Legal Malpractice Case Dismissed Where Plaintiff Claimed The Firm Failed To Argue Bankruptcy Toll To Save Med Mal