South Carolina Establishes New Precedent for Legal Malpractice Cases

The South Carolina Supreme Court has reversed a decade old precedent-setting decision in which it dismissed a legal malpractice case based on the expiration of the statute of limitations and in doing so adopted a new rule for which the statute of limitations will now be applied in legal malpractice cases in the state.

The state high court reached its decision Sept. 9 in response to an appeal brought before it by auto dealership Stokes-Craven Ford, who contended a circuit court erred in applying the current statute of limitations from the 2005 Epstein v. Brown case to its case (Stokes-Craven Ford, Appellant, v. Scott L. Robinson and Johnson McKenzie & Robinson, LLC, Respondents; case No. 2013-001452).

Case History

Stokes-Craven’s 2010 legal malpractice lawsuit against Scott L. Robinson and his firm Johnson, McKenzie & Robinson stemmed from a 2006 lawsuit against the dealership from a customer in which Stokes-Craven was found liable.

Stokes-Craven appealed its verdict to the South Carolina Supreme Court and in 2010 the court affirmed the verdict but remanded the matter to the circuit court to determine the amounts of the appellate and post-appellate fees.

Stokes-Craven subsequently filed a legal malpractice complaint against Robinson and the firm alleging negligence and breach of fiduciary duty in its representation both prior to and during the original trial. The counsel respondents denied the allegations and claimed Stokes-Craven’s assertions were barred by the expiration of the three-year statute of limitations based on the date of the original verdict.

A motion filed by the firm for summary judgment was granted by the circuit court on the grounds that Stokes-Craven’s legal malpractice claim had passed the statute of limitations. The circuit court cited the Epstein precedent, saying Craven was aware he may have a legal malpractice claim when the jury’s decision was made in 2006 because Craven had knowledge of the counsel’s “shortcomings” and other “actionable errors.”

In the appeal to the state Supreme Court heard Dec. 10, 2014, Stokes-Craven requested review of the circuit court’s order granting summary judgment to the respondents based on the three-year statute of limitations. It also requested to argue against the Epstein precedent being applied in its case, saying it was factually distinguishable and no longer a viable precedent. Stokes-Craven further requested the court adopt a “bright-line rule” that the statute of limitations in a legal malpractice case does not begin until a decision has been issued in the underlying lawsuit.

Epstein Precedent

The precedent-setting Epstein case stemmed from a verdict against Dr. Franklin Epstein in 1998 from a medical malpractice suit after the death of one of his patients.

Epstein’s attorney, David Brown, appealed the ruling and remained an active counsel of Epstein during the appeal but did not represent him. Epstein’s appeal petition was denied in 2001 by the state’s high court.

In 2002, Epstein filed a legal malpractice claim against Brown alleging breach of fiduciary duty, negligence, and breach of contract. Brown moved for summary judgment on the grounds that Epstein had failed to file his action within the three-year statute of limitations, which the circuit court granted.

Epstein then appealed to the state Supreme Court, which affirmed the circuit court’s order by majority decision (3-2). The court said it declined to apply the “continuous-representation rule,” in the Epstein case, which includes the period an attorney represents a client on the same matter the legal malpractice came out of as part of the statute of limitations.

The state Supreme Court instead chose to use the discovery rule adopted by the South Carolina Legislature that set “absolute time restrictions” on filing medical malpractice actions. Under the discovery rule, the limitations period begins when a person could or should have known that a cause of action against another party could exist.

The court ultimately found that Epstein “clearly knew or should have known that he might have had some claim against Brown at the conclusion of his [1998] trial” and before the Supreme Court denied his appeal in 2001. Therefore, he could not file suit in 2002 as it had passed the three-year statute of limitations.

Stokes-Craven Appeal of Epstein

The decision rendered by the South Carolina Supreme Court in Epstein v. Brown has been relied upon in the 10 years since it was reached, despite being controversial and disputed, including by two of the court justices back in 2005.

Stokes-Craven stated in its appeal that the circuit court erred in its decision to apply the Epstein statute of limitations for legal malpractices cases to its case.

In its Stokes-Craven opinion, the state Supreme Court said the case provided an “appropriate opportunity to address the criticism and conflict that has arisen out of our decision in Epstein.” The justices also acknowledged that most courts in the U.S. have now adopted the continuous-representation rule.

The court said the key question is when a claimant’s cause of action begins and triggers the running of the three-year statute of limitations. The court acknowledged reaching such a decision was “complicated” based on the factors that are at play in the legal malpractice scenario and the preservation of the attorney-client relationship.

“Clearly, if a client files a legal malpractice cause of action while the client is still represented by counsel during an appeal, the attorney-client relationship is compromised,” the justices opinioned.

The court also said Stokes-Craven’s appeal noted that Craven “repeatedly testified that, at the time of the trial, he had never been sued before, had never participated in litigation, and had no idea what an attorney should or should not do to prepare a case for trial.”

Based on this testimony, Stokes-Craven maintains that Craven did not know or could not have known that it might have a claim for legal malpractice on the date the verdict was rendered, the state Supreme Court opinioned.

The court ultimately ended up applying the rule adopted by the Oklahoma Court of Appeals in its decision in Ranier V. Stuart & Frieda, saying it most similarly followed the discovery rule established by South Carolina’s Legislature and the purpose of the statute of limitations.

The court adopted the following statement in the Ranier case as the new statute of limitations standard for South Carolina legal malpractice suits: “If it appears that the client knew of the harm before the case is finally determined on appeal, the statute of limitations begins to run from the time the underlying injury occurs or upon the client’s awareness of the alleged negligence.” (Ranier, 887 P.2d at 343).

The South Carolina justices said the Oklahoma Court of Appeals rule provides a threshold limit to the “tolling of the statute of limitations, eliminates the rigidity of the remittitur rule, and prevents arbitrary application of the rule with a case-by-case analysis.”

Furthermore, the court wrote, the rule advances the purpose of the statute of limitations, which is to punish plaintiffs who sleep on their rights, protect defendants from stale claims, and lend order to the judicial system.

Because the circuit court relied upon Epstein in determining the statute of limitations began to run on the day of the jury’s verdict and not when the state Supreme Court issued its remittitur, the Supreme Court reversed the circuit court’s grant of summary judgment without prejudice. It remanded the case back to the circuit court for further proceedings consistent with the opinion.

“We overrule Epstein and now hold that the statute of limitations for a legal malpractice action may be tolled until resolution on appeal of the underlying case if the client has not become aware of the injury prior to the decision on appeal,” the opinion stated.

Chief Justice Jean Hoefer Toal and Justice John. W. Kittredge dissented on the majority’s decision.