The North Carolina Court of Appeals revived a dismissed legal malpractice claim filed by a client who was found liable in a defamation case
On 24 January 2018, Defendants were hired to represent Plaintiff, who was a defendant in a defamation lawsuit (“Defamation Case”) filed in the United States District Court for the Eastern District of North Carolina against Plaintiff by Fredric Eshelman (“Eshelman”) on 16 February 2016. Defendants replaced the prior attorneys, Wilkinson Walsh + Eskovitz, LLP (“Wilkinson Walsh”). Eshelman alleged Plaintiff had defamed him by publishing certain information to their shareholders during a proxy contest. HG LLP assigned Levy to work on the Defamation Case. The lead attorney from Wilkinson Walsh updated Levy on strategy, provided insight on Eshelman’s attorneys, and advised that Alan Auerbach, Chief Executive Officer, President, and Chairman of the Board of Directors of Puma (“Auerbach”), was a very active client, who needed to be kept up-to-date and involved.
On 20 February 2019, Levy signed a pretrial order containing 146 stipulations of fact of which Plaintiff contends many were not true or were not relevant to the issues of the case. Levy did not consult with Auerbach prior to entering the stipulations. The trial court subsequently entered the pretrial order, establishing the truth of the stipulations for the purpose of the trial. Defendants did not review the stipulations with Auerbach prior to trial, and on cross-examination Auerbach attempted to deny the truth of the statements and stipulations, damaging his credibility as a witness. Levy also did not make a motion for judgment as a matter of law at the conclusion of evidence. The jury returned verdicts in favor of Eshelman. In total, Eshelman was awarded $26,334,646.58 in compensatory and punitive damages and pre-judgment interest.
After the verdict, Latham & Watkins was hired “to take over the lead role in filing post-trial motions and appealing the verdict.” On 22 April 2019, Plaintiff moved for a new trial or alternatively a reduction in damages.
Defendant later withdrew and the client paid $16 million.
On 8 July 2019, the trial court granted Defendants’ motion to withdraw as counsel for Plaintiff. On 2 March 2020, the trial court entered an order denying Plaintiff’s motion for a new trial. The matter was appealed to the United States Court of Appeals for the Fourth Circuit which upheld the judgment on the issue of liability but set aside the award of damages as excessive. Plaintiff ultimately paid Eshelman $16 million dollars to settle the defamation suit.
In the malpractice case
On 20 February 2024, arguments were presented to the trial court by all parties. The trial court considered two main questions, “(1) What was the last act [by] Defendants that gave rise to the cause of action? and (2) Was the action filed within the four-year Statute of Repose?” On 20 March 2024, the trial court filed a written order dismissing Plaintiff’s Refiled Complaint with prejudice under Rule 12(b)(6) because it “was not brought within the statute of repose[.]” Plaintiff filed notice of appeal on 28 March 2024.
Dismissal reversed
Because the savings provision of Rule 41(a)(1) of the North Carolina Rules of Civil Procedure allows a timely-filed claim to be refiled within one year of its voluntary dismissal and this one year time period is not cut short by the four-year statute of repose contained in N.C. Gen. Stat. § 1-15(c), the trial court erred in granting Defendants’ motion to dismiss the Refiled Complaint. We hold Plaintiff’s cause of action for legal malpractice and negligence is not barred by the applicable statute of repose and reverse the trial court’s dismissal of the claim. Presuming the trial court correctly determined the last act of negligence date, even though the trial court did not grant Defendants’ motion to withdraw as counsel for Plaintiff until 8 July 2019, Plaintiff’s cause of action for gross negligence is barred by the statute of repose and was properly dismissed. We affirm in part, reverse in part, and remand to the trial court for further proceedings not inconsistent with this opinion.
FREEMAN, Judge, concurring in part and dissenting in part.
I concur with the majority’s determination of the date of defendants’ last act, but I write separately to address the interplay between the statute of repose and the savings provision. As neither this Court nor our Supreme Court have addressed whether the savings provision provides an exception to the statute of repose, this Court must engage in meaningful statutory interpretation to answer the question posed in this case. Because the statute of repose explicitly states, “in no event shall an action be commenced more than four years from the last act of the defendant giving rise to the cause of action,” N.C.G.S. § 1-15(c) (2023) (emphasis added), the savings provision states, “a new action based on the same claim may be commenced within one year after such dismissal,” N.C.G.S. § 1A-1, Rule 41 (a)(1) (2023) (emphasis added), and the savings provision does not provide an exception to the statute of repose. Accordingly, I respectfully dissent from the majority’s reversal of the trial court’s order granting defendants’ motion to dismiss.
(Mike Frisch)