insurers. directly defense of the tendering the existence of Brobeck’s alleged could not establish either that litigation and Jordache’s neglect causal connection between negligence damages. that tolls the to create a rule general obstacles any attempt
Two preclude a causal connection until a related lawsuit establishes limitations period First, have no such a rule would injury. error and resulting between Second, intent. legislative of the statute involved or basis in the language Most litigation. by exigencies often would be frustrated such a rule settle,8 money the allocation of determining only for damages civil lawsuits factors can influence different Many to end the necessary litigation. (foreword by page vii Lynch, Negotiation and Settlement Handbook 8See California Lucas). M. Supreme Court Chief Justice Malcolm former California
755 suit; claim decision a a related or not be may may to settle settlements, related a decisive. Given the litigation prevalence claim is to conclude with a determination unlikely judicial either the error nexus damages or causal between establishing attorney’s Moreover, and the error. there is no a settlement will determine guarantee error, issue connected with the extent to any attorney which except perhaps event, have been In a settlement that to do damages mitigated. purports more could not determine the issues in a action legal malpractice the settlement does not bind. attorneys established,
As
Adams
determination of actual
does not
form of
necessarily
some
or settlement.
require
adjudication, judgment,
{Adams,
J.);
As a to related party litigation, prospective malpractice plain- tiff could influence the course of the collateral suit and the of its timing A conclusion. rule that invariably tolls limitations if collateral litigation might affect conflicts damages with section 340.6’s terms and is inimical to its Laird’s comments about the limitations purposes. tolling statute to the pending well Court of rule in appeal apply tolling Appeal’s Laird, (See this case. 2 Cal.4th at Delaying recognition until related litigation concludes would a client who has give error, sustained actionable and who is aware of the damages, attorney’s unilateral control over the limitations This result would undermine period. the Legislature’s a statute enacting {Ibid.) of limitations. purpose
Jordache’s Public Policy Arguments Limitations statutes are intended to enable defendants to marshal evidence while memories facts are fresh and to defendants with provide Intemat., (See acts. Romano repose past (1996) v. Rockwell Inc. 479, 20, 1114]; P.2d v. Eli Jolly Lilly & Co. Cal.Rptr.2d [59 (1988) 923]; 44 Cal.3d 1111-1112 P.2d Cal.Rptr. [245 39 Cal.3d 898-899 Cal.Rptr. Gutierrez Mofid *16 observed, 886].) goal P.2d As Laird limitations legislative underlying of so that legal statutes is to known claims require diligent prosecution their and so that affairs can have claims necessary finality predictability resolved while remains available fresh. reasonably can be evidence stated, 618.) a {Laird, As Laird also plaintiff’s at supra, undermine these leg- unilateral control statute’s commencement can 618.) at islative goals. p. {Id. but a acknowledges Jordache these purposes argues countervailing “ ” defenses’ decisions that deem limitations statutes ‘technical citing
policy, forfeiture of a rights. that are construed to avoid strictly plaintiff’s {Steketee Lintz, Cal.3d (1985) v. Williams & 38 56 Rothberg Cal.Rptr. [210 see, 1153]; Co. P.2d National Fire Ins. e.g., Bollinger However, this 399].) subject P.2d rule is to Cal.2d interpretive 340.6. two caveats to section applied
First,
are in
the lead
stated:
of
fact
repose
in Adams
opinion
“[Statutes
law,
justice
surprises
favored in the
to
‘designed
promote
by preventing
that have been
to slumber until
the revival
claims
allowed
through
lost,
faded,
have
has been
memories have
and witnesses
evidence
disap-
a
not to
is that even if one has
claim it is
theory
just
unjust
put
peared.
on notice
limitation and that the
to defend within
adversary
period
comes
the right
to be free
stale claims in time
to
over
to
right
prevail
{Adams,
at
them.’
prosecute
[Citation.]”
Arabian, J.).)
