A California appeals court has reversed a summary judgment in favor of an attorney in a legal malpractice action. In Cohen v. Fried & Goldsman, a client brought a legal malpractice claim against her former attorney who represented her during her divorce proceedings. The client alleged that the attorney negligently failed to discover essential information about her former husband’s acquisition of marital property prior to her entering an agreement in settlement of the divorce.
During the marriage, the husband had plead guilty to tax evasion. At that time, the IRS had also been attempting to collect a much larger sum from the husband’s business partner. Under the husband’s plea agreement, he had agreed to pay the delinquent tax amount to the partner in exchange for the partner’s interest in the company, allowing the IRS to claim that money from the partner.
Since the husband had acquired his partner’s interest during the marriage, it should have been included as community property in the divorce settlement. However, the attorney failed to discover the terms of the plea bargain, and incorrectly concluded that the husband’s interest was separate property, which resulted the wife’s l loss of her property interest in the business.
The wife filed a legal malpractice claim against her attorney. The attorney successfully moved for summary judgment on the basis that the client had failed to bring her claim within the one year statute of limitations. The client then appealed,relying on the discovery rule as an exception to the one year statute.
The appellate court reversed. It reasoned that although the client was aware of the husband’s plea and his payment of money, she was not aware of the substance of the agreement until her current attorney became aware of he true facts, which was several months before she filed the malpractice action. Furthermore, the court found that the wife had justifiably relied on her former attorney’s assertions, when she signed the divorce agreement and did not discover that he was mistaken until shortly before she filed the malpractice complaint. Therefore, summary judgment was not appropriate.
Decision: Cohen v. Fried & Goldsman