Brennan v. Manning, 2007 WL 1098476 (Tex. App.--Amarillo 2007).

In this case, the client knew of monies potentially owed to her in her divorce action, but did not fault counsel for not pursuing such claim until well after the lawsuit was over and done with.

In 1995, the client retained Manning and his law firm to represent her in a divorce proceeding against James Brennan. Brennan was an attorney specializing in personal injury litigation. At the time of the divorce, the client was aware that her husband received income from contingent fees and from the referral of cases to other attorneys. The client contended that during the lawyers' representation of her, she received erroneous legal advice from Manning that caused her to receive an inadequate share of the marital estate. Specifically, she maintained that Manning incorrectly advised her that she was not entitled to an interest in any contingent or referral legal fees owed to her husband.

The client's divorce proceeding resulted in the entry of a Decree of Divorce on January 23, 1998. Subsequent to entry of the Decree of Divorce, the client was periodically represented by the lawyers on matters related to the enforcement of that decree. The underlying cause of action was filed on June 24, 2004.

Manning and the other defendants filed an Original Answer affirmatively alleging that the client's claims were barred by limitations. The lawyers subsequently filed a traditional and no-evidence Amended Motion for Summary Judgment alleging that the client's claims were barred by limitations and a lack of causation. The client contended that limitations did not operate to bar her cause of action for three reasons: (1) limitations was tolled during the existence of an attorney-client relationship; (2) accrual of her cause of action was deferred due to the discovery rule; and (3) limitations was tolled due to fraudulent concealment by The lawyers. The client further contended the summary judgment evidence raised a question of fact as to causation.

The trial court granted summary judgment in favor of the lawyers, holding that the client’s claims were barred both by the statute of limitations and lack of causation. The Court of Appeals affirmed.

Hughes tolling rule held inapplicable

The Court of Appeals found that the Hughes tolling rule was inapplicable:

Legal malpractice claims are governed by a two year statute of limitations. A legal malpractice claim accrues when the legal injury occurs, unless there is a legal basis for tolling limitations. Appellant's legal malpractice claim centers upon her allegation that she received an inadequate division of community property when Manning incorrectly advised her that she was not entitled to a share of referral or contingency fees from lawsuits pending at the time of her divorce. Therefore, Appellant's legal malpractice claim accrued when she sustained a legal injury, which would have been at the time the community property was divided by the entry of a decree of divorce.

Appellant, relying upon Willis v. Maverick, would have us adopt a bright line rule that says in a legal malpractice cause of action, limitations is tolled so long as the attorney-client relationship exists between the parties. Appellant's reliance on Willis is misplaced. The existence of an attorney-client relationship does not, standing alone, toll limitations in a legal malpractice cause of action. Rather, limitations in a legal malpractice cause of action is tolled due to the attorney-client relationship only when the attorney's malpractice occurs and is discoverable during the course of the underlying litigation being pursued by the attorney on behalf of the client. The Hughes rule, which tolls the limitations period until all appeals in the underlying action are exhausted, is expressly limited to cases involving claims of attorney malpractice in the prosecution or defense of the underlying litigation and does not apply to malpractice claims involving transactional work.

Appellant's Decree of Divorce was signed on January 23, 1998. Therefore, applying the Hughes rule to the facts of this case, the statute of limitations on Appellant's legal malpractice cause of action was tolled until February 22, 1998, the date her divorce decree became final.

Subsequent to the Decree of Divorce becoming final, Manning performed legal services for Appellant in the nature of work incident to the enforcement of the decree. Appellant would have this Court extend the Hughes rule to revive the tolling of limitations during these periods of representation. We conclude that reasons underlying the Hughes rule are inapposite to the facts of this case, and we decline to extend that rule without clear precedent.

Tolling under discovery rule had long since run

With respect to the discovery rule, the court stated that this rule would operate to defer accrual of a cause of action until the client knew or should have known that she had an interest in the fees in question, but that she still sued too late:

Appellant further argues that the accrual of her cause of action was deferred due to the fact that she could not and did not discover the erroneous advice. The "discovery rule" exception to the statute of limitations operates to defer accrual of a cause of action until such time as the claimant knows, or in the exercise of reasonable diligence should know, of the facts giving rise to her claim or cause of action.

