United States Court of Appeals
For the First Circuit
No. 05-1305
FREDERICK FEDDERSEN,
Plaintiff, Appellant,
v.
CAROLYN S. GARVEY, ESQ.; and DOUGLAS, LEONARD & GARVEY, P.A.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Joseph A. DiClerico, Jr., U.S. District Judge]
Before
Lipez and Howard, Circuit Judges,
and Restani,* Judge.
Steven M. Latici, with whom McKean, Mattson & Latici, P.A.,
was on brief, for appellant.
Peter F. Kearns, for appellees.
October 26, 2005
_________________
*Chief Judge of the United States Court of International
Trade, sitting by designation.
LIPEZ, Circuit Judge. Frederick Feddersen brought this
malpractice action against the defendants, a lawyer and law firm
that represented him during divorce proceedings. The district
court granted summary judgment for the defendants on statute of
limitations grounds. Feddersen appealed. We affirm.
I.
We review the record submitted for summary judgment in
the light most favorable to Feddersen. Cloutier v. Costco
Wholesale Corp., 390 F.3d 126, 128 (1st Cir. 2004). In 1993,
Feddersen, having retained the defendants to represent him, filed
for divorce from his then-wife, Shelly Cannon Feddersen ("Cannon").
Although Feddersen and Cannon had entered into a prenuptial
agreement before their 1988 marriage, their divorce proceedings
were lengthy and complex. Under the terms of the prenuptial
agreement, Cannon was entitled to "twenty-five percent of the net
book value of FMT corporation" — a closely-held corporation that
was Feddersen's principal asset — "calculated as of the end of the
fiscal year immediately preceding the filing of the libel for
divorce." In the Matter of Feddersen and Feddersen, No. 2001-642,
slip op. 1 (N.H. 2003). The parties' efforts to determine the net
book value of FMT constituted both a major issue in the divorce and
the basis of this case.
During the pendency of the divorce, FMT was prosecuting
two patent infringement claims, both related to technology used in
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plastic bottles manufacturing. By 1994, the first claim, against
a company known as "Nessei," had resulted in a judgment in favor of
FMT for $3.4 million, which had been confirmed on appeal. The
second claim, against a company called "Constar," was at an earlier
stage of litigation. Feddersen, through the defendants, informed
Cannon of the net value of the Nessei settlement and of the
existence of the Constar litigation. In December 1994, as
discussions on the divorce neared completion, Feddersen offered
Cannon the chance to share in any proceeds of the Constar lawsuit
in exchange for her contribution to FMT's legal fees in the case.
Cannon declined Feddersen's offer and stipulated that she would
waive any interest in the Constar case in exchange for a lump sum
property settlement. Subsequently, Cannon and Feddersen stipulated
to a property settlement of $600,000. Because FMT's assets had
been depleted by the two patent litigations, the parties agreed
that their stipulation would be filed in escrow with the court
until the money from the Nessei case was received, at which time
Cannon would be paid and the case would proceed to a final hearing.
By early 1995, the Constar case had been referred to a
special master, who, in February 1995, found in favor of FMT and
recommended a judgment of $30 million. Feddersen and counsel for
FMT expected a lengthy and costly appeal, but Constar settled for
$11 million in April 1995. FMT received its first payment of $5
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million from Constar in May 1995, well before any payment was
received from Nessei.1
Neither Feddersen nor the defendants informed Cannon or
her lawyers of the developments in the Constar case. Instead, on
June 1, 1995, the defendants sent the New Hampshire court and
Cannon's lawyers a letter stating that the awaited "contingency,"
meaning the receipt of funds sufficient to satisfy the property
settlement in the divorce stipulation, had occurred. Cannon and
her lawyers assumed that the money from Nessei had been delivered.
For a final hearing, the defendants prepared for
Feddersen an affidavit of his current financial standing, which was
submitted to the court in accordance with former New Hampshire
Superior Court Rule 158.2 In the affidavit, Feddersen certified
that the value of his interest in FMT corporation was "[$]1,440,000
[b]ased on book value 12/31/92," and that his income was $150,000
per year. A final divorce decree, incorporating the $600,000
property settlement, entered on July 13, 1995.