Second,
struck
Legislature
section 340.6 reflects
balance the
and the
interest in
meritorious claim
public
between plaintiff’s
pursuing
of known
The courts may
interests
assertion
claims.
not
policy
prompt
that balance
extend or toll
limitations
by devising
shift
expedients
disallowed
under
circum
any
The Legislature
tolling
period.
expressly
61.8.)
In
{Laird,
stated in the
Cal.4th at
stances not
statute.
event,
discovery
as the lead
in Adams
continuous
opinion
suggested,
of section 340.6 help protect
representation provisions
meritorious
from
or inadvertent forfeiture of
claims.
unknowing
plaintiffs
Adams,
592.)
to achieve
(See
Cal.4th at
fairness
Consequently,
claims,
and to
need not
just
artificially
to
avoid forfeiture
we
plaintiffs
to sue
discover their
extend the time
after
plaintiffs
interpret
claims.
damage
and have
attorneys’ negligence
cognizable
are designed
also
that statutes of limitation
suggests
judicial
lawsuits and
unnecessary
promote
discourage prosecution
Here,
on
from Romano v. Rockwell
Jordache draws
economy.
excerpts
Internal, Inc.,
494-495,
From Romano’s discussion Jordache to rules glean attempts policy gener- to all and to ally statutes limitations applicable particularly applicable Thus, section 340.6. Jordache that the reasons interests of judicial economy to be able to determine the date a require parties accurately promptly limitations commences and the of a limitations defense. period viability Jordache also asserts would be served if the did judicial economy plaintiff not have to sue a chance while remained that the act leave wrongful might no Jordache damage. Lastly, contends the should not run statutory period sue, when it is inconvénient or difficult for a to related plaintiff remains litigation pending.
Whatever the merits of these in other the policies settings, legislative scheme embodied in section 340.6 allocates their relative weight legal actions. Section 340.6 does not commence the limita- one-year Instead, tions with a period ascertainable event. the single, immediately decided Legislature the would the statutory first on period depend factually discovered, intensive of when the question or should plaintiff reasonably discovered, have the facts the act or omission. constituting wrongful 340.6, (§ (a).) subd.
The scheme also legislative accommodates concerns about effectively suits the limitations if the has not premature by tolling period plaintiff 340.6, result, (§ sustained actual (a)(1).) subd. As a a injury. plaintiff error, or actually who discovered the but who has constructively attorney’s action, suffered no to cause of need not damage legal support Rather, file suit that still has one prematurely. year sustaining after whether, how, actionable to assess to the pursue remedy against has accorded a measure of relief to a attorney. Legislature who finds it suit impossible bring by tolling statutory during period time the “is under a legal which restricts physical disability 340.6, (§ (a)(4).) to commence action.” subd. ability
plaintiff’s Except statute, however, for the circumstances specified Legislature intended to disallow or extension of the limitations expressly tolling {Laird., for other reasons. 2 Cal.4th at Jordache’s other concerns likewise do not us to policy require interpret in a that the limitations undermines the way prolongs period, statute’s fundamental and conflicts intent. Legislature’s with purposes, that for confi- suggests attorney-client relationships privileges dential matters be if clients had to sue their attorneys would while disrupted However, related for con- pursuing litigation. tolling explicit provision (§ tinuous addresses some of these concerns. subd. representation Moreover, observed, (a)(2).) as Adams law means for existing provides courts to deal arise from the of a filing with potential problems {Adams, action when related is legal malpractice litigation pending. J.).) 11 Cal.4th at The case management 592-593 courts, tools available to trial the inherent including authority stay *18 action and the to ability when issue orders when appropriate protective can overcome of simultaneous if do necessary, litigation they problems {Ibid.) occur. Budd, Section Case Law
Reconciling
Subsequent
that several
decisions
section 340.6
argues
addressing
appellate
view,
decisions,
its
while Brobeck’s
is
to other
support
position
contrary
Adams,
583,
Parts,
International
Inc. v.
including
Engine
150,
(1995)
Feddersen & Co.
