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In Time

By Michael Frisch

The United States Court of Appeals for the Fourth Circuit affirmed orders holding that a legal malpractice suit had been timely filed

Plaintiffs filed a legal malpractice suit in Maryland against Defendants White [sic] Taylor & Preston, LLP, and Thomas Carroll Beach, III, for providing advice that allegedly resulted in an adverse legal ruling holding Plaintiffs liable for up to $17.5 million in damages. Defendants moved to dismiss Plaintiffs’ suit as time-barred under Maryland’s general three-year statute of limitations. The bankruptcy court denied the motion, concluding that Plaintiffs’ complaints were timely filed because the limitations period commenced when Plaintiffs received the adverse ruling. The bankruptcy court’s order resolved all pending issues and concluded the adversary proceeding. On appeal, the district court affirmed the bankruptcy court’s decision.

…Having reviewed the record, we see no reversible error and thus affirm. We dispense with oral argument because the facts and legal contentions are adequately presented in the materials before this Court and argument would not aid the decisional process. 

The order of the United States District Court for the District of Maryland affirming the order of the Bankruptcy Court is linked here.

The Bankruptcy Court

For the reasons stated below, the Court concludes that (1) the Sens Parties timely filed the initial complaint because the applicable limitations period began to run on December 18, 2018 and the Sens Parties filed the initial complaint on February 28, 2020, less than three years later; (2) SMI did not have standing to file the initial complaint because only the SMI Trustee could have filed the complaint under applicable law; (3) although SMI did not have standing to file the initial complaint, the SMI Trustee properly substituted in as a Plaintiff for SMI and the action can and should proceed as if it had been originally commenced by the SMI Trustee, the real party in interest; (4) SMI was not judicially estopped from pursuing the claim against the Defendants even though it delayed disclosure of the claim because there is no evidence that SMI acted intentionally to mislead the Court to gain an unfair advantage; and (5) even if SMI were judicially estopped from pursuing the claim against the Defendants, the SMI Trustee would not be judicially estopped from pursuing the claim because SMI’s delay in disclosing the claim is not attributable to the SMI Trustee.

To be clear, the Court considers the issues presented only as they apply to SMI and the SMI Trustee and to the Amended Complaint. The Defendants contend the issues and arguments may extend to Mr. Sens and Mrs. Sens, who are also debtors in bankruptcy, because they are plaintiffs under the initial complaint, which would be operative if the Court were to determine that the Amended Complaint was improperly filed and should be stricken. Because the Court concludes that the Amended Complaint was timely filed and procedurally proper, the Amended Complaint replaced and superseded the initial complaint and the initial complaint and any claims thereunder by Mr. Sens and Mrs. Sens have no operative effect.

Mike Frisch)