Atlas Iron and Metal Co. v. Ashy

• Decision Date: 04 January 2006
• Docket Number: No. 05-458.,05-458.
• Citation: 918 So.2d 1205
• Parties: ATLAS IRON AND METAL COMPANY v. D. Warren ASHY.
• Court: Court of Appeal of Louisiana — District of US

918 So.2d 1205

ATLAS IRON AND METAL COMPANY v. D. Warren ASHY.

No. 05-458.

Court of Appeal of Louisiana, Third Circuit.

January 4, 2006.

COPYRIGHT MATERIAL OMITTED

Henry James Miltenberger, Jr., Covington, LA, for Defendant/Appellee, Gilsbar, Inc.

William H. Parker, III, Allen & Gooch, Lafayette, LA, for Defendants/Appellees, Westport Insurance Company and D. Warren Ashy.

George Febiger Riess, New Orleans, LA, for Plaintiff/Appellant, Atlas Iron and Metal Company.

Court composed of ULYSSES GENE THIBODEAUX, Chief Judge, BILLY HOWARD EZELL, and J. DAVID PAINTER, Judges.

THIBODEAUX, Chief Judge.

Plaintiff, Atlas Iron and Metal Company ("Atlas"), appeals a trial court judgment which dismissed a legal malpractice claim against Defendant, D. Warren Ashy, on the basis of peremption pursuant to La.R.S. 9:5605. Atlas avers that it did not have actual or constructive knowledge of Mr. Ashy's failure to investigate insurance coverage a year before its lawsuit was filed and that its cause of action accrued only when actual and appreciable damages were sustained. We disagree and affirm the judgment of the trial court.

I. ISSUE

Does peremption begin to run under La.R.S. 9:5605 when a client learns facts that should put a reasonable person in the client's position on notice that their attorney may have committed malpractice, and is there an additional requirement that the peremption periods cannot begin to run until the client suffers actual and appreciable damages?

II. FACTS

Atlas and four other defendants were sued in the Civil District Court for the Parish of Orleans. The claims against them included an action for conversion for the alleged improper and unauthorized misappropriation of dismantled drilling equipment for use as scrap metal. Four of the defendants, including Atlas, hired appellee, attorney Warren Ashy (Mr. Ashy), to defend them in that lawsuit. Trial on the matter was set for September 9, 1996. On the first morning of trial, the attorneys for each side met with District Judge Michael Bagneris for a pre-trial conference. Judge Bagneris asked Mr. Ashy if his clients, including Atlas, had insurance coverage to help them pay for any damage award if they were unsuccessful at trial. Mr. Ashy came out of the pre-trial conference and directly asked Atlas' President, Mr. Robert Adler, about the existence of insurance coverage for damage awards.

Atlas and the other defendants lost the case. They were ordered to pay damages to the plaintiff in the amount of $395,843.00. Mr. Ashy filed an appeal on behalf of Atlas and the other defendants with the Louisiana Fourth Circuit Court of Appeal. The case was affirmed by the fourth circuit in January of 1998. Mr. Ashy then applied for writs of certiorari or review with the Louisiana Supreme Court. The supreme court reversed the trial court and the court of appeal, and remanded the case back to the trial court on the issue of apportionment of fault and damages. The parties eventually settled the underlying litigation for $42,000.00 in September of 2000.

In March of 1998, Atlas hired attorney George Reiss to offer an opinion about Mr. Ashy's handling of the case. In April of 1998 Mr. Reiss advised Atlas that Mr. Ashy may have committed legal malpractice by not joining Atlas' insurance companies in the original lawsuit. A suit for legal malpractice was filed against Mr. Ashy on December 30, 1998, in the Fifteenth Judicial District Court. The trial court sustained Mr. Ashy's exception of prescription. Atlas now appeals that decision.

III.

LAW AND DISCUSSION

Standard of Review

A trial court's factual determinations can only be overturned if they are clearly wrong or if the trial court committed manifest error.

It is well settled that a court of appeal may not set aside a trial court's or a jury's finding of fact in the absence of "manifest error" or unless it is "clearly wrong," and where there is a conflict in the testimony, reasonable evaluations of credibility and reasonable inferences of fact should not be disturbed upon review, even though the appellate court may feel that its own evaluations and inferences are as reasonable.

Rosell v. ESCO, 549 So.2d 840, 844 (La.1989) (citations omitted). Therefore, an appellate court reviews the trial court record in its entirety, and determines whether the trial court reached a reasonable conclusion based on the facts and evidence in that record. Id.

