The Supreme Court of Nebraska has affirmed summary judgment in favor of an attorney in a legal malpractice case on the grounds that the claim was barred by a statute of limitations. In Behrens v. Blunk, a client had operated a Ponzi scheme for over ten years, which offered promissory notes in connection with purported real estate investments. However, the client never invested the funds and instead used the money for personal expenses.
Just prior to federal indictments being handed down, the client filed a legal malpractice action against his long time attorney. The client alleged that he could not have carried out the scheme, if the attorney had properly advised him that the alleged promissory notes were securities, requiring registration under state and federal securities laws. The client pleaded guilty to securities fraud and received a five year prison sentence. The trial court granted the attorney’s motion for summary judgment in the malpractice action, and the client appealed.
The Nebraska Supreme Court affirmed, finding that the claim was barred by the state’s two year statute of limitations. The client had argued that the statute should be tolled because he could not have reasonably discovered the attorney’s negligence acts within the applicable limitations period. The court disagreed, based on the client’s knowledge of an investigation of his conduct by the Nebraska Department of Banking & Finance at least eight years prior to the indictment. The court determined that the statute started running upon the commencement of the investigation, thereby barring the action against the attorney.
Decision: Behrens v. Blunk