Summary
The Nevada Supreme Court affirmed dismissal of a legal malpractice action against McDonald, Carano & Wilson, LLP as barred by the two-year statute of limitations under NRS 11.207(1). The court held that alleged negligence occurring during non-adversarial portions of a bankruptcy proceeding does not qualify for the litigation-malpractice tolling rule. The court also concluded that any error concerning judicial estoppel was harmless.
Topics
Practice areas
Questions Presented
- Whether the alleged negligence of an attorney representing a creditor in the non-adversarial portions of a bankruptcy proceeding constitutes litigation malpractice such that the Hewitt litigation-malpractice tolling rule applies.
- Whether appellants' professional malpractice claim was timely under the discovery rule in NRS 11.207(1).
- Whether the district court's alternative application of judicial estoppel required reversal.
Holdings
- An attorney's alleged negligence while representing a creditor in the non-adversarial portions of a bankruptcy proceeding does not constitute litigation malpractice for purposes of the Hewitt litigation-malpractice tolling rule.
- NRS 11.207(1)'s two-year discovery rule governed appellants' malpractice claim, and the claim accrued no later than November 3, 2006, when appellants filed their first complaint and were aware of the material facts constituting the claim.
- The district court erred by applying judicial estoppel because appellants had not successfully asserted their first position, but the error was harmless because dismissal was independently proper under NRS 11.207(1).
Key quotations
“The statute of limitations for a professional malpractice claim against an attorney commences on the date the plaintiff discovers, or through due diligence should have discovered, the material facts that constitute the cause of action.” (129 Nev. at 547)
“Non-adversarial bankruptcy proceedings do not constitute litigation for purposes of the litigation malpractice tolling rule” (129 Nev. at 551)
“an attorney's alleged negligence while representing a creditor in the non-adversarial portions of bankruptcy proceedings does not occur in the course of 'litigation,' as that term is used for purposes of the accrual of an attorney malpractice action.” (129 Nev. at 552)
Factual background
Patterson Laboratories, Inc. and Joon S. Moon held interests in a Goodyear, Arizona facility and collateral securing a promissory note owed by Sierra International, Inc. After Sierra filed a Chapter 7 bankruptcy petition, appellants hired McDonald, Carano & Wilson LLP to represent them in the bankruptcy proceeding. Counsel negotiated a stipulation under which appellants obtained possession of collateral and the lease was terminated; counsel's representation ended in February 2003. Appellants later alleged that counsel negligently handled the bankruptcy matter and filed their second malpractice action in October 2010.
Procedural history
Appellants sued their former bankruptcy counsel for professional negligence, breach of contract, and vicarious liability. Their first complaint was dismissed without prejudice for failure to comply with NRCP 16.1(e)(2), and this court affirmed. Appellants filed a second complaint, which the district court dismissed as untimely under NRS 11.207(1). The Supreme Court of Nevada affirmed.