The trial court determined that prescription began to toll on Atlas' alleged malpractice claim on September 10, 1996, the date that damages were awarded against Atlas by the trial court on the conversion claim. The trial court reasoned that when Mr. Ashy asked his client, Atlas, if there was an insurance policy to cover the damage claim awards, a reasonable person in Atlas' position would have been put on notice that there was a reason for concern regarding Mr. Ashy's representation.

Louisiana Revised Statutes 9:5605 Peremption Time Periods

Louisiana Revised Statutes 9:5605 governs claims for legal malpractice. The relevant parts of the statute are as follows:

§ 5605. Actions for legal malpractice

A. No action for damages against any attorney at law duly admitted to practice in this state, any partnership of such attorneys at law, or any professional corporation, company, organization, association, enterprise, or other commercial business or professional combination authorized by the laws of this state to engage in the practice of law, whether based upon tort, or breach of contract, or otherwise, arising out of an engagement to provide legal services shall be brought unless filed in a court of competent jurisdiction and proper venue within one year from the date of the alleged act, omission, or neglect, or within one year from the date that the alleged act, omission, or neglect is discovered or should have been discovered; however, even as to actions filed within one year from the date of such discovery, in all events such actions shall be filed at the latest within three years from the date of the alleged act, omission, or neglect.

B. The provisions of this Section are remedial and apply to all causes of action without regard to the date when the alleged act, omission, or neglect occurred. However, with respect to any alleged act, omission, or neglect occurring prior to September 7, 1990, actions must, in all events, be filed in a court of competent jurisdiction and proper venue on or before September 7, 1993, without regard to the date of discovery of the alleged act, omission, or neglect. The one-year and three-year periods of limitation provided in Subsection A of this Section are peremptive periods within the meaning of Civil Code Article 3458 and, in accordance with Civil Code Article 3461, may not be renounced, interrupted, or suspended.

(Emphasis added).

The prescription periods in this statute are peremptory. This means that both the underlying cause of action and the legal right to bring that cause of action to court dissolve at the end of the specified periods of limitation. There are two ways to start the peremption clock running under La.R.S. 9:5605. The peremption period will begin to run one year from the date when a client knew or should have known about the act, omission, or negligence on the part of his or her attorney that indicates that the client may be a victim of an act of malpractice. See La.R.S. 9:5605(A). Additionally, the peremption clock will start running on the date of the act, omission, or negligence that allegedly constitutes malpractice, and will toll three years from that date regardless of whether a client discovered, knew, or should have known about the attorney's alleged malpractice. Id. "Public policy requires that rights to which peremptive periods attach are to be extinguished after passage of a specified period. Accordingly, nothing may interfere with the running of a peremptive period. It may not be interrupted or suspended; nor is there provision for its renunciation." Reeder v. North, 97-0239, p. 12 (La.10/21/1997), 701 So.2d 1291, 1298 (citing Hebert v. Doctors Mem'l Hosp., 486 So.2d 717, 723 (La.1986)).

How to Determine if a Client Knew or Should Have Known About the Alleged Attorney Malpractice

The peremption period begins to run when a client knows or should have known that a lawyer's actions or inaction may cause the client to incur damages, thereby creating a legal cause of action. Therefore, courts look to see when a client "knew of the existence of facts which would have enabled him to state a cause of action for legal malpractice." Dauterive v. Landry and Watkins, 01-1112, p. 18 (La.App. 3 Cir. 3/13/02), 811 So.2d 1242, 1255. It is also possible for a client to have constructive knowledge of facts sufficient to "place a reasonable man on notice that malpractice may have been committed," such that the one year peremption period will begin to toll. Id. at 1254 (quoting Taussig v. Leithead, 96-690, p. 6 (La.App. 3 Cir. 2/19/97, 689 So.2d 680, 684)). The Louisiana Supreme Court is in full agreement:

Prescription commences when a plaintiff obtains actual or constructive knowledge of facts indicating to a reasonable person that he or she is the victim of a tort. Percy v. State, E.A. Conway Memorial Hosp., 478 So.2d 570 (La.App. 2 Cir.1985). A prescriptive period will begin to run even if the injured party does not have actual knowledge of facts that would entitle him to bring a suit as long as there is constructive knowledge of same. Constructive knowledge is whatever notice is enough to excite attention and put the injured party on guard and call for inquiry. Such notice is tantamount to knowledge or notice of everything to which a reasonable inquiry may lead. Such information or knowledge as ought to reasonably put the alleged victim on inquiry is sufficient to start [the] running of prescription.

Campo v. Correa, 01-2707, pp. 11-12 (La.6/21/02), 828 So.2d 502, 510-11 (citations omitted).

The facts of this case and...