The Court of 6 Cal.3d said following Appeal, sustained actual when he incurred fees to defend the medical injury attorney Latts, 928-929.) (Sirott suit. v. at malpractice supra, Cal.App.4th doctor fees were not actual because were less argued injury they than the he would have if he had premium paid disregarded negligent advice. The court this “novel and that actual rejected argument” unsupported (Id. 929.) can be negated some form of offset. at by
Sirott on to that the went comment doctor sustained another form of actual more than one before he sued the The court said that year attorneys. award, confirmed the arbitration the doctor suffered judgment at that because he damage well lost point right malpractice insurance coverage—the (Sirott advice. v. subject allegedly negligent Latts, supra, Cal.App.4th
However, to Jordache’s does not contrary suggestion, Sirott support rule that general determinations are actual judicial necessary precursors First, the court injury. found under Budd that the doctor properly sustained of section he incurred purposes 340.6 when costs to defend the medical action because he had no insurance. Latts, (Sirott 928-929; Adams, see Cal.App.4th *19 Cal.4th at fn. 5 and J.); text id. accompanying Kennard, (cone. at J.); cf. p. Indemnity Walker v. Co. Pacific (1960) 183 when inad- Cal.App.2d Cal.Rptr. injury 924] [no insurance third nevertheless defense of equate coverage provided party’s claim].)
Second, the insurance advice their attorneys’ negligent essentially was of how the insurer’s to the tail and the prediction right coverage premium, doctor’s right without the would be resolved if paying premium, Thus, adjudicated. we view this of the decision an Sirott as instance aspect where the advice or actions on the propriety attorney’s depended James, outcome of a claim (See or a client. Baltins v. by against circumstances, 1208.) at In these the claim have to be Cal.App.4th may resolved order for the client to know that the erred. The attorney pertinent there not be when the sustained actual but when inquiry plaintiff injury, discovered, discovered, the should have the facts plaintiff reasonably a act constituting wrongful (§ (a).) or omission. subd. event,
In the circumstances of do not Jordache’s claims any Sirott support actual Jordache does not that Brobeck delayed injury. allege negligently a future result or otherwise Jordache incor- predicted adjudication’s advised Rather, Jordache omissions—a failure to rectly. alleges only investigate Also, insurance issues or render advice. Jordache acknowl- any appropriate it discovered Brobeck’s errors before it sued its insurers. Like edged alleged Sirott, the doctor in Jordache incurred fees because its attorney attorneys’ errors caused benefit of a insurance alleged forgo primary liability Sirott therefore does not that Jordache’s assertion its policy. support occurred when it settled the only coverage litigation. Atta, Jordache also refers to v. Van Foxborough Cal.App.4th 217. The defendant there failed to certain auto- allegedly secure matic without time constraints in development rights exchange preparing Instead, (Id. 222.) for the at agreement owned. the property plaintiff after three rights as a state development expired years, regulation required. (Id. onerous, 223.) at The then had to resort tó more plaintiff expensive, course to its The also unpredictable pursue development plans. plaintiff sued the other to the for an exchange party agreement, seeking damages (Ibid.) failure to the would notify plaintiff rights expire. Court of held the sustained actual when the Appeal plaintiff develop- ment the statute was not tolled until the lost its suit rights expired; (Id. 226-227.) the other at party.
