The attorney, provides the following explanation of a recent legal malpractice case:
In Lefta Associates v. Hurley, a client hired an attorney to negotiate a loan transaction for a construction project. The client agreed to provide a guaranty for up to 25% of the principal loan amount. However, the loan closing documents, as negotiated by the attorney, contained a guaranty for 50% of the loan amount. The loan closed and the client began making payments to the lender.
Over one year later, the client discovered the attorney’s error and then sued him for malpractice. The attorney moved for summary judgment on the grounds that the suit was barred by a one-year statute of limitations. However, under Pennsylvania law, the statute is tolled until the client discovers, or reasonably should have discovered, the attorney’s negligence, which in this case was less than one year prior to the filing of the lawsuit. Thus, the action was timely. Under Massachusetts state law, the claimant has three years after they discover, or should have reasonably discovered the lawyer’s negligence to file a lawsuit.
Next, the attorney argued that the client’s damages were limited to the amount of the attorney’s fees paid under the parties’ retainer agreement. The magistrate judge disagreed, finding that the attorney’s argument only applied to malpractice claims arising from criminal litigation. In a civil context, the client is entitled to all consequential damages of the attorney’s negligent conduct, which included the amount of the excess exposure under the loan agreement.
The district court judge affirmed the magistrate judge’s findings and recommendations and entered an order denying the attorney’s motion for summary judgment.
Decision: Lefta Associates v. Hurley