In late 1998, Cannon petitioned for additional child
support payments from Feddersen. Trial was scheduled for March
1
Payment from Nessei did not arrive until January 1996. The
record does not indicate the reasons for the delay.
2
At the time of the proceedings, New Hampshire Superior Court
Rule 158, which was repealed in 2001, provided, in pertinent part,
that the parties to a divorce submit current financial affidavits.
See N.H. Superior Court Rules 197-98 (2001) (current version of the
same rule).
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1999, and discovery commenced. In reviewing Feddersen's tax
returns, Cannon's lawyer, Patricia Murphy, learned that Feddersen's
income for 1995 had been nearly $4 million, not the $150,000 he had
sworn to in the affidavit prepared by the defendants. Murphy and
Cannon soon learned about the Constar settlement. By this time,
Feddersen had retained a new lawyer, Steven Grill. Murphy told
Grill that she was thinking about moving to set aside the 1995
property settlement on the grounds of fraud.3
Grill explored Murphy's theory and determined that
Feddersen had "a problem" because of the discrepancy between his
financial affidavit and his actual income and assets. He told
Feddersen as much in a March 26, 1999 letter and status report,
going so far as to warn his client that if Cannon "pursues a fraud
claim, you may be very hard pressed to prove that she actually had
all the details regarding the Constar case at the time the
Permanent Stipulation was negotiated and agreed to," and that
"there is a strong possibility that the Affidavit would not be
considered a 'current' affidavit as required by New Hampshire law."
3
Cannon's lawyer relied on Shafmaster v. Shafmaster, 642 A.2d
1361 (N.H. 1994). The Shafmaster court concluded that in a divorce
case, "once financial information was requested and provided, the
defendant had an ongoing obligation to provide current and accurate
financial information." Id. at 1365. New Hampshire Superior Court
Rule 158, the Shafmaster court concluded, incorporates this
continuing obligation. Id. at 1366. The Shafmaster decision
included a warning that the provisions of Rule 158 would be deemed
"mandatory and may not be waived by parties or the court." Id.
The Shafmaster decision was announced more than a year before the
defendants submitted Feddersen's Rule 158 affidavit.
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Grill "strongly recommend[ed]" to Feddersen that he try to settle
Cannon's claims and avoid litigation of "a complicated and
potentially very dangerous issue."
In the same letter, Grill reacted angrily to news that
Feddersen had put Charles Douglas of the defendant law firm on
notice of Cannon's potential fraud claim. "My main concern," Grill
wrote, "is that having been alerted to the potential problem . . .
Douglas may attempt to protect himself against any potential
malpractice claim."
Shortly after receiving the March 26 letter, Feddersen
terminated his relationship with Grill (who later noted that he and
Feddersen had not been "seeing eye-to-eye on a number of strategic
and judgmental matters"). Feddersen retained, as new counsel,
Matthew Cairns and Garry Lane. Feddersen's initial April 14, 1999
meeting with Cairns and Lane was recorded at Feddersen's request.
At that meeting, Feddersen revealed to Cairns and Lane that he had
called Carolyn Garvey, a named defendant in this case along with
Douglas and their law firm. According to Feddersen, Garvey had
denied that anything about the 1995 settlement was improper.
Feddersen also told Cairns and Lane that, according to Grill,
Garvey and her partners would "be fixing all the documents up now
to cover their ass for malpractice."
Citing the Shafmaster case, see supra n.3, Cannon moved,
on May 14, 1999, to set aside the 1995 property settlement. At the
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recommendation of the marital master handling the case, settlement
negotiations commenced. Through Cairns and Lane, Feddersen sought
to resolve Cannon's claims by offering her a substantial share in
the potential proceeds of a third patent infringement case, then
ongoing, with a company called "Aoki." Ultimately, negotiations
were unsuccessful, and the matter proceeded to a hearing. On
September 5, 2001, the marital master set aside the property
settlement. His decision was affirmed by the New Hampshire Supreme
Court on March 19, 2003. In the Matter of Feddersen and Feddersen,
No. 2001-642 (N.H. 2003). Feddersen then paid $1.3 million to
settle all remaining issues with Cannon.