Jordache finds it that did not hold the significant Foxborough sustained actual became effective exchange agreement without unlimited automatic rights. Foxbor- development suggests immediate therefore that an diminution of a ough supports proposition However, such as unlimited is not actual right, right, injury. development noted, could have exercised Foxborough development Thus, time, time the initial rights during three-year during period. (Fox- harm. created attorney’s alleged negligence potential Atta, v. Van The loss of the borough Cal.App.4th automatic and hence the actual oc- rights, injury, plaintiff’s development *20 (Ibid.) curred the three-year period expired. James,
Jordache also relies on Baltins v. 36 supra, 1193. Cal.App.4th case, wife, in that husband and alleged attorney negligently plaintiffs advised them about real while the transferring managing property husband an order aside his settlement community appealed setting property with his former wife. to the agreement According attorney complaint, that, told the husband could treat the plaintiffs during appeal, property
761 wife, to if the order did not exist. The husband transferred ranch his new He was a asset of his former also although community marriage. spent $500,000 than he under the former settlement more on received properties He he made the because the told agreement. alleged expenditures him he would receive either title to the or reimbursement. After properties the order was affirmed on the trial entered a finding court appeal, judgment the husband breached his duties fiduciary regarding community property (id. most of the reimbursement he at denying credits sought, pp. action, concluded, 1197-1199.) In the the Court of legal malpractice Appeal “Under the error in [plaintiffs’] allegations, any advice was attorney’s] [the determinable, effect, not and had no until his advice resulted in the following adverse in the dissolution action. at judgment [Citations.]” {Id. that, James,
Jordache contends inas Baltins v. Brobeck’s alleged negli- Jordache gence to a threat of that on the exposed injury depended However, insurers’ the late notice defense. successfully raising alleged in negligence Baltins v. James was that the attorney predicted incorrectly Thus, how a court would resolve an issue in the future. propriety advice, error, hence the existence and effect of on the depended James, future resolution of the issue to the client. v. adversely supra, {Baltins 1196, 1208; Latts, at cf. Cal.App.4th Sirott v. pp. supra, Cal.App.4th 929-930.)9 at pp. contrast, Brobeck’s
By alleged did not professional negligence require to indicate its adjudication existence. Jordache’s claims Brobeck do not another require determine the proceeding affirmative propriety advice or actions. Nor was this an instance where alleged negligence would have no effect at all until a Brobeck’s adjudication. subsequent neglect defense costs in the Marciano action for required pay and to years lose investment for those funds. The opportunities alleged defense, omissions also the insurers an gave objectively viable which Na- tional Union raised when it Jordache’s immediately answered complaint the insurance action. The circumstances Jordache are not alleges James, to those of Baltins comparable v. Like 1193. Cal.App.4th Laird, ITT, 9Baltins contains and Feddersen language suggesting “bright that established James, broad, line general test” actual with applicability. v. {Baltins However, clear, 1204-1205.) as Adams made Cal.App.4th pp. at there are short cut no {Adams, “bright determining line” rules for actual under section 340.6. 588, 591, Arabian, (lead J.); (cone. id. at pp. Cal.4th at opn. pp. opn. fn. Kennard, Instead, J.).) require particular issues examination of the facts of each light wrongful case in act or omission. 591-592 {Id. Kennard, Thus, id. J.); (cone. J.).) language 595-597 to the extent the James, Baltins Cal.App.3d implying injury” can be read as that “actual rule, by any bright disapprove language. is determined line we *21 Latís, and unlike the the in Sirott v. supra, Cal.App.4th James, in fees as a direct attorney Baltins v. plaintiffs expended result of its well before the resolution of attorneys’ alleged negligence any collateral action. judicial court, the recent this Jordache contends that to more decisions of
Turning
actual
to mean
the
to assert a
damage necessary
interpreting
injury
ITT,
245, Feddersen,
cause of action would be
