Hayenga v. Gilbert – 2/12/2015

February 20, 2015

Arizona Court of Appeals Division One holds that legal malpractice claims for failure to join a party and failure to timely commence an action do not accrue until the underlying litigation is finally resolved.

Miriam Hayenga engaged the law firm of Beus Gilbert to represent her in a fraud action against the seller of a parcel of real property, alleging that the seller had misrepresented the zoning of the property.  During trial, Hayenga discovered for the first time that the false information about the zoning had resulted not from fraud, but from a mistake made by an employee of the City of Phoenix.  In a subsequent lawsuit against the City, Hayenga lost certain claims because they were barred by the statute of limitations and because her notice of claim under A.R.S. § 12-821.01 was untimely.  She settled the remaining claims against the City.

More than two years after the trial in which she discovered Gilbert’s negligence, Hayenga brought a legal malpractice action against Beus Gilbert and her former attorney, Paul Gilbert, alleging that Gilbert had negligently failed to disclose that she had a potential claim against the City and that her claim could be barred if she did not take timely action.  Gilbert moved for summary judgment, arguing that the statute of limitations barred Hayenga’s suit against him.  The trial court granted the motion, and Hayenga timely appealed.

The Court of Appeals reversed the decision.  A legal malpractice claim accrues when the plaintiff has “sustained appreciable, non-speculative harm.”  Outside of litigation, the point at which the harm becomes non-speculative is a fact-specific inquiry.  When a lawyer’s negligence occurs within the course of litigation, however, the malpractice claim does not accrue until a court of appeals issues a mandate, the parties enter a binding settlement, or the right to appeal is otherwise waived. 

Because the “course of litigation” includes the process of preparing for litigation, Gilbert’s failure to advise Hayenga of her claim against the City did not accrue until she settled the litigation against the City.  Similarly, the harm resulting from Hayenga’s claim that Gilbert’s malpractice caused her to lose the original trial against the seller did not accrue until Hayenga abandoned her appeal of that case.  Because both claims were timely when the accrual was measured from the final completion of the respective litigation, the Court remanded the case for further proceedings on Hayenga’s malpractice claims against Beus Gilbert.

Presiding Judge Swann authored the opinion; Judges Jones and Brown joine