Levin v. Berley

• Decision Date: 24 February 1984
• Docket Number: No. 83-1654,83-1654
• Citation: 728 F.2d 551
• Parties: Irving M. LEVIN, etc., et al., Plaintiffs, Appellants, v. David R. BERLEY, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

Page 551

728 F.2d 551

Irving M. LEVIN, etc., et al., Plaintiffs, Appellants, v. David R. BERLEY, Defendant, Appellee.

No. 83-1654.

United States Court of Appeals,

First Circuit.

Argued Jan. 6, 1984.

Decided Feb. 24, 1984.

Elizabeth Nevins Mulvey, Boston, Mass., with whom Andrew C. Meyer, Jr., and Lubin & Meyer, Boston, Mass., were on brief, for plaintiffs, appellants.

Edward T. Hinchey, Boston, Mass., with whom Sloane & Walsh, Boston, Mass., was on brief, for defendant, appellee.

Before CAMPBELL, Chief Judge, BREYER, Circuit Judge, and PETTINE, ^* Senior District Judge.

LEVIN H. CAMPBELL, Chief Judge.

This is an appeal from a judgment of the district court granting defendant's motion for summary judgment. Irving Levin, a resident of Massachusetts, brought this diversity action against attorney David Berley, a Florida resident, in the United States District Court for the District of Massachusetts. Levin charged Berley with malpractice in drawing the will of Levin's deceased wife, Evelyn.

Berley drafted the will in 1972 under instructions to take full advantage of the marital deduction in the federal estate tax law. Evelyn Levin died on December 31, 1975 and plaintiff, as executor of his wife's will, filed a federal estate tax return on October 4, 1976 in which he claimed a marital deduction. In 1978 the IRS contacted Levin questioning the amount of the marital deduction. Attorney Lippman, who represented Levin in administration of the estate, wrote Berley on January 23, 1979, stating, "Mr. Levin has requested that I write you this letter advising you that he plans to hold you accountable for alleged errors made in the will of his wife Evelyn." On March 9, 1979, the IRS sent Levin notice of a $60,000 deficiency in the payment of estate taxes due to the disallowance of the marital deduction claimed on Mrs. Levin's New York stock account. After receiving Lippman's letter and learning of the deficiency notice, Berley told Levin that he would testify before the tax court and that the controversy would be resolved in Levin's favor. On April 9, 1981, the tax court decided in favor of the IRS. This court later affirmed that decision in an unpublished opinion.

Levin filed this action against Berley on October 12, 1982, suing both in his individual capacity and as executor of his wife's will. In addition to malpractice, he alleged a violation of Mass.Gen.Laws ch. 93A, the Massachusetts unfair trade practices act. The district court allowed summary judgment for defendant on the malpractice claim, holding that it was barred by the statute of limitations. It also granted summary judgment for the defendant on the Chapter 93A claim, holding that Levin lacked standing. Levin has appealed from both judgments.

I.

The malpractice claim is governed by Massachusetts law, which provides for a three-year statute of limitations for attorney malpractice. Mass.Gen.Laws ch. 260, Sec. 4. The relevant question is when Levin's malpractice claim "accrued" under the statute of limitations. The district court applied the Massachusetts "discovery rule," which tolls the statute of limitations until a plaintiff knows or reasonably should know that he has been harmed by the defendant's conduct. Franklin v. Albert, 381 Mass. 611, 619, 411 N.E.2d 458, 463 (1980). The discovery rule applies to attorney malpractice:

The attorney, like the doctor, is an expert, and much of his work is done out of the client's view. The client is not an expert; he cannot be expected to recognize professional negligence if he sees it, and he should not be expected to watch over the professional or to retain a second professional to do so. The relation of attorney and client is highly fiduciary in its nature.

Hendrickson v. Sears, 365 Mass. 83, 90, 310 N.E.2d 131, 135 (1974); see also Robertson v. Hirsh, 276 Mass. 452, 177 N.E. 676 (1931).

In Hendrickson, the plaintiff sued his attorney in 1971 for failing to uncover an encumbrance in the title to property which the attorney certified in 1961. The plaintiff did not discover the error until 1970 when a prospective purchaser searched the title. The Massachusetts Supreme Judicial Court held that the defect in the certified title was "inherently unknowable" to the client and that the statute of limitations began to run only in 1970 when the error was discovered, not in 1961 when the mistake was made. 365 Mass. at 90-91, 310 N.E.2d at 136. We assume, without deciding, that the faulty language in the will was similarly "inherently unknowable" to the Levins. Nonetheless, Levin knew or should have known of the blunder by at least January 29, 1979 when attorney Lippman sent Berley the letter regarding Mr. Levin's intent to hold Berley responsible for "alleged errors made in the will." Levin denies knowledge of this letter, but a client is charged with the knowledge of his attorney. ¹ Continental Casualty Co. v. United States, 337 F.2d 602, 603 (1st Cir.1964); Quinn v. Hintlin, 4 Mass.App.Ct. 805, 805, 346 N.E.2d 374, 375 (1976); cf. Flynn v. Wallace, 359 Mass. 711, 717, 270 N.E.2d 919, 923 (1971) (knowledge of real estate broker imputed to principal). The March 9, 1979 deficiency notice also put Levin on notice that something had gone seriously awry. The date of suit was well over three years from this later date.

