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Moon v. McDonald, Carano & Wilson, 306 P.3d 406, 129 Nev. Adv. Rep. 56 (2013)

The Nevada Supreme Court added to its slowly-growing body of legal malpractice statute of limitations jurisprudence in Moon v. McDonald, Carano & Wilson, 306 P.3d 406, 129 Nev. Adv. Rep. 56 (2013). In this case, former clients sued a law firm for alleged malpractice arising from representation during bankruptcy proceedings. The issue of first impression presented was whether representation of a client during bankruptcy proceedings constitutes “litigation." If so, the commencement of the statute of limitations was tolled until the bankruptcy proceedings concluded. On the other hand, if bankruptcy representation does not constitute “litigation,” then the statute of limitations would not be suspended, or tolled, and the malpractice claims would be time-barred.

Under Nevada law, “An action against an attorney . . . to recover damages for malpractice . . . must be commenced within 4 years after the plaintiff sustains damage or within 2 years after the plaintiff discovers or through the use of reasonable diligence should have discovered the material facts which constitute the cause of action, whichever occurs earlier.” NRS 11.207(1). The statute’s two-year measure provides a built-in “discovery rule,” which requires an analysis of whether the alleged malpractice occurred during the course of representing a client in litigation, or whether the litigation was transactional in nature. In the litigation malpractice context, the two-year statute of limitations does not start running until the litigation matter in which the malpractice allegedly occurred is concluded, including any appeal. (See Hewitt v. Allen, 118 Nev. 216, 221, 43 P.3d 345 (2002)).

In the Moon case, the clients alleged that the defendant law firm mishandled aspects of a lease and promissory note involving a bankruptcy debtor. The clients first filed a lawsuit against the law firm in 2006, but this lawsuit was dismissed on procedural grounds. After the bankruptcy proceedings ended in 2008 and related civil proceedings ended in 2009, in 2010 the clients filed a second malpractice lawsuit. The law firm moved to dismiss on statute of limitations grounds - i.e., that the clients knew of the material facts constituting their cause of action in 2006, when they filed their first lawsuit. The clients argued that the bankruptcy-related work performed by the law firm constituted litigation, and that the appropriate accrual date, at the earliest, was 2008, when the bankruptcy proceedings concluded. 

In resolving this issue of first impression, the Nevada Supreme Court held that bankruptcy proceedings that do not involve formal adversary proceedings do not constitute “litigation” for purposes of statute of limitations tolling. Thus, the statute of limitations for the clients’ malpractice claims against the law firm were not tolled during the pendency of the bankruptcy proceedings, and the claims were accordingly time-barred.
 
By establishing a bright-line rule as to when an attorney’s representation of a client in connection with a bankruptcy constitutes “litigation,” the Nevada Supreme Court has hopefully created more certainty regarding the time frames for bringing legal malpractice claims arising out of bankruptcy proceedings.

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