Invoking 28 U.S.C. § 1332, Feddersen filed the current
suit in the district court on July 29, 2003. The defendants moved
for summary judgment on the grounds that Feddersen had exceeded the
three year statute of limitations for legal malpractice actions
provided by N.H. Rev. Stat. Ann. § 508:4.4 The district court
granted the defendants' motion, and this appeal followed.
II.
We review a grant of summary judgment de novo, based on
the record as it stood at the time of the district court's order.
Cordero-Soto v. Island Fin., Inc., 418 F.3d 114, 118 (1st Cir.
2005). We will affirm summary judgment if the record shows "that
4
The defendants' earlier motion to dismiss on the same
grounds was denied.
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there is no genuine issue as to any material fact and that the
moving party is entitled to judgment as a matter of law." Rathbun
v. Autozone, Inc., 361 F.3d 62, 66 (1st Cir. 2004) (quoting Fed. R.
Civ. P. 56(c)). A "material" fact is one "that might affect the
outcome of the suit under the governing law . . . . Factual
disputes that are irrelevant or unnecessary will not be counted."
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
A. The Discovery Rule
In this diversity action the governing law is, of course,
the law of New Hampshire. Rodi v. Southern New England School of
Law, 389 F.3d 5, 13 (1st Cir. 2004). New Hampshire law provides
that "the statute of limitations for a malpractice action is three
years." Furbush v. McKittrick, 821 A.2d 1126, 1129 (N.H. 2003)
(applying discovery rule to legal malpractice case); N.H. R.S.A. §
508:4. When a suit is initiated more than three years after the
act or omission alleged to constitute malpractice, "the plaintiff
has the burden of proving that an exception applies to toll the
statute of limitations such that his malpractice claim would be
timely filed." Furbush, 821 A.2d at 1129. One such exception is
the discovery rule:
when the injury and its causal relationship to the act or
omission were not discovered and could not reasonably
have been discovered at the time of the act or omission,
the action shall be commenced within 3 years of the time
the plaintiff discovers, or in the exercise of reasonable
diligence should have discovered, the injury and its
causal relationship to the act or omission complained of.
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N.H. R.S.A. § 508:4. Feddersen contends that the discovery rule
tolled the statute of limitations until at least the date that the
marital master set aside the property settlement. The defendants
argue, and the district court concluded, that the discovery rule
tolled the statute of limitations only until the spring or summer
of 1999, by which time Feddersen knew that Cannon had initiated
proceedings to set aside the property settlement and that the acts
or omissions of the defendant were causing him harm.
Under New Hampshire law, the discovery rule operates to
toll the statute of limitations in a legal malpractice case only
until "the plaintiff could reasonably discern that he suffered some
harm caused by the defendant's conduct." Furbush, 821 A.2d at
1130. It does not matter that "the plaintiff may not have
understood the full extent of the harm that would result" from the
defendant's malpractice. Id. "[T]he discovery rule is not
intended to toll the statute of limitations until the full extent
of the plaintiff's injury has manifested itself." Id. Also, the
plaintiff does not have to know that the defendant actually was
negligent. The New Hampshire Supreme Court has held that a
plaintiff can "reasonably discern that he suffered some harm caused
by the defendant's conduct," id., for the purpose of the discovery
rule, as soon as he begins "incurring legal fees" to defend himself
against the consequences of a defendant's actions, Pichowicz v.
Watson Ins. Agency, Inc., 768 A.2d 1048, 1049 (N.H. 2001). The
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discovery rule, then, does not necessarily allow a plaintiff to
postpone a malpractice suit until a court has confirmed the
defendant's negligence.
