Larson & Larson, P.A. v. Tse Industries

• Decision Date: 05 November 2009
• Docket Number: No. SC08-428.,SC08-428.
• Citation: Larson & Larson, P.A. v. Tse Industries, 22 So.3d 36 (Fla. 2009)
• Parties: LARSON & LARSON, P.A., et al., Petitioners, v. TSE INDUSTRIES, INC., Respondent.
• Court: Florida Supreme Court

22 So.3d 36

LARSON & LARSON, P.A., et al., Petitioners, v. TSE INDUSTRIES, INC., Respondent.

No. SC08-428.

Supreme Court of Florida.

November 5, 2009.

Brandon S. Vesely and Michael J. Keane of Keane, Reese, Vesely, and Gerdes, P.A., St. Petersburg, FL, for Petitioners.

Marie Tomassi, Stanley H. Eleff, and Edward B. Carlstedt of Trenam, Kemker, Scharf, Barkin, Frye, O'Neill, and Mullis, P.A., St. Petersburg, FL, for Respondent.

CANADY, J.

We have for review the decision of the Second District Court of Appeal in TSE Industries, Inc. v. Larson & Larson, P.A., 987 So.2d 687 (Fla. 2d DCA 2008), in which the district court certified direct conflict with the decision of the Fourth District Court of Appeal in Integrated Broadcast Services, Inc. v. Mitchel, 931 So.2d 1073 (Fla. 4th DCA 2006), regarding when the two-year statute of limitations begins to run on a legal malpractice claim. We have jurisdiction. See art. V, § 3(b)(4), Fla. Const.

The Second District held in Larson that where the judgment underlying a litigation-related legal malpractice claim is final, the statute of limitations does not begin to run until the final disposition of motions for sanctions. On similar facts, however, the Fourth District in Mitchel held that the limitations period on a legal malpractice claim began to run on the underlying judgment when that judgment was final but did not begin to run with respect to a subsequent sanctions judgment until the sanctions judgment became final. As we explain below, we agree with the Fourth District's decision in Mitchel.

I. BACKGROUND

In 1998, Larson & Larson, P.A., as counsel for TSE Industries, filed a patent infringement suit in United States district court to enforce one of TSE's patents against Franklynn Industries, Inc. After trial, the jury returned a verdict in favor of Franklynn, finding that TSE's patent was invalid. The trial court entered judgment against TSE in the case on October 24, 2001. TSE filed timely motions for judgment as a matter of law and for new trial, and Franklynn filed a post-judgment motion for declaration of an exceptional case and for recovery of attorney fees. See 35 U.S.C. § 285 (2006) ("The court in exceptional cases may award reasonable attorney fees to the prevailing party [in patent infringement actions].")

On August 16, 2002, the federal district court entered two orders. One order disposed of TSE's motions and affirmed the jury verdict, thus entering judgment against TSE.¹ TSE did not appeal this order, and the judgment was final thirty days later, September 16, 2002. In the other order of August 16, 2002, the federal judge granted Franklynn's sanctions motion. The court found the case exceptional within the meaning of the statute, relying largely on its findings that a TSE employee engaged in inequitable conduct both before the Patent and Trademark Office and before the court and that TSE was aware of a possible problem with the patent and did not candidly disclose this fact. The federal court determined that but for such conduct, the trial would not have been necessary and awarded Franklynn prevailing party attorney fees and expert witness fees. Leaving the amount of the sanctions award for later determination, the trial court ordered Franklynn to file a revised statement of fees and costs. The parties, however, settled the issue before the court issued a final determination, and on October 10, 2002, the parties filed a stipulation of dismissal.

On October 5, 2004—more than two years after the judgment in the patent case was final but less than two years after the parties filed the stipulation of dismissal—TSE filed a legal malpractice suit against Larson in Florida circuit court. TSE alleged negligence and breach of contract and sought monetary damages for the attorney fees and expenses incurred by TSE to initiate and prosecute the patent infringement suit and for the sums it paid for Franklynn's attorney fees and expenses.²

Larson moved for summary judgment based on the two-year statute of limitations for professional malpractice in section 95.11(4)(a), Florida Statutes (2002). After hearing argument, the trial court entered final summary judgment for Larson. Applying this Court's decision in Silvestrone v. Edell, 721 So.2d 1173 (Fla. 1998), the trial court held the action was barred. The court reasoned that judicial labor regarding the merits of the underlying action ended when the judgment was not appealed. Further, the court concluded that the order granting attorney fees could not alter that final judgment and TSE's complaint did not allege any legal malpractice occurring after the August 2002 orders were entered.

As explained more fully in the next section, the Second District reversed, concluding that this Court's Silvestrone opinion did not contemplate the factual scenario in this case. Larson, 987 So.2d at 691. Accordingly, the district court held that the statute of limitations did not begin to run until the parties settled the sanctions claim and filed the stipulation dismissing the case with prejudice.

II. SILVESTRONE AND THE CONFLICT IN THE CASES

Florida law provides that "[a] cause of action accrues when the last element constituting the cause of action occurs," § 95.031(1), Fla. Stat. (2002), and that a legal malpractice action must be brought within two years "from the time the cause of action is discovered or should have been discovered with the exercise of due diligence," § 95.11(4)(a), Fla. Stat. (2002). "A legal malpractice action has three elements: 1) the attorney's employment; 2) the attorney's neglect of a reasonable duty; and 3) the attorney's negligence as the proximate cause of loss to the client." Law Office of David J. Stern, P.A. v. Sec. Nat'l Servicing Corp., 969 So.2d 962, 966 (Fla.2007) (quoting Sec. Nat'l Servicing Corp. v. Law Office of David J. Stern, P.A., 916 So.2d 934, 936-37 (Fla. 4th DCA 2005)).

In Silvestrone, we specifically addressed the question of when the statute of limitations begins to run in a litigation-related legal malpractice claim. The district courts in both Larson and Mitchel expressly relied on Silvestrone. Accordingly, to provide context for these decisions and the conflict presented here, we begin by reviewing Silvestrone.

Silvestrone, the plaintiff in a federal antitrust action, prevailed when the jury returned a verdict in his favor and awarded him money damages. Silvestrone, 721 So.2d at 1174. The court entered final judgment two years later, when it resolved various post-trial motions, including Silvestrone's motion for attorney fees and costs and a coplaintiff's motion for new trial. The final judgment became final on February 4, 1992, when it was not appealed. Almost a year later, Silvestrone filed a legal malpractice action against his former trial attorney "for exceeding his authority to enter into a settlement agreement." Id. His former attorney raised the statute of limitations as a bar to the suit, arguing that the statute began to run when the jury returned its verdict. Although the district court agreed, we unanimously quashed its decision. Id.

Beginning from the premise that the law was unclear regarding when the statute of limitations period begins to run for a litigation-related legal malpractice claim, we sought to establish a clearly delineated rule. Id. at 1175. We recognized in this context that until final judgment is entered, a trial court may revisit any nonfinal ruling. Accordingly we reasoned and held as follows:

[W]hen a malpractice action is predicated on errors or omissions committed in the course of litigation, and that litigation proceeds to judgment, the statute of limitations does not commence to run until the litigation is concluded by final judgment. To be specific, we hold that the statute of limitations does not commence to run until the final judgment becomes final.

To be liable for malpractice arising out of litigation, the attorney must be the proximate cause of the adverse outcome of the underlying action which results in damage to the client. Since redressable harm is not established until final judgment is rendered, a malpractice claim is hypothetical and damages are speculative until the underlying action is concluded with an adverse outcome to the client.

....

We therefore hold, in those cases that proceed to final judgment, the two-year statute of limitations for litigation-related malpractice under section 95.11(4)(a), Florida Statutes (1997), begins to run when final judgment becomes final. This bright-line rule will provide certainty and reduce litigation over when the statute starts to run. Without such a rule, the courts would be required to make a factual determination on a case by case basis as to when all the information necessary to establish the enforceable right was discovered or should have been discovered.

Id. at 1175-76 (emphasis added) (citations and footnote omitted). For Silvestrone, this meant that his malpractice claim was timely because the two-year statute did not begin to run until the "final judgment became final," id. at 1175, some two years after the jury verdict was entered, see id. at 1174.

In the present case, the Second District addressed a somewhat different factual scenario. Unlike Silvestrone—where the damages based on the jury's verdict and the award of attorney fees were included in the same final judgment—in this case, when the final judgment against TSE Industries in the federal action was final, the sanctions order against TSE was not. The district court applied our Silvestrone decision as follows:

The Silvestrone court's "bright-line rule" was that that the statute of limitations begins to run when "the litigation is concluded by final judgment." Under the particular facts in Silvestrone, the litigation was concluded when the final judgment became final. In this case, however, the litigation was not concluded until the parties filed the stipulation to dismiss the underlying action with...