The Risk Manager, Spring 2014
First, some perspective on just how significant this decision is for Kentucky lawyers. Prior to the 1970s legal malpractice claims were infrequent. From then on, however, they ballooned into a major risk of the practice of law today. Often the affirmative defense of the Kentucky one-year professional services malpractice statute of limitations is available to defeat this increasing number of claims. This in turn generated novel pleadings to convert a legal malpractice claim into another cause of action with a longer statute of limitations. Many of these claims are styled as fraud, misrepresentation, and breach of contract based on a letter of engagement or fee agreement.
Kentucky Statute of Limitations for Professional Services Claims
KRS 413.245 provides:
Notwithstanding any other prescribed limitation of actions which might otherwise appear applicable, except those provided in KRS 413.140, a civil action, whether brought in tort or contract, arising out of any act or omission in rendering, or failing to render, professional services for others shall be brought within one (1) year from the date of the occurrence or from the date when the cause of action was, or reasonably should have been, discovered by the party injured. Time shall not commence against a party under legal disability until removal of the disability.
The killer development to enlarge the statute of limitations and put more pressure on lawyers to settle is to allege a fiduciary duties breach instead of malpractice. This allows a routine malpractice matter invoking the lawyer standard of care into a cause of action based on a breach by a lawyer of the fiduciary obligations of undivided loyalty or confidentiality. These suits usually are couched in general terms that fail to specify damages or clearly describe the wrong or breach of duty committed. A fiduciary breach claim often enlarges the statute of limitations and connotes a treacherous act by a lawyer as opposed to mere negligence. With professional reputation at stake and loss of a one-year statute of limitations defense, lawyers sometimes will settle rather than dispute frivolous and questionable fiduciary breach claims.
The Kentucky Supreme Court resolved this muddled situation for Kentucky in Abel v. Austin. The facts of Abel stem from the class action tort lawsuits arising from injuries to Fen-Phen consumers. The essential facts for the purposes of this article are that 53 plaintiffs discovered that instead of receiving the $47,943.84 to which they were entitled, they received only $29,500. Fifty of these plaintiffs brought suit against the defendant lawyers alleging fraud, misrepresentation, and breach of fiduciary duty. The Circuit Court dismissed the suit because it was not commenced within the Kentucky one-year statute of limitations for professional services claims, KRS.§ 413.245. The Court of Appeals affirmed, as did the Supreme Court.
In its decision the Supreme Court covers:
- When the Kentucky professional services statute of limitations applies in cases involving another jurisdiction;
- Why KRS § 413.245 is the exclusive statute of limitations for claims against lawyers for acts or omissions arising out of the rendition of professional services regardless of how pled; and
- Provides an instructive analysis of the facts of Abel in determining when the plaintiffs discovered or reasonably should have learned of the malpractice to start the statute of limitations to run. It was concluded that the plaintiffs knew of their claim one year and 15 days before filing suit and thus, were out of time.
Abel means that in Kentucky a legal malpractice claim by any other name still has a one-year statute of limitations. Gaming the system to enlarge the limitation period and pressure lawyers to settle will not work anymore. Abel is highly recommended professional reading. For a quick refresher on the Kentucky professional services statute of limitations as it applies to lawyers go to Lawyers Mutual’s Website at lmick.com – click on Resources, Subject Index, Statute of Limitations for Legal Malpractice, and on the article “The Supreme Court Clears the Air.”