As the district court recognized, Feddersen knew enough
by the summer of 1999 that he "could reasonably discern that he
suffered some harm caused by the defendant's conduct." Furbush,
821 A.2d at 1130. By that time, Feddersen had paid legal fees to
two additional law firms in order to begin defending himself
against the consequences of what he now alleges was the defendants'
malpractice. Feddersen had been told in no uncertain terms by one
of his lawyers that "he had a serious problem because of the
Shafmaster issue arising from the affidavit prepared by [the
defendants]." That same lawyer had told Feddersen, both orally and
in writing, that he had a "potential malpractice claim" against the
defendants. With all of this information at his disposal,
Feddersen could not reasonably have doubted that his additional
legal fees and prospective settlement expenses had been caused by
the defendants' representation of him. At this point, Feddersen
was not entitled to close his eyes and ignore his potential claim
against the defendants.
Feddersen contends that, given the defendants' assurances
that they had done nothing wrong, it was "reasonable" for him to
believe that his legal expenses were caused "by a very motivated
ex-wife" rather than by the defendants' malpractice, until a court
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ruled in Cannon's favor. This argument reflects both
misapprehension of the applicable standard and disingenuousness.
It is not material for purposes of the discovery rule
whether Feddersen knew or reasonably should have known in 1999 that
the 1995 property settlement would be set aside on account of the
defendants' failure to comply with the law, or that the defendants
had been negligent. It was enough that Feddersen knew that he was
paying attorneys' fees (to a different lawyer) to defend acts of
the defendants that had been at least arguably negligent, and that
there was a likelihood — expressed in Feddersen's willingness to
settle the case for a substantial sum — that eventually he would
have to pay monetary damages to Cannon as well.5
Feddersen was a sophisticated businessman who had won
substantial awards in lawsuits. His own lawyer explicitly warned
him not to trust the defendants' assurances because the defendants
could be expected — using Feddersen's own 1999 words — to "cover
their ass for malpractice." He understood that his exposure to
Cannon's claim was serious enough to warrant a significant offer in
5
For similar reasons, we are not swayed by Feddersen's
reliance on the defendants' delay in reporting Feddersen's
malpractice claim to their insurance company. (The defendants did
not notify their insurer until 2003.) This evidence does not tend
to show that Feddersen's own delay was reasonable. Very likely,
the defendants expected Feddersen to file a suit against them
before he did. But even the most generous inference in favor of
Feddersen from evidence that the defendants did not report such a
suit to their insurance carrier until 2003 cannot undue the
uncontested evidence as to what Feddersen actually knew in 1999.
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settlement. In short, the evidence does not allow an inference
that Feddersen "reasonably relied" on the defendants' denials of
any negligence.
B. Continuing Representation
Feddersen contends that the "continuing representation
doctrine" precluded application of the discovery rule until 2001.
In jurisdictions where it applies, that doctrine, which "recognizes
that a person seeking professional assistance has a right to repose
confidence in the professional's ability and good faith," Greene v.
Greene, 436 N.E.2d 496, 500 (N.Y. 1982), "tolls the statute of
limitations 'while the defendant attorney [in a malpractice case]
continues to represent the plaintiff," Rosen Const. Ventures, Inc.
v. Mintz, Levin, Cohn, Ferris Glovsky & Popeo, P.C., 364 F.3d 399,
406 (1st Cir. 2004) (quoting Cantu v. St. Paul Cos., 514 N.E. 2d
666, 669 (Mass. 1987)).
First, Feddersen's continuing representation argument
fails because New Hampshire has not adopted the doctrine. In
another case involving a legal malpractice plaintiff who was forced
to retain counsel to defend himself from the consequences of a
defendant attorney's likely malpractice, the New Hampshire Supreme
Court specifically "decline[d] to adopt" the continuing
representation rule. Coyle v. Battles, 782 A.2d 902, 906 (N.H.
