Judicial Finality and Legal Malpractice

For Whom Montgomery Bell Tolls … Not for Tennessee Lawyers

Montgomery Bell was an antebellum Tennessee industrialist who began his remarkable career at the age of 16 as a tanner’s apprentice and then a hatter. He soon broadened his activities from selling to manufacturing hats at his factory at Lexington, Kentucky, where he employed 20 workers. By 1802 he had relocated to Tennessee and purchased James Robertson’s interest in Cumberland Iron Works 20 miles south of Clarksville.

Bell became a prominent Dickson County citizen and served as justice of the peace. In 1805, he bought out his chief competitor, Yellow Iron Works in Montgomery County, and acquired many thousands of acres to supply timber and iron ore to his thriving enterprises. His wealth skyrocketed when he secured a contract with the federal government to supply cannon balls just before war erupted with Great Britain.

Bell employed hundreds of migrants from North Carolina and Virginia and more than 300 slaves, but these workers often proved insufficient and he leased additional slave labor. His works helped to make Tennessee the third ranking state in iron production.[1]

By the time he was in his seventies in the 1840s, Bell had scaled back his business activities and moved to Nashville where he led a life of leisure and indulged heavily in horseracing. He also became active in the colonization movement, which transported freed slaves to Africa. He financed the relocation of 38 slaves to Monrovia in the 1850s. Upon his death in 1855, he left funds to found a school for boys in Nashville, becoming Montgomery Bell Academy.[2] Montgomery Bell State Park in Dickson County is named in his honor.

It was one of Montgomery Bell’s business deals gone wrong that resulted in the creation of a basic principle of Tennessee law: If an element of a case of action does not exist at the time the summons is issued, then that particular proceeding is forever invalid. In Bell v. Bullion,[3] William Bullion sued Bell in circuit court on a promissory note. According to the note, Bell promised to pay Bullion $150 two years after its execution. The note was executed on April 13, 1826. Suit was filed and the summons was issued on April 9, 1828. The sheriff served it the same day. The jury found for the plaintiff and an appeal was filed with the Tennessee Supreme Court.[4] The court reversed, explaining:

It seems to be a small matter for which a judgment is to be reversed, in a rightful and honest cause, that the suit is brought two or three days too soon, especially in a case where a credit of two years was given, and the debtor has had almost the entire benefit of it. But suppose in the above case, the suit, instead of being brought a few days before the expiration of the two years, had been brought a few days after the note was given, the case would have a very different aspect. To sustain such a verdict and judgment would appear at once a glaring injustice. This court has no power to sustain the one or the other of these extremes, or any intermediate case between them. Its province is to enforce and execute the contracts of men, not to make contracts for them.[5]

This principle was upheld and expanded by the Supreme Court in the 1857 decision of Blevins v. Alexander.[6] A plaintiff was accused of wrongfully obtaining an injunction in the Chancery Court of Hawkins County and thereby damaged the defendants. The chancellor awarded recovery on the injunction bond and the plaintiff appealed. While the appeal was pending, the aggrieved chancery defendants also filed an action in circuit seeking recovery of damages beyond those secured by the bond, but the circuit judge dismissed the second action because of the pendency of the chancery appeal. The Supreme Court affirmed in keeping with the rule of Bell v. Bullion.[7] The court stated:

To enable the plaintiffs to maintain their action in this case, as in all others, there must have existed at the commencement of the suit which was the issuance of the original writ or summons, a valid, legal cause of action. It is not sufficient that there be an inchoate cause of action, which becomes complete pending the action. Now, in this case, when did the cause of action accrue to the plaintiffs? Certainly not until it was finally and judicially ascertained that the process was wrongfully sued out, for until then it cannot be said that damages had been sustained by the plaintiffs.[8]

Accordingly, there was no cause of action in circuit until the appeal was resolved, which would finally determine whether the injunction was wrongfully issued. Since this was not decided when the circuit summons was issued, that circuit action was forever untenable, even if the chancery appeal was resolved one moment after issuance of the summons.

However, Blevins v. Alexander did more than simply follow in the footsteps of Bell v. Bullion. It also forged the judicial finality rule. In Blevins what was missing was a final judicial determination and hence the element of certain damage. Therefore, under the finality rule, if a cause of action is contingent on the outcome of a prior judicial proceeding, that prior proceeding must be resolved before the second, dependent proceeding can be maintained. If not resolved at the time the summons in the second case is issued, then that second case is permanently poisoned and must be dismissed. Of course, a third action could be filed after finality is achieved in the original suit, assuming the plaintiff did not allow the statute of limitations to run while litigating the fatally flawed second action.