Levin argues that he suffered no injury until the tax court upheld the IRS, since a reversal of the IRS by the tax court would have eliminated any harm. In Hendrickson v. Sears, the Supreme Judicial Court of Massachusetts reserved the question "whether the cause of action would accrue on discovery in the absence of appreciable harm." 365 Mass. at 91, 310 N.E.2d at 136. Since then the court has held that "[a] cause of action based on negligence requires that both negligence and harm be shown ...," and that therefore a cause of action for negligent design of a ladder did not accrue until plaintiff suffered personal injury. Cannon v. Sears, Roebuck & Co., 374 Mass. 739, 742; 374 N.E.2d 582, 584 (1978). While Cannon involved a question of negligent design, it seems likely that Massachusetts would apply a similar rule to legal malpractice claims. See Fort Myers Seafood Packers, Inc. v. Steptoe & Johnson, 381 F.2d 261, 262 (D.C.Cir.1967), cert. denied, 390 U.S. 946, 88 S.Ct. 1033, 19 L.Ed.2d 1135 (1968); Bowman v. Abramson, 545 F.Supp. 227, 231 (E.D.Pa.1982); Simmons v. Ocean, 544 F.Supp. 841, 844 (D.V.I.1982); Mitchell v. Transamerica Insurance Co., 551 S.W.2d 586 (Ky.App.1977); Price v. Holmes, 198 Kan. 100, 422 P.2d 976 (1967). The Supreme Court of California has said,

The mere breach of a professional duty, causing only nominal damages, speculative harm, or threat of future harm--not yet realized--does not suffice to create a cause of action for negligence. Hence, until the client suffers appreciable harm as a consequence of his attorney's negligence, the client cannot establish a cause of action for malpractice.

Budd v. Nixen, 6 Cal.3d 195, 200, 98 Cal.Rptr. 849, 491 P.2d 433, 435 (1971).

The difficult question is what constitutes an injury. Levin argues that his sole injury was the loss of the marital deduction, which was merely speculative until the tax court upheld the IRS. Under his view the cause of action would only have accrued when the tax court's decision established a definite injury. On the facts of this case, however, we cannot accept Levin's contention as to the time of accrual. Once Levin encountered difficulties with the IRS he suffered injury in the form of additional legal fees to ameliorate the harm caused by Berley's error.

Berley's asserted error was plain. Had it not occurred, no special dealings with the IRS would have been anticipated. Berley was not given some pioneering mission which would have resulted in legal proceedings even if responsibly handled. Berley allegedly erred by failing to satisfy a basic requirement set out in the tax law. In the words of the tax court, "Mrs. Levin's will is consistent and unambiguous"; the marital deduction failed because "the New York account was subject to a trust rather than passing outright to Mr. Levin." See 26 U.S.C. Sec. 2056(b). Levin would have been entitled to damages for attorney fees and other costs incurred in attempting to save the marital deduction even in the unlikely event he had later snatched victory from defeat in the tax action. ² See Royal Crown Cola Bottling Co. v. Aetna Casualty & Surety Co., 438 F.Supp. 39, 46 (W.D.Okl.1977) (in malpractice action for attorney's failure to assert statute of limitations defense on behalf of client in a prior suit, damages began to accrue when client was forced to defend prior suit on the merits).

Had Berley been representing Levin or the estate in connection with the IRS assessment of the tax deficiency, our analysis might possibly be different. See Northwestern National Insurance Co. v. Osborne, 573 F.Supp. 1045, 1050 (E.D.Ky.1983); Bowman v. Abramson, 545 F.Supp. 227, 229 (E.D.Pa.1982); cf. Siegel v. Kranis, 29 A.D.2d 477, 288 N.Y.S.2d 831 (1968) (attorney malpractice cause of action only accrues when attorney-client relationship ends). In the present case, however, Berley's representation of Levin ended in 1972, long before the problems with the IRS arose. Thus even were we to accept the principle of delaying accrual of a malpractice cause of action while an attorney attempts to undo his error, that principle is not applicable to this case. When trouble arose, Levin was being represented by independent counsel who knew of the cause of action and could have instituted a suit on Levin's behalf or recommended that Levin seek other counsel to do so.

The total extent of Levin's damages was, to be sure, uncertain prior to final judicial resolution of the tax deficiency. This uncertainty did not, however, delay accrual of Levin's cause of action. The Supreme Judicial Court of Massachusetts has recently held,

If knowledge of the extent of an injury were to control the accrual of a cause...