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Feddersen v. Garvey

Court: Court of Appeals for the First Circuit
Date filed: 2005-10-26
Citations: 427 F.3d 108
Copy Citations
4 Citing Cases
Combined Opinion
          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


                                       -2-
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




                                   -3-
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).

                                    -4-
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.

                                     -5-
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


                                    -6-
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.

                                 -7-
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.


                                 -8-
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


                                   -9-
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


                                      -10-
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.

                                       -11-
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


                                 -12-
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"


                                    -13-
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


                                       -14-
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.


                               -15-