Cal.4th
contrary
supra,
Adams,
In the defendant note loan attorney prepared promissory (ITT, documents to the lender interests. give security various later, 248.) 9 Cal.4th at A few the borrower filed for years bankruptcy that instituted an adversary proceeding challenged adequacy (Ibid.) documents interests. The lender retained to protect security in the adversary counsel to defend documents’ sufficiency proceeding. The lender notified the that it to be indemnified for losses attorney expected that attributable to the loan it also negligence suggested preparing papers; (Id. 248-249.) at should his insurer. attorney notify later, About the lender settled with the debtor and received less years two settlement, than the full value of its Two months after the the lender security. (Id. sued the the loan documents. attorney negligence preparing 249.) that, actions, in transactional once the attorney argued work, it “has defending attorney’s
former client incurs fees attorney discovered the fact of that limitations damage triggers running course, (ITT, italics.) . . . .” Cal.4th at Of original of actual under discovery necessary is not damage component Atta, (a)(1). section v. Van (Foxborough subdivision Cal.App.4th ITT, fees in an effort to
In the lender incurred (ITT, its interests and to its mitigate damages. protect security *22 Nevertheless, 252, that 257.) acknowledge the court did not Cal.4th at fees, documents these incurred to defend attorney negligently prepared effects, (Id. 253.) actual injury. p. reduce the error’s constituted broad, Instead, transactional legal declared a rule: categorical the court “[I]n cases, subject of the documentation is when malpractice adequacy on of adverse entry an action accrues attorney dispute, malpractice settlement, action. It is at this point or dismissal of the underlying judgment, the fact of and suffered ‘actual damage that the former client has discovered Cal.4th at (ITT, due to the under section 340.6.” supra, injury’ italics.) original p. Adams, a
In ITT and in this court described ITT as narrow again presenting circumstances (ITT, that Cal.4th at restricted to the case. holding supra, Adams, Arabian, 258; (lead J.).) We are 11 Cal.4th at opn. convinced, however, that the ITT cannot be reconciled now rules advanced with the factual to determine actual particularized inquiry injury required Budd, Adams, under section 340.6 in accord and our decision in this with Budd, in case. The the rule established Legislature, by codifying 195, did Cal.3d not toll the limitations to await preordained configu- period rations of injury.
The facts of each case must be examined in light specific errors the in each case the rule that alleges. Consequently, applies when sustains actual from transactional matters cannot differ the rule that other from when claims involve applies areas of advice and services. The resolution of related litigation to alleged or not mark the at which a malpractice may may point first sustains actual under section scheme cannot statutory 340.6. accommodate a rule declares otherwise. be- peremptory Accordingly, cause ITT criteria for under section employed determining 340.6 that conflict with the reaffirmed in this we overrule principles opinion, it. that case to an misconceives Feddersen by attempting apply noted, of section 340.6. As Adams Feddersen
analysis specialized presented a rule or circumstances did not articulate of broad general applicability. (Adams, J.); 11 Cal.4th at id. at Kennard, Feddersen, (cone. J.).) In the court considered 595-596 tax return caused harm accountant’s allegedly negligent preparation that commenced the limitations section two-year period provided (Feddersen, subdivision 1. case is the
A distinction between Feddersen Jordache’s key particular limitations statute involved. Feddersen dealt with section subdivision contract, and its limitations two-year for suits “upon obligation *23 339, 1; (§ not founded an instrument of liability . . . .” subd. upon writing Feddersen, 621-622.) Cal.4th at supra, 9 The standards for pp. beginning that limitations result from judicial decisions rather than legislative Feddersen, 614; (See Neel, enactment. Cal.4th at supra, 9 6 Cal.3d supra, 176; Budd, 340.6, 6 Cal.3d In section supra, the established Legislature detailed, and scheme explicit, exclusive and commencing tolling legal limitations The did not establish a periods. Legislature Therefore, not, scheme for section comparable 339. Feddersen does was to, not intended rules for actions—the provide legal malpractice only subject we address here.10