2001). This case is in federal court on diversity grounds. While
Feddersen no doubt had good reasons to initiate his suit in federal
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court, he cannot expect us to adopt a new rule of state law that
the state's highest court refused to adopt only four years ago, in
a case similar to this one. "We have warned, time and again, that
litigants who reject a state forum in order to bring suit in
federal court under diversity jurisdiction cannot expect that new
trails will be blazed." Ryan v. Royal Ins. Co. of Am., 916 F.2d
731, 744 (1st Cir. 1990).
Second, even if we applied the continuing representation
doctrine (as it is defined in the Massachusetts cases to which
Feddersen refers us), we would not resolve this appeal in
Feddersen's favor. "The continuing representation doctrine . . .
has no application . . . where the client actually knows that he
suffered appreciable harm as a result of his attorney's conduct.
If the client has such knowledge, then there is no 'innocent
reliance which the continued representation doctrine seeks to
protect.'" Lyons v. Nutt, 763 N.E.2d 1065, 1070 (Mass. 2002)
(quoting Cantu, 514 N.E.2d at 669). Here, as noted, Feddersen knew
that he had been harmed by the defendants; he did not rely
"innocently" on their assurances to the contrary.
C. Inconsistent Positions in Litigation
Feddersen argues that the district court's ruling "placed
[him] in the untenable position of having to file a malpractice
action against his former attorney [at a time when doing so would
have] compromise[d] his ability to defend the underlying case"
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brought by Cannon. There are cases in other jurisdictions that
support this argument. See Clark v. Deloitte & Touche LLP, 34 P.3d
209, 217-18 (Utah 2001) (allowing tolling of malpractice action
against accountant until conclusion of underlying litigation);
Hughes v. Mahaney & Higgins, 821 S.W.2d 154, 157 (Tex. 1991)
(same). There are also cases that reject it. See Carvell v.
Bottoms, 900 S.W.2d 23, 29-30 (Tenn. 1995) and cases cited therein.
We view Feddersen's contention as again foreclosed by the
New Hampshire authorities. In at least two cases, the New
Hampshire Supreme Court has refused to toll the statute of
limitations in a professional liability action while the plaintiff-
client sought to defend the professional's advice in collateral
litigation. In Draper v. Brennan, 713 A.2d 373 (N.H. 1998), the
New Hampshire Supreme Court rejected the reasoning in Hughes and
the proposition that a plaintiff should be able to postpone a legal
malpractice action until the conclusion of an appeal in the
underlying litigation. Id. at 377-78. In Pichowicz, the New
Hampshire Supreme Court refused to toll the statute of limitations
in a professional malpractice suit (against an insurance agent)
until the conclusion of trial on the underlying claim. 768 A.2d at
1049. To the extent that Feddersen seeks to limit or challenge
these holdings, he has chosen the wrong forum.
Moreover, we do not think that Feddersen would have been
injured by commencing his malpractice action while Cannon's suit
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against him was pending. If Feddersen had brought suit against
the defendants in 1999, he could have asked the district court to
hold the action in repose until the conclusion of the Cannon case.
We think it likely that the court would have granted the motion.
See Currie v. Group Ins. Comm'n, 290 F.3d 1, 9-13 (1st Cir. 2002)
(discussing doctrines pursuant to which federal courts may stay
cases pending outcome of related state court litigation raising
complex issue of state law). See also Morrison v. Goff, 91 P.3d
1050, 1055-58 (Colo. 2004) (collecting cases and adopting "two-
track" approach, by which malpractice action is filed during
pendency of underlying litigation and then stayed until resolution
of the underlying case). We also think it likely that Feddersen
could have resisted any effort by Cannon to use the existence of a
malpractice suit against him in her underlying case. Feddersen has
not suggested how evidence of the malpractice suit could have been
introduced at trial on Cannon's claim, nor why the judge hearing
the matter would have held any such evidence against him. See
Carvell, 900 S.W.2d at 30 (holding that judicial estoppel doctrine
did not apply when malpractice action was filed during pendency of
related litigation).
III.
The judgment of the district court is affirmed. Costs
are taxed against the Appellant.
So ordered.
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