Massachusetts Elec. Co. v. Fletcher, Tilton & Whipple, P.C.

• Decision Date: 13 March 1985
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: MASSACHUSETTS ELECTRIC COMPANY et al. 1 v. FLETCHER, TILTON & WHIPPLE, P.C., et al. 2

Page 390

475 N.E.2d 390

394 Mass. 265

MASSACHUSETTS ELECTRIC COMPANY et al. ¹ v. FLETCHER, TILTON & WHIPPLE, P.C., et al. ²

Supreme Judicial Court of Massachusetts Middlesex.

Argued Jan. 7, 1985.

Decided March 13, 1985.

Robert Glass, Cambridge, for plaintiffs.

D. Alice Olsen, Boston (Alan H. Robbins, Boston, with her), for defendants.

Before HENNESSEY, C.J., and WILKINS, LIACOS and O'CONNOR, JJ.

WILKINS, Justice.

On the ground that the plaintiffs' claim was barred by the statute of limitations, a judge of the Superior Court allowed the defendants' motion under Mass.R.Civ.P. 12(b)(6), 365 Mass. 754 (1974), to dismiss the complaint for malpractice. The plaintiffs appealed. We transferred the appeal here and now affirm the judgment.

This action was commenced on July 1, 1983. The parties agree that actions for malpractice against the defendant attorneys are governed by the statute of limitations set forth in G.L. c. 260, § 4, as appearing in St.1981, c. 765. See Cioffi v. Guenther, 374 Mass. 1, 3, 370 N.E.2d 1003 (1977). Section 4 provides that such an action "shall be commenced only within three years next after the cause of action accrues." The issue in this case is whether the plaintiffs' cause of action accrued more than three years prior to July 1, 1983.

The factual background begins in August, 1972, when one Clark, an employee of an independent contractor, was seriously injured while painting a transmission tower owned by one of the electric companies. In separate actions Clark and his wife sued two of the electric companies. Home Insurance Company (Home Insurance) was an excess insurer of the electric companies (above $100,000). The primary insurer selected the defendant law firm to defend the actions, and the individual defendant attorney became involved in the defense.

The Clarks' tort actions involved claims that the electric companies failed to warn the painting contractor and its employees of the risk and failed to provide proper supervision of the work. The electric companies relied on the defense that they provided proper supervision. In the course of preparation for last minute depositions, an employee of one of the companies and the individual defendant attorney found field notes of an internal investigation conducted by a company employee which contained a notation indicating that there had been no supervision of the painting operation. The attorney told the company employee, "That hurts." The employee tore up the notes and threw them into a waste basket. The attorney did not retrieve the notes. About one week later, the defendant attorney and the law firm concluded that the Canons of Ethics required disclosure to the Clarks' attorney of the information shown on the discarded field notes. That information was disclosed, as well as the fact of the destruction of the notes. Home Insurance, the excess insurer, learned of what had happened and notified the electric companies that it would reserve its rights as a result of the allegations of destruction of the field notes (and as the result of alleged alteration of certain relevant documents, a matter in which the defendant attorneys did not participate).

In early 1977, the Clarks moved unsuccessfully for a default judgment. The judge ruled, however, that the fact of document destruction (and of the alleged tampering with evidence) would be admissible against the electric companies at the trial of the Clarks' tort actions. On February 8, 1977, the Clark case was settled for $725,000, of which Home Insurance paid $625,000 under a purported reservation of rights. The complaint in this case alleges that, because of the improper destruction of documents (and the alleged alteration of evidence), the electric companies were obliged to make a larger settlement than they would have otherwise. In January, 1980, Home Insurance brought an action against two of the electric companies seeking reimbursement of the $625,000 it paid in settlement of the Clark actions, alleging a breach of the cooperation clause in its insurance policy by the destruction of the field notes and by the altering of documents. The electric companies settled the Home Insurance action against them in 1981 by payment of $250,000.

As we have said, this action was commenced on July 1, 1983, well within three years of the settlement of the Home Insurance action but well after three years of its commencement. The defendant attorneys argue that the electric companies' cause of action against them accrued at least by the date Home Insurance commenced its action in January, 1980. Because the Legislature has not undertaken to provide an answer as to when a cause of action for legal malpractice accrues, it is a question for judicial determination. Hendrickson v. Sears, 365 Mass. 83, 88, 310 N.E.2d 131 (1974). See Olsen v. Bell Tel. Laboratories, Inc., 388 Mass. 171, 174, 445 N.E.2d 609 (1983).

In some cases involving the issue of when a cause of action accrues, we have been concerned with the question whether a plaintiff knew or had reason to know of the existence of the cause of action. See Olsen v. Bell Tel. Laboratories, Inc., supra at 174-175, 445 N.E.2d 609; White v. Peabody Constr. Co., 386 Mass. 121, 128-129, 434 N.E.2d 1015 (1982); Hendrickson v. Sears, supra, 365 Mass. at 90-91, 310 N.E.2d 131. Here the electric companies knew immediately of the alleged negligence of the defendant attorneys, but it was not then clear that the alleged negligence had caused or would cause the companies any appreciable harm. Our recent cases have indicated that a cause of action does not accrue until a plaintiff knows or reasonably should know that it has sustained appreciable harm as a result of a defendant's negligence. See Joseph A. Fortin Constr., Inc. v. Massachusetts Hous. Fin. Agency, 392 Mass. 440, 442, 466 N.E.2d 514 (1984); Olsen v. Bell Tel. Laboratories, Inc., supra, 388 Mass. at 176 445 N.E.2d 609; Dinsky v. Framingham, 386 Mass. 801, 803, 438 N.E.2d 51 (1982); Cannon v. Sears, Roebuck & Co., 374 Mass. 739, 741, 374 N.E.2d 582 (1978). See also Budd v. Nixen, 6 Cal.3d 195, 203, 98 Cal.Rptr. 849, 491 P.2d 433 (1971). The parties in this case are in substantial agreement...