Conclusion Adams, As this court in the determination of recognized when 340.6, error has caused actual under injury section subdivision facile, (a)(1), (Adams, cannot on line” rules. depend “bright supra, 588, Arabian, (lead Cal.4th at J.); (cone, id. at pp. opn. Kennard, Instead, J.).) facts of each case must be particular examined in of the act or light wrongful omission plaintiff alleges against When the attorney. error causes or harm in a alleged injury recoverable action, the has “sustained actual that ends injury” tolling (a)(1). under section subdivision This rule conforms to the of the statute and the language Legislature’s Budd, intention to codify supra, Cal.3d 195. The rule that the recognizes diverse tasks and undertake can create occa- responsibilities attorneys many Thus, sions for error and the facts and circumstances of each injury. case, analyzed light alleged negligence its consequences evidence, revealed can establish by sustained actual under section When the 340.6. material facts are the trial undisputed, court can resolve the as a matter of to the question law according principles (Adams, 11 Cal.4th at governing summary judgment. Budd, 202; Here, J.); 437c.) 6 Cal.3d at see the trial §
court concluded the facts established that Jordache sustained undisputed after it discovered Brobeck’s and more than one alleged neglect before its suit was deemed filed. The year Court of reversed that Appeal decision. conclude the We Court of erred in Jordache did not Appeal holding ITT, part reasoning 10Feddersen relied in on the in applying section (Feddersen, allegedly negligent filing subdivision to an accountant’s of a tax return. However, above, 619-620.) Cal.4th at for the reasons noted we have no occasion case to reexamine this Feddersen’s rationale or rule. settlement of the insurance litigation. sustain actual before Brobeck’s omissions for Jordache of injurious consequences sued. The Court judgment existed more than one before Jordache year the other the Court of did not reach is reversed. Because Appeal Appeal remand from the trial court’s we judgment, issues Jordache raised on appeal the case for further consistent with this opinion. proceedings J., Kennard, J., Baxter, J., J., Brown, concurred. Werdegar, . J,, decision in as KENNARD, many years is fourth Concurring. *24 court addressed the of what constitutes “actual which this has question of a statute of from injury” professional malpractice purposes applying decisions, made a limitations. In the first a of the court majority two to formulate line” rules to the actual misguided “bright govern attempt Parts, (International (1995) determination. Inc. v. Feddersen & Co. 9 Engine 150, (Feddersen); P.2d ITT Small Cal.4th 606 888 Cal.Rptr.2d [38 1279] 552, (1994) Finance Business v. Niles 9 Cal.4th Corp. Cal.Rptr.2d [36 each, (ITT).) I the and authored a 885 P.2d In with disagreed majority 965] out that the lines” separate majority’s “bright opinion pointing proposed and that of a has were the ultimately impractical question suffered actual a fact to be decided on a is necessarily question (Feddersen, (cone, basis. at and dis. case-by-case supra, opn. Kennard, ITT, Kennard, J.); (dis. J.).) at supra, opn. decision, concurred,
In the third
I
a
of the court
which-
majority
that the actual
determination is a
of fact and that
recognized
question
variables,
number of
a set
necessarily
which do not
follow
potential
“[t]he
the
of harm as a fixed
or event
pattern, precludes defining
point
point
(Adams
because reasonable
Paul
becomes too
application
problematic.”
(1995)
(Ad
11 Cal.4th
P.2d
588-589
Cal.Rptr.2d
[46
1205]
Kennard,
ams),
(cone.
J.).)
see also id. at
The decision in the
case,
concur,
but
in which I
not
reaffirms this
present
fully
principle,
earlier,
(ITT,
also
one of
erroneous decisions
overrules
our
expressly
(Feddersen,
245),
Cal.4th
and it
the other erroneous decision
distinguishes
Proc.,
606)
(Code
9 Cal.4th
a
Civ.
construing
statutory provision
ante,
1)
here.
subd.
that is not at issue
(Maj. opn.,
§
Adams,
583, the
has
In this decision and in
majority
a
the
This
made welcome correction in
course of
law’s development.
and,
correction should
I
will be
when this court
ultimately
expect,
completed
Feddersen,
overrules
GEORGE,
dissent. I do so consistent with the position
C.
I respectfully
J.