The judicial finality rule in Tennessee has been followed in other types of actions contingent on the outcome of prior judicial proceedings. For instance, in the 1992 Supreme Court decision of Christian v. Lapidus,[9] it was held that to be able to maintain an action for malicious prosecution, the underlying action alleged to have been prosecuted maliciously must be “finally terminated in favor of the plaintiff.”[10]

Until 1995, Tennessee applied the judicial finality rule to legal malpractice cases. Consequently, damages did not accrue, or the statute of limitations was tolled, if the alleged malpractice might be alleviated or found not to exist at all by the resolution of a pending appeal or proceeding. In other words, there must have been finality in the underlying cause before malpractice is actionable. For example, in the 1981 decision of Ameraccount Club Inc. v. Hill,[11] the Supreme Court held that a malpractice action could not be maintained against a lawyer until a bankruptcy action was concluded in which the alleged malpractice might be cured. Quoting a California decision, the court stated: “A cause of action against an attorney for professional negligence accrued as of the date on which the negligence became irremediable.”[12]

The Supreme Court in Ameraccount Club also cited to a 1975 Sixth Circuit decision of Woodruff v. Tomlin.[13] In that case, the federal appellate court held that malpractice could not be asserted against Tennessee lawyers for the alleged mishandling of a trial. The court reasoned that “[u]ntil the case was finally terminated and a final judgment rendered the plaintiffs could not prove damage, because the Court of Appeals might have granted a new trial, and on retrial a different result could possibly have occurred.”[14] Therefore, whether the theory is that the statute of limitations is tolled or, more commonly, no damages exist until judicial finality, the result was the same: there is no justiciable controversy.

In 1995, however, the Tennessee Supreme Court case of Carvell v. Bottoms[15] carved out an exception to the judicial finality rule in legal malpractice cases by broadly applying the discovery rule. Henceforth, alleged injury from legal malpractice need not be “irremediable” to be actionable.[16] The statute of limitations would now begin to run and a malpractice suit could be maintained from the time of discovery of possible legal malpractice, even if an appeal might cure the attorney mistake, make it meaningless, or establish that there was no error or injury at all. Thus the statute could run before finality is achieved. The Carvell court reasoned that “[a] plaintiff cannot be permitted to wait until he knows all the injurious effects or consequences of an actionable wrong.”[17]

In Carvell, the Supreme Court addressed a problem: the client bringing “a malpractice action against an attorney before the appeals in the underlying case are concluded has the effect of forcing the client to take inconsistent positions on the same issue in different lawsuits.”[18] In other words, the client would have to awkwardly contend that there was no attorney error in the pending appeal of the underlying suit and that there was attorney error in the malpractice action. The court remedied the predicament by declaring that the judicial estoppel rule does not apply in this scenario and thereby the client can simultaneously plead and assert contradictory positions in the separate proceedings.[19]

Furthermore, the Supreme Court in Carvell said the malpractice action may be stayed pending the resolution of the underlying appeal, but stay is not mandated.[20] Yet this stay procedure does not offer the policy blessings of judicial estoppel: the prevention of inconsistences and the preservation of the “sanctity of the oath” and “public confidence in the purity and efficiency of judicial proceedings.”[21] But both the stay and the judicial finality rule do prevent inconsistent judgments: a judgment finding malpractice and a later appellate decision in the first case establishing no malpractice, a horror that actually happened in the Nevada case of Semenza v. Medical Liability Ins. Co.[22]

In Jones v. Cox,[23] the Tennessee Court of Appeals, Western Section, would subsequently follow the reasoning of Carvell, as it was bound to do, but nevertheless pointed out that waiting upon the outcome of an underlying appeal before filing a legal malpractice action is “logical”[24] and “very reasonable.”[25] Unfortunately for the lawyer in Jones, he logically and reasonably awaited an appeal’s resolution before issuing the summons in a malpractice action against his client’s previous lawyer for failure to meet a statute of limitations in an automobile accident case. He hoped that the appeal would reverse the dismissal and in so doing cure the professional negligence. However, while waiting on the appeal, the statute of limitations ran on the malpractice claim and thus, ironically, subjected the second lawyer to being a potential target of a second legal malpractice action by the same client, also for failure to meet the statute of limitations.[26]

Many states, including Florida,[27] Texas[28] and Pennsylvania,[29] adhere to the finality rule in legal malpractice. The rule is defended by insisting that it really does not treat legal malpractice differently from other negligence actions:

In reality, we would not be creating a special rule but applying the principle that an injury differs in legal malpractice cases because, to paraphrase the immortal words of another professional, the case “is not over until it is over.” Legal malpractice is not like a surgical operation on the wrong arm of a patient, nor is it like leaving a support beam out of a bridge. There is no appeal from such mistakes. On the other hand, a lawyer’s opinion is as good or as bad as the court of last resort deems it. To convince courts takes longer in some cases than others.[30]

Similarly, the Arizona Supreme Court has said:

Negligence alone is not actionable; actual injury or damage must be sustained before a cause of action in negligence is generated…. [I]n legal malpractice cases, the injury or damaging effect on the unsuccessful party is not ascertainable until the appellate process is completed or is waived by failure to appeal.[31]

And it is observed that applying the discovery rule before finality forces clients to suspect and continually second-guess their lawyer throughout litigation in order to gage whether the malpractice statute of limitations has begun to run.[32] In contrast, the bright line judicial finality rule gives the client “peace of mind to allow the legal process to work fully and finally in hopes that this position will ultimately be vindicated and will not be forced to disrupt his relationship with his lawyer to preserve what he thinks to be a valid malpractice claim.”[33]

It is also maintained that the Carvell type reasoning is a perversion of the judicially crafted discovery rule. As a federal court has stated:

[T]he discovery rule is founded upon simple notions of equity and fairness. It is only used to toll the statute of limitations to prevent an injustice, never to start the statute to create one…. It would indeed be unjust for the statute of limitations to begin to run when someone merely suspects an injury may occur…. It does not follow from my decision that the plaintiff is without remedy; only that the remedy must await a wrong.[34]

Moreover, it is argued that to apply the discovery rule in legal malpractice as Tennessee currently does undermines judicial economy[35] and negates the maxim of statutory construction that limitations should be construed in favor of preserving claims.[36] It is further contended that to treat legal malpractice differently from the other causes of action contingent on the full adjudication of prior litigation, such as malicious prosecution, is inconsistent.

As for lawyers, Carvell may on occasion cause the statute of limitations to run sooner to their benefit and the detriment of their clients, but the burdens may outweigh this benefit. It is asked: Why subject lawyers, and the system, to premature and perhaps unnecessary litigation? Why inflict injury on lawyers, such as harm to reputation and increased premiums, caused by commencement of provisional malpractice actions that may prove moot? And why inject needless tension, distrust and conflict into an ongoing attorney-client relationship? In any event, in today’s Tennessee, Montgomery Bell tolls the statute of limitations for everyone but lawyers.

Notes

  1. See Robert E. Corlew, “Montgomery Bell (1769-1855)” in Carrol Van West, Tennessee Encyclopedia of History and Culture 58-59 (2002).
  2. Id. at 59.
  3. 10 Tenn. (2 Yer.) 479 (1831).
  4. Id.
  5. Id.
  6. 36 Tenn. (4 Sneed) 583 (1857).
  7. Id. at 583-85.
  8. Blevins v. Alexander, 36 Tenn. (4 Sneed) 583, 585 (1857).
  9. 833 S.W.2d 71 (Tenn. 1992).
  10. Id. at 73.
  11. 617 S.W.2d 876 (Tenn. 1981).
  12. Id. at 879.
  13. 511 F.2d 1019 (6th Cir. 1975).
  14. Id. at 1020.
  15. 900 S.W.2d 23 (Tenn. 1995).
  16. See id. at 29.
  17. Id at 27.
  18. Id. at 29.
  19. Id.
  20. Id.
  21. See Melton v. Anderson, 222 S.W.2d 666 (Tenn. Ct. App. 1948)
  22. 756 P.2d 184 (Nev. 1988).
  23. Jones v. Cox, 316 S.W.3d 616 (Tenn. Ct. App. 2009).
  24. Id. at 621.
  25. Id.
  26. See id. at 621-22.
  27. Peat, Marwick, Mitchell & Co. v. Lane, 565 So.2d 1323 (Fla. 1990).
  28. Hughes v. Mahaney & Higgins, 821 S.W.2d 154 (Tex. 1992).
  29. Bowman v. Abramson, 545 F.Supp. 227 (E.D. Penn 1982).
  30. Grunwald v. Bronkesh, 621 A2d. 459, 502 (N.J. 1993) (dissenting opinion).
  31. AMFAC Dist. Corp. v. Miller, 673 P.2d 792, 793 (Ariz. 1983).
  32. Neylan v. Moser, 400 N.W.2d 538, 542 (Iowa 1987).
  33. Id.
  34. Bowman v. Abramson, 545 F.Supp. 227, 231 (E.D. Penn. 1982).
  35. Beesley v. Van Doren, 873 P.2d 1280, 1286 (Alaska 1994)(dissenting opinion).
  36. See Elder v. Bradley, 34 Tenn. (Mart. & Yer.) 396 (1825).

Russell Fowler

RUSSELL FOWLER is Director of Litigation and Advocacy at Legal Aid of East Tennessee (LAET) and since 1999 has been adjunct professor of political science at the University of Tennessee at Chattanooga. He served as the law clerk to Chancellor C. Neal Small in Memphis and earned his law degree at the University of Memphis in 1987. Fowler has many publications on law and legal history, including many in this Journal.

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