Smith Development, Inc. v. Conway, Record No. 1245-22-4 (Va. Ct. App. Jan. 9, 2024)
Today, a divided Court of Appeals panel decides whether a legal malpractice action is time-barred due to the “particular undertaking” doctrine.
Facts. Smith Development, Inc. (SDI) retained Martin Conway and his firm (Conway) to represent it to “file a chapter 11 bankruptcy petition and obtain confirmation of a plan of reorganization.” That undertaking was memorialized in a 2008 written agreement. The written agreement specified that the scope of Conway’s services did “not include representation on…any other matter not specifically described in this Agreement.”
Conway filed the Chapter 11 proceeding, including three adversary actions. But on March 17, 2010, the bankruptcy court converted the proceeding to a chapter 7 liquidation. As required by law, the court replaced SDI as debtor-in-possession of the bankruptcy estate with the bankruptcy trustee. The bankruptcy trustee retained Conway to continue to work on the adversary actions. While Conway maintained that he no longer represented SDI after the conversion, SDI insisted that Conway’s representation continued because Conway continued to provide it legal advice. On September 10, 2012, the bankruptcy court entered a final order, released the bankruptcy trustee, and closed the case.
Four-and-a-half years later, on April 28, 2017, SDI sued Conway for legal malpractice related to the adversary actions. Conway filed a plea in bar based on the five-year statute of limitations for a written contract, arguing that its services ended on the date of the conversion to a chapter 7 proceeding, and therefore that the statute ran on March 18, 2015. Conway continued that even if it had provided continuing services, those services were a different undertaking, therefore subject to the three-year statute of limitations for an oral or implied contract. Either way, SDI filed suit after the limitations period had run, and Conway filed a motion for summary judgment on that defense.
The trial court agreed with Conway and granted its motion for summary judgment on the basis that SDI’s suit was time-barred. SDI appealed.
Issues. (1) Whether SDI’s action was time-barred. (2) Whether Conway was estopped under Code § 8.01‑229(D)(ii) or common law from asserting the statute of limitations as a defense.
Holdings. (1) Yes. Any legal advice that Conway gave SDI after the conversion was a different undertaking than the one governed by the 2008 contract, thus it was subject to an implied contract and a three-year statute of limitations. (2) No. Conway undertook no fraudulent or deceptive conduct to prevent or delay SDI from filing suit.
Notes. (1) A legal malpractice action accrues “when the attorney last provided legal services on the particular undertaking or transaction at issue,” even if the attorney’s services continued on a different undertaking. Here, the facts are undisputed that that the 2008 contract was for a chapter 11 proceeding, not a chapter 7 proceeding. When the chapter 11 proceeding was converted to a chapter 7 proceeding, SDI was replaced by the bankruptcy trustee as the proper plaintiff and representative of the estate, and Conway’s services ended. Conway could no longer fulfill the purpose of the 2008 contract. Thus, any continued representation was governed by an implied contract with a three-year statute of limitations.
(2) Under Code § 8.01‑229(D)(ii), a defendant may be estopped from asserting the statute of limitations as a defense if it takes an affirmative act or makes a representation “designed to prevent, and which does prevent, the discovery of the cause of action.” That act “must consist of some trick or artifice preventing inquiry, or calculated to hinder a discovery of the cause of action by the use of ordinary diligence.” Under common law, a defendant may be estopped from asserting the statute of limitations as a defense where fraud prevented a plaintiff from asserting claims or where the defendant “has by affirmative act deprived the plaintiff of his power to assert his cause of action in due season.” Here, there was no evidence that Conway did anything to obstruct SDI’s filing, thus neither statutory nor common law equitable estoppel applies.
Dissent. Judge Causey writes a dissent. In her opinion, there are several facts that were in genuine dispute, barring summary judgment. First, she finds that whether Conway continued to represent SDI under a written contract was disputed and outcome-determinative. Second, she finds that the date the action accrued was in dispute. Third, she finds that the parties did not brief or argue the particular undertaking doctrine, continuing representation, or any other exceptions at the trial level, therefore the material facts necessary to establish their applicability are in genuine dispute. Since appellate courts are courts “of review, not of first view,” she finds it inappropriate to decide the case on those bases.