Recent Commercial Litigation Blog Post by Doug MacKelcan.

The South Carolina Court of Appeals recently issued an Opinion in Personal Care, Inc. v. Jerry N. Theos, et al., affirming the Circuit Court’s dismissal of a legal malpractice case for failing to comply with the statute of limitations. The Court of Appeals considered two arguments by Appellants: (1) whether the Circuit Court erred in denying the Motion to Restore and (2) whether the Circuit Court erred in concluding the discovery rule, and not the date the underlying case was resolved, applied to determine the applicable statute of limitations.

Personal Care retained attorney Jerry Theos to investigate claims against a former employee. Personal Care directed Theos to send a letter to the former employee demanding she refrain from certain wrongful activity, including soliciting its clients. Theos also sent the letter, dated September 14, 2009, to a third-party medical services provider frequently employed for Personal Care’s business. Theos ultimately filed suit on behalf of Personal Care against the former employee. The former employee asserted a counterclaim for defamation stemming from the September 2009 letter.

On March 8, 2013, prior to resolution of Personal Care’s case against the former employee, Personal Care commenced a legal malpractice lawsuit against Theos (and others) for the handling of the underlying lawsuit. In the legal malpractice Complaint, Personal Care claimed Theos’ September 2009 letter exposed the company to liability and forced it to incur additional legal costs in defending the counterclaim, among other allegations of negligence. Theos filed an Answer generally denying the allegations and moved to dismiss the claims based on the expiration of the statute of limitations. Shortly thereafter, the parties executed a Consent Order pursuant to Rule 40(j) SCRCP, striking the case from the docket pending resolution of the underlying case between Personal Care and its former employee.

Rule 40(j), SCRCP provides for tolling of the statute of limitations if the claim is restored upon motion made within one year of the date stricken. Here, Personal Care did not move to restore the legal malpractice case until more than one year after the Order dismissing it pursuant to Rule 40(j). Respondents opposed the Motion to Restore, asserting the statute of limitations had run on the legal malpractice claims. The Court agreed, essentially holding that the case was dismissed, and therefore, Respondents could only raise this statute of limitations defense at this motion (as opposed to a motion for summary judgment).

In response, Appellants cited Stokes-Craven Holding Corp. v. Robinson, 416 SC 517, 787 S.E. 2d 485 (2016) to argue the statute of limitations did not begin to run until an “adverse verdict, judgment or a ruling” was entered against the client in the underlying lawsuit. In this case, the Court of Appeals disagreed and held Stokes-Craven did not eliminate the discovery rule in favor of a bright-line rule that all legal malpractice claims accrue on the date an adverse judgment is entered against the client. Rather, it found that Stokes-Craven dealt with the “particular scenario” in which a client’s injuries are predicated on an adverse judgment that is then appealed. Here, Personal Care’s cause of action for legal malpractice was predicated on the September 2009 letter, and therefore, Personal Care first suffered a financial injury when it was forced to spend additional funds and commit time and other resources to mitigate the damages caused as a direct and proximate result of Respondent’s errors.

While Stokes-Craven dealt a blow to the statutes of limitations defense available in legal malpractice cases in South Carolina, Personal Care has narrowed Stokes-Craven and reinforced the applicability of the discovery rule.

The entire Opinion can be found here.

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