(1995)
I took in Adams v. Paul
The dissent former Chief Justice in by which I raised First, two general it noted the objections. of result in the inconsistency lead (1992) with our decisions in Laird v. Blacker 2 opinion prior Cal.4th 606, 550, (“actual 828 P.2d for of Cal.Rptr.2d injury” purposes [7 691] Proc., the statute of limitations in a legal action Civ. malpractice [Code (a)(1)] subd. arose at the time of of adverse to the entry judgment § client to failure to client-plaintiff’s rather than at the prosecute], [due conclusion of the conducted on behalf of the client appeal, litigation by to litigation attorneys alleged have committed and ITT Small malpractice), 245, (1994) Business Finance v. Corp. Niles 9 Cal.4th [36 257-258 552, (“actual 885 P.2d for Cal.Rptr.2d of the statute of injury” purposes 965] limitations in a action did not legal arise until of malpractice entry judgment client, adverse to the initiated litigation a borrower the lender- by testing client’s interest created security loan documents the transac- by by prepared tional to (Adams, have committed alleged malpractice). 583, 599-602, Lucas, (dis. Cal.4th J.).) of C. Chief Justice Lucas’s opn. dissent also noted the lead was inconsistent with the opinion policy Parts, our decision in underlying International Inc. v. Feddersen & Engine 606, 150, (1995) Co. (“actual 888 P.2d Cal.Rptr.2d [38 1279] of the statute of in an injury” limitations accountant purpose malpractice Proc., 339, action Civ. subd. did not arise until conclusion of an § [Code 1] 150, (1971) Kaplan Superior Cal.Rptr. 1See Court 6 Cal.3d 491 P.2d 1] Burke, (cone. J.); opn. Superior Cal.Rptr. of Renters v. Court 2 Cal.3d 669 [87 J.; (cone. id., Burke, J.). opn. Wright, opn. 470 P.2d of C. cone. of 11] based audit its final assessment of a deficiency Internal Revenue Service tax the accountant who was to have returns upon prepared by committed malpractice).
Second, the consider- dissent in Adams concluded that “important policy ations are best served a rule that ‘actual in missed- by recognizing injury’ statute cases an action occurs at involving underlying point malpractice lawsuit, settlement, of of dis- underlying by whether disposition plaintiff’s (Adams, (dis. missal or adverse judgment.” Lucas, J.).) C. include the ease Those considerations comparative policy rule, narrow favoring of that its with application consistency policy limitation, and construction of statutes of the theoretical advis- practical 599-600, (Id. one at a time. lawsuit 602-605 ability entertaining Lucas, (dis. J.).) C. a rule that measures Additionally, running the statute of limitations from date—before early underlying litigation (or been encour- controversy has will least resolved—inevitably require actions that otherwise not be age) early filing might clients, lead former brought, may malpractice plaintiffs, pursue their legal action more than their action vigorously underlying the third for reasons other than the relative merits of the two party, actions and the relative tortfeasors. For ex- culpability respective the former client conclude that a law firm is a less ample, wealthy defendant than a less affluent third sympathetic party. limitations, case does not involve missed statute of as in present
' Adams, but rather what was
to a missed contractual deadline.
analogous
Nonetheless,
here,
that circumstance does not
appear
justify
majority
*26
Adams,
more than it did the
any
abandoning
reasoning
plurality
Blacker,
in Laird
2 Cal.4th
ITT
Business
v.
Small
employed
Niles,
(in
Finance
a
the context of
Corp.
Parts,
limitations)
different statute of
Inc.
Engine
International
v. Feddersen
Co.,
Furthermore,
case,
&
For would affirm the Court foregoing judgment Appeal.
MOSK, dissent. J. (1994) Cal.4th 245
In ITT Small Business Finance v. Niles Corp. 965], P.2d this court Cal.Rptr.2d adopted pragmatic approach attorney when “actual occurs for of the injury” question purposes Proc., (Code 340.6), statute of limitations Civ. that holding § such actual until does not occur an third is underlying party dispute time, terminated determination or Until that by judicial adverse settlement. the statute of limitations for is tolled. The now majority that line” rule in uncertain reject “bright favor case-by-case approach that will to sue their harm for be require plaintiffs lawyers causally unrelated to the act or omission. I both for lawyers’ disagree analytical reasons. practical Here,
The illogic is defendant majority’s approach lawyers, patent. in an action representing manufacture and involving marketing offs,” “knock did not clothing offer advice concerning availability insurance for coverage defense costs. Plaintiff contacted its insurance broker told that it did not was have such After its defense coverage. own paying costs it for several learned of and tendered years, coverage defense potential of the action to the The insurers. insurers asserted that there was no coverage all, or, insurer, that tender was too late. sued the alternatively, Plaintiff sum, for a substantial eventually settling albeit less than the amount of full It then sued the for coverage. lawyers conclude malpractice. majority limitations, which, that the latter suit was barred the statute of by they determine, commenced to run at the time first had a claim potential i.e., determine first its own defense costs. coverage, paid They that such constituted actual under Code of payment Civil Procedure (a)(1). section subdivision however, concluded,
theAs Court of Appeal persuasively injury, construed, (See means invasion of a properly legally Rest.2d protected right. Torts, word is used the Restatement of ‘injury’ throughout this § [“The to denote the Subject invasion of interest of an- any legally protected definition, other.”].) Under that did not suffer actual as a until the conclusion of the action consequence alleged malpractice insurers, which involved issues of and notice and thus had a direct on the whether it suffered bearing question compensable injury all as a result of the omissions. The failure of lawyers’ alleged defendant to the insurance issues could not have been the cause of harm investigate *27 if, contended, to as the insurers the claims were not covered under if, contended, the notice of the timely policy, gave adequate, case, action. In either no claim for would exist because malpractice omissions could not be deemed to have to lawyers’ required plaintiff pay defense costs. omission to the Although lawyers’ exposed plaintiff defense, that its possibility insurers have viable such defense was might neither certain to be raised nor certain to succeed. The causal connection established only between the omission and was lawyers’ damages plaintiff’s settled its lawsuit with insurers. In the is also apparent. impracticality majority’s approach rule, actions absence of a line clients will be constrained bright bring in- their before could they even lawyers prove compensable to the jury—resulting unnecessary hardship par- potentially expense Moreover, time ties and a waste of clients wishing resources. judicial suits their claims be forced to two preserve legal litigate malpractice thus obvious additional simultaneously, raising practical problems. reasons, For these I would adhere to the rule summarized the Court of by as follows: the time when a client suffers actual Appeal “Pinpointing within of Code of Civil Procedure section 340.6 meaning requires factual determination of what interest the client claims the legally protected invaded, and attorney when that invasion occurred. If a third lawsuit is party filed, the results of determine which will whether or not client’s legally invaded, interest in fact has been or if the occurs protected issue, during course which will determine that the client will litigation not sustain actual until of that third lawsuit disposition party by settlement, dismissal, If, hand, or adverse on the other an under- judgment. lawsuit has been filed but the lying outcome of that will have no proceeding on the existence or bearing effect of the or will lawyer’s malpractice, serve to mitigate resolution of that action will not constitute damages, ‘actual within the of section 340.6. in so-called injury’ meaning Finally, ‘missed statute’ cases in which the fails to file a third timely party action, lawsuit and takes no further the client will suffer actual injury upon of the statute of expiration limitations to the action.” applicable underlying (Fn. omitted.) facts, rule to I conclude that the
Applying foregoing present action should be resolved on the merits. I would Accordingly, affirm the of the Court of judgment Appeal. for a was denied
Appellants’ petition rehearing 1998. September Mosk, J., was of the that the should be opinion petition granted.