A North Carolina Appeals Court has reinstated a legal malpractice action dismissed in a lower court. In Babb v. Hoskins, a client had created an estate planning trust. Several years later, the client hired an attorney to amend the trust documents to appoint two of her friends to be trustees, who sometime later improperly removed funds from the trust. The client died the following year.
In the year after her death, the attorney prepared and filed state and federal estate tax returns for the deceased client. The attorney made various errors, including overpaying the state tax, failing to seek a refund and writing a check to the IRS, which was dishonored, resulting in substantial penalties.
Over five years after the amending the trust documents, and over three years after the tax filings, the client’s estate brought a legal malpractice action against the attorney, on the basis of the improperly filed tax returns, and the failure to discover the friend’s wrongdoing. The lower court dismissed the case on the basis of that the case was untimely filed after the expiration of the applicable three year statute of limitations. The estate appealed on the basis of the continuing representation doctrine.
The appeals court affirmed in part and reversed in part, deciding that the claims against the attorney with respect to the trust documents were barred because his representation had ended, but that the claims involving the tax filings had created a new attorney-client relationship. Those claims were tolled based on continuing representation, and therefore not time barred.
Decision: Babb v. Hoskins