Appeals Court: Plaintiff’s Legal Malpractice Claim Was Wrongly Dismissed

The trial court in this legal-malpractice case improperly interpreted the terms of the parties’ agreement and, as a result, the plaintiff’s malpractice suit was improperly dismissed, the Michigan Court of Appeals has ruled.

The plaintiff in New Products Corp v Butzel Long (Docket No. 361412) initially retained the defendant-law firm in an underlying action to quiet title to a golf course. The defendant was subsequently let go from that case and, in 2011, the plaintiff filed this legal-malpractice suit, claiming the defendant was negligent in handling the quiet title action. In 2012, the plaintiff and the defendant entered into an agreement whereby the lawsuit “would be dismissed without prejudice and the statute of limitations would be tolled” while the plaintiff litigated the underlying quiet title action. When the plaintiff did not prevail in the underlying case, it resumed this legal-malpractice action against the defendant.

In the meantime, the Michigan Legislature enacted MCL 600.5838b, a statute of repose pertaining to legal-malpractice claims. The statute, enacted in 2013, prohibits malpractice actions that are commenced “six years after the date of the act or omission that is the basis for the claim.” The Wayne County Circuit Court ruled the plaintiff’s malpractice suit was barred by this statute of repose.

The Court of Appeals reversed and remanded. “We agree with [the plaintiff] that the trial court’s interpretation of the agreement was erroneous because interpreting the tolling agreement as to include the statute of repose is consistent with the contract’s plain language and because excluding it is contrary to the clear intent of the parties,” the panel wrote.

Judge Noah P. Hood and Judge Allie Greenleaf Maldonado joined the unpublished opinion. Judge Elizabeth L. Gleicher concurred separately, saying the case “exemplifies gotcha lawyering.”

Intent Of The Parties

On appeal, the plaintiff argued the intent of the parties’ agreement was to “ease the litigation burdens” while the underlying quiet title action was winding its way through the appellate process. The plaintiff claimed the trial court erroneously interpreted the language of the contract “to allow for the dismissal of the malpractice claim based on a statute which was not in existence at the time that the tolling agreement was executed and made binding.”

The defendant, on the other hand, asserted the trial court correctly interpreted the parties’ agreement because the statute of repose “was not named as a statute that was tolled.”

The Court of Appeals began its analysis by noting the purpose of contract interpretation is to “ascertain and give effect” to the parties’ intent. “It is undeniable, both from the language of the agreement and the circumstances surrounding its formation, that the parties’ intent was that [the plaintiff] would be allowed to bring its malpractice action against [the defendant] without being time-barred at the conclusion of its [underlying] litigation …. It is likewise undeniable that the parties did not intend that the action be time-barred by the statute of repose because the statute of repose did not exist at the time of the agreement’s formation.”

In addition, interpreting the parties’ contract “as to toll the statute of repose is consistent with its plain language,” the Court of Appeals said. “The parties agreed to toll ‘[a]ll applicable Statutes of Limitation,’ and we conclude that the statute of repose fits within the term ‘Statutes of Limitation’ as it is used in this agreement.”

The Court of Appeals set forth several reasons for its decision. “First, the contract specifically says that it tolls all statutes of limitations, and this implies that the parties intended for a broad interpretation of the term. Second, the statute of repose is a statute that imposes a limitation on the timeframe within which an action may be commenced. Third, [the defendant’s] motion for summary disposition was brought and granted pursuant to MCR 2.116(C)(7), and this court rule allows for judgment based on a ‘statute of limitations;’ however, it makes no mention of a ‘statute of repose.’ By bringing and granting the motion pursuant to this court rule, both [the defendant] and the trial court implicitly recognized that the statute of repose is a type of statute of limitations.”

The Court of Appeals also said it recognized there is case law distinguishing between statutes of limitations and statutes of repose. In particular, the appeals court cited Frank v Linkner, 500 Mich 133 (2017), which recognized that “a statute of limitations is generally measured from the date a claim accrues, while a statute of repose is measured from some other particular event, such as ‘the date of the last culpable act or omission of the defendant.’”

“However,” the Court of Appeals continued, “all rules of interpretation are subordinate to the goal of ascertaining the parties’ intent, … and interpreting the term in such a way as to include the statute of repose is consistent with the parties’ intent to waive time limitations so that [the plaintiff] could litigate the underlying claim prior to bringing the malpractice action. The parties could not have intended for the statute of repose to remain effective given that it did not yet exist. Therefore, we conclude that the trial court did not properly interpret the contract.”

Accordingly, the Court of Appeals reversed the order granting summary disposition in favor of the defendant and remanded the case.

‘Gotcha Lawyering’

In her concurring opinion, Judge Gleicher said the defendant’s actions demonstrated “gotcha lawyering.”

“Rather than honoring an agreement extending the time for filing [the plaintiff’s] legal malpractice claim, [the defendant] seeks to dodge its liability by exploiting an intervening and unforeseeable event - the passage of a statute of repose applicable to legal malpractice actions,” Judge Gleicher wrote. “Not only was the statute an unpredictable event, [the defendant] had specifically stipulated, in writing, to the precise timing of [the plaintiff’s] lawsuit. The majority correctly rejects [the defendant’s] malign effort to abandon its commitment, holding that the contract controls. I write separately to suggest another reason that the majority opinion rests on legally solid ground.”

Judge Gleicher pointed out the plaintiff unsuccessfully argued in the trial court that the 2013 statute of repose was not retroactive and the plain language of the contract demonstrated the intent that a malpractice suit could be filed at a later time. “My colleagues find the latter argument meritorious and reverse. Guided by the Michigan Supreme Court’s opinion in Buhl v Oak Park, 507 Mich 236 … (2021), I would reverse on a second ground as well: the 2013 statute of repose is not retroactive.”

In particular, the judge rejected the defendant’s argument that Nortley v Hurst, 321 Mich App 566 (2017), supports retroactively applying the statue of repose. “Nortley did not hold that the 2013 statute of repose always applies retroactively. Rather, the Court concluded that under the unusual circumstances presented in that case, retroactive application did not deny the plaintiff a vested right. … The Nortley Court also relied on the ‘procedural’ nature of statutes of repose.”

The difference between Nortley and the present case is the parties’ tolling agreement, Judge Gleicher explained. “No such agreement existed in Nortley. Here, the parties specifically agreed that suit could be brought 60 days after a final adjudication of the underlying claim. Whether or not the parties should have included the words ‘statute of repose;’ in the agreement, the majority correctly holds that they intended that [the plaintiff] could withhold suit until the underlying case concluded.”

In other words, the tolling agreement “endowed [the plaintiff] with a ‘vested right’ to bring suit 60 days after the conclusion of the underlying case,” the judge said. “Because retroactive application of the statute of repose would impair that vested right, it is impermissible.”

Judge Gleicher also examined the Legislature’s intent when enacting the statute of repose in 2013. “Applying the pertinent LaFontaine [Saline, Inc v Chrysler Group, LLC, 496 Mich 26 (2014)] factors here, … leads to a determination that under the circumstances presented, MCL 600.5838b is not retroactive.”

Therefore, because the plaintiff’s right to sue the defendant “vested before the 2013 enactment of MCL 600.5838b(1)(b), the statute of repose may not be imposed retroactively,” Judge Gleicher concluded. “With these added observations, I join the majority.”