The Massachusetts Supreme Judicial Court held today in Halstrom v. Dube, SJC-12598, that an attorney waited too long—a few days beyond the 6-year contract statute of limitations applicable under Massachusetts law—to bring his claims for fees owed under a contingent fee agreement against the estate of his former client and successor counsel, his own former employee.
In 2007, Client retained Original Counsel to serve as counsel in a medical malpractice action in the Superior Court. The 2007 contingent fee agreement between Client and Original Counsel contained a discharge provision to the effect that “If the client wishes to discharge the Law Firm, the client shall, in this event, be liable to the Law Firm for a fee at the hourly rate of Three Hundred Fifty Dollars ($350.00) per hour, as substantiated by a Notarized Statement of Hours, provided by the Law Firm to the client.”
Successor Counsel, then an employee of Original Counsel did most or perhaps even all of the work, but neither he nor Original Counsel recorded Successor Counsel’s hours contemporaneously—a mistake no lawyer should make. As a practice tip in the vein of a “trap for the unwary,” always record your time contemporaneously. Not only does it help you determine whether a case was profitable, it aids in disputes that may later arise with a client or another lawyer.
Original Counsel terminated Successor Counsel in 2010, while Client’s medical malpractice case was pending. Client chose to have Successor Counsel continue to represent him in the action. Successor Counsel and Original Counsel were notified of Client’s election in writing on July 1, 2010. On July 2, Original Counsel transferred Client’s file to Successor Counsel at his new firm. In August 2013 and July 2015, Original Counsel asked Successor Counsel to provide it a statement of the hours he spent on Client’s medical malpractice action while in Original Counsels’s employ. Successor Counsel effectively declined. On August 17, 2015, Original Counsel sued to try to compel cooperation. But he only sued Successor Counsel, not Client.
Original Counsel then sued Client and Successor Counsel on July 7, 2016. The defendants moved for summary judgment on the ground that the action was commenced beyond the six-year statute of limitations applicable to contract actions. Original Counsel argued that his 2015 action against Successor Counsel tolled the limitations period because the action “made it abundantly clear that it was a lawsuit to begin vindicating Original Counsel’s right to attorneys’ fees” and “formally served as the commencement of its claim against [Client] for attorneys’ fees.” He asserted alternative equitable claims.
The trial court entered summary judgment against Original Counsel and the SJC affirmed.
The SJC analyzed the issues in the case by noting that ordinarily an attorney’s cause of action for legal fees accrues no later than the date his or her services are terminated unless the parties enter into a new, enforceable agreement concerning the payment of outstanding fees. The language in the original fee agreement, the SJC concluded, “compels the same result.” Specifically, “discharge provision unmistakably provides that if the client discharges [Original Counsel], then the client will be liable” to Original Counsel for work performed by Original Counsel at a prescribed rate. So Original Counsel’s cause of action against Client for legal services accrued no later than July 1, 2010, the date that Original Counsel was notified that Client had elected to terminate Original Counsel’s services. Original Counsel missed the deadline by a handful of days. The SJC stated, “In short, in accordance G. L. c. 260, § 2, [Original Counsel] had until July 1, 2016, to bring his contract action against [Client]. That [he] missed the deadline ‘by a few days’ is inconsequential -- his claim is time barred nevertheless.”
The SJC reasoned that Successor Counsel’s refusal to cooperate with Original Counsel had no bearing on when Original Counsel’s cause of action for legal fees against Client accrued. Successor Counsel was not a party to Original Counsel’s contingent fee agreement with Client. Also, the fact that a contingency contemplated in Original Counsel’s fee agreement with Client (settlement) did eventually come to pass had no bearing on when Original Counsel’s cause of action for legal fees against Client accrued, because Client’s discharge of Original Counsel terminated Original Counsel’s right to recover on the contingent fee agreement.
The SJC also rejected Original Counsel’s equitable arguments around equitable tolling and estoppel. Equitable tolling is to be “used sparingly,” and the circumstances where tolling is available are exceedingly limited. Estoppel also failed because the defendants timely asserted the statute of limitations as an affirmative defense in their answer. The SJC found unpersuasive the argument that the defendants should have acted on the defense in the form of a motion to dismiss before moving for summary judgment. The rules of civil procedure, the SJC held, “’do not compel parties to assert pleaded defenses in pretrial motions within an arbitrary time period.’”