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DISTRICT OF COLUMBIA ADOPTS CONTINUOUS REPRESENTATION RULE FOR LEGAL MAL -- BUT MARYLAND DECLINES By Deborah Murrell Whelihan For the present, at least, the District of Columbia and Maryland diverge in their treatment of the "continuous representation rule", which can toll the statute of limitations for legal malpractice cases. This creates yet another basis for forum shopping by astute plaintiff's attorneys. The District of Columbia and Maryland both apply the discovery rule to determine when a cause of action accrues for limitations purposes. Under the discovery rule, a cause of action accrues when a claimant knows (or should have known by the exercise of reasonable diligence) (1) the existence of the injury, (2) its cause in fact, and (3) some evidence of wrongdoing. Once a claimant acquires knowledge sufficient to make an inquiry, the claimant is responsible for investigating and bringing suit within the statute of limitations. During an attorney's representation, a client may have no reason to distrust the attorney and may be unaware of the attorney's mistake. Even where the client knows of the error, the client may be reluctant to disrupt the attorney-client relationship, believing that the error can be corrected. Many jurisdictions have adopted the continuous representation rule through legislation or through judicial decision, because of the concerns that the statute of limitations unnecessarily disrupts the attorney client relationship. In R.D.H. Communications, Ltd., v. Winston, 700 A.2d 766 (D.C. 1997), the District of Columbia Court of Appeals rejected the attorneys' argument that the courts should leave the enactment of a tolling rule to the legislature, and held that the District of Columbia should apply the continuous representation rule to toll a client's cause of action against his attorney "until the attorney's representation concerning the particular matter in issue is terminated." In R.D.H. Communications, the client sued the attorney and law firm who failed to properly prepare and file an application to the FCC for the building of a new radio system. In 1991, the FCC dismissed the application because it failed to include a financial certification page. The day following the dismissal of the application, the attorney informed the client of the dismissal and posited three scenarios for how the certification page was lost, including the possibility that the page was lost when the law firm photocopied the application. The attorney advised the client that they had a strong argument for reinstatement and then filed a petition for reinstatement. More than three years later, and shortly after losing the petition for reinstatement before the United States Court of Appeals for the District of Columbia Circuit, the client filed its lawsuit filed in 1995, which the trial court determined was barred by limitations. In creating an exception to the discovery rule, the Court of Appeals concluded that there was no compelling reason for effectively informing the client that he can no longer trust the professional from whom he seeks guidance, especially where the professional is confident that the error can be remedied. The Court reasoned that its adoption of the continuous representation rule would not simply benefit clients, but would also benefit the attorney-client relationship -- by granting the attorney the opportunity to fix the error, at the client's option. Thus, the Court held that the continuous representation rule applies to toll the statute of limitations even where the client has actual knowledge of the attorney's alleged error. Maryland thus far has declined to judicially adopt the continuous representation rule for legal malpractice. Shortly after the District of Columbia decided R.D.H. Communications, the Court of Special Appeals rejected the opportunity to adopt the continuous representation rule in two reported decisions. In the first case, Edwards v. Demedis, 118 Md. App. 541, 703 A.2d 240 (1997), a number of Baltimore County teachers sued their financial planner, the securities firm that employed the financial planner, and the tax attorney for damages that they incurred when they erroneously created individual retirement accounts, believing the transaction to be tax free. The teachers created the I.R.A. accounts in 1990, but did not sue until 1995 when they had failed to prevail in their federal suits for tax refunds. The teachers argued that their claims were not barred by limitations because they never received notices of deficiencies, they did not know of their damages until they lost their refund suits, and they were continuously represented by the same tax attorney who consistently advised them that his tax advice was right. In affirming that the teachers had failed to timely file their lawsuits, the Court of Special Appeals held, among other things, that continuous representation alone is not sufficient to avoid the bar of limitations. In Edwards, the Court of Special Appeals concluded that, "Once sufficient knowledge of a cause of action existed, continuous representation was irrelevant. The wrong continued over time which is different from a wrong which comes into existence or becomes known only after the passage of time." Similarly, in Frederick Road Ltd v. Brown & Sturm, 1998 WL 3597 (Md. App. 1998), the Court of Special Appeals expressly declined to apply the continuous representation rule, absent any directive from the Legislature or the Court of Appeals. In Frederick Road, the clients retained a law firm in 1981 to assist them in their transfer of their farm to their children. The law firm devised a plan that incurred substantial income, gift, and estate taxes, and the clients followed the law firm's advice, despite receiving contrary advice from another lawyer in a letter dated June 30, 1982. In 1987, the IRS issued deficiency notices. The first law firm defended the clients in the tax court and, in December of 1988, shortly before the trial advised them to settle their case for $20 million. The first law firm told the clients that they had to pay the settlement because the I.R.S. had obtained copy of the letter written by the other lawyer, which the law firm felt compromised their defenses. The law firm then recommended that the clients sue the other lawyer, which they did. Significantly, however, the first law firm did not represent the clients in that suit, due to the advocate-witness rule: thus, the first law firm's representation of the clients with respect to that specific undertaking ended at that time. That malpractice suit ended in favor of the other lawyer, at which time the clients realized that they should sue the first law firm. The clients filed their lawsuit in May of 1995, and it was found barred by limitations. The Court of Special Appeals rejected the clients' purported reliance on the first law firm's explanation of the adverse outcome of the tax issue, and concluded that the date of accrual occurred with the $20 million settlement of the tax case. The Court also found that even if the continuous representation rule applied, it would make no difference, as it would only have tolled the statute of limitations while the representation continued "on the same case that gave rise to the alleged malpractice . . . ." Both the Edwards and Frederick Road decisions relied upon a 1972 decision by the Maryland Court of Appeals, Watson v. Dorsey, 265 Md. 509, 290 A.2d 530 (1972), in which the Court held that the statute of limitations for legal malpractice began to run when there was an adverse trial decision, notwithstanding that the defendant attorney represented the client in the ensuing appeal. |
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