Therefore, the accrual of her cause of action, and concomitantly, the commencement of limitations, was deferred until that point in time that Appellant, with the exercise of reasonable diligence, knew or should have known that the community had an interest in the referral or contingent fees owed to her husband as a result of cases pending at the time of their divorce. Competent summary judgment evidence established that, more than two years prior to the commencement of this suit, Appellant had specific knowledge that referral and contingent fees were a part of their community estate because they had been listed as such in a sworn inventory filed by her husband in a prior divorce proceeding between the parties. Furthermore, Appellant was aware of specific referral and contingency fees cases pending at the time of her divorce and she even spoke to other lawyers concerning her right to receive a portion of the fees due to her husband from those cases. Subsequent to the divorce, Appellant retained an attorney to assist her in securing part of a referral or contingent fee that was due to be paid to her former husband. Based upon these facts, Appellant either knew, or in the exercise of reasonable diligence should have known, the facts giving rise to her claim more than two years prior to the commencement of this cause of action. As such, the trial court did not err in finding that the "discovery rule" did not operate so as to defer the accrual of Appellant's cause of action.

Fraudulent inducement also rejected

Finally, with respect to fraudulent inducement, the court held that it was inapplicable for the same reasons as the discovery rule was:

Appellant further argues the statute of limitations was tolled by the doctrine of fraudulent concealment. The tolling of limitations based upon fraudulent concealment is a distinct concept from the "discovery rule" exception and it exists for different reasons. When applicable, the doctrine of fraudulent concealment operates to estop a defendant from relying on limitations as a defense. The doctrine provides that where a defendant is under a duty to make disclosure but fraudulently conceals the existence of a cause of action from the party to whom it belongs, the defendant is estopped from relying on the defense of limitations until the party either learns of the right of action or should have learned thereof through the exercise of reasonable diligence. For the same reason that the discovery rule did not bar the application of the statute of limitations, the doctrine of fraudulent concealment does not operate to bar limitations.

Professional services exemption barred DTPA claim

The Texas Deceptive Trade Practices Act (DTPA) expressly exempts claims for damages based on the rendering of a professional service, the essence of which is the providing of advice, judgment, opinion, or similar professional skill. This exemption does not, however, apply to: (1) an express misrepresentation of a material fact that cannot be characterized as advice, judgment, or opinion; (2) a failure to disclose information in violation of § 17.46(b)(24); (3) an unconscionable action or course of action that cannot be characterized as advice, judgment, or opinion; (4) breach of an express warranty that cannot be characterized as advice, judgment, or opinion; or (5) a violation of § 17.46(b)(24).

The Court of Appeals agreed that none of the exceptions to the professional services exemption applied in this case:

Appellant's claims are clearly based upon legal services provided to her by Manning and the other Appellees. The essence of those legal services was the providing of advice, judgment, opinion, or similar skill. As such, the professional services exception to the DTPA was raised by the evidence, thereby shifting the burden to Appellant to establish an exception to the exemption.

In order to establish the "failure to disclose" information in violation of § 17.46(b)(24) exception, the party must prove (1) the concealing-party knew something material about the goods or services being rendered (2) which was not disclosed (3) with the intent to induce the claimant-consumer into entering into a transaction, and (4) the claimant-consumer would not have entered into the transaction had the information been disclosed. Appellant produced no summary judgment evidence which would have shown that either Manning or the other Appellees knew that any of the advice given to Appellant was erroneous. Furthermore, she failed to produce any summary judgment evidence that would have established that the failure to disclose any erroneous advice was done so with the intent to induce her into entering into the divorce settlement reached, nor that she would not have entered into the agreement reached had the allegedly erroneous information been disclosed. Appellant, therefore, failed to establish the "failure to disclose" exception to the professional services exemption.

In order to establish the "unconscionable" exception to the professional services exemption, a consumer-complainant must establish that the complained of conduct was unconscionable. An unconscionable act is one that takes advantage of the lack of knowledge, ability, experience, or capacity of a person to a "grossly unfair degree," or which results in a gross disparity between the value received and consideration paid, in a transaction involving transfer of consideration. Unconscionable action requires a showing that the resulting unfairness was glaringly noticeable, flagrant, and unmitigated. Conduct simply showing the failure to exercise that degree of care, skill, and diligence that an attorney of ordinary skill and knowledge would have exercised under the same or similar circumstances does not equate to an unconscionable act in violation of the DTPA. Having reviewed Appellant's claim of unconscionability in light of the entire transaction, we find that Appellant's claims are best stated as simple negligence claims. It cannot be said that the alleged concealment of erroneous advice resulted in glaringly noticeable, flagrant, and unmitigated unfairness to Appellant in the attorney-client relationship. Accordingly, we find Appellant's summary judgment evidence did not establish the "unconscionable" exception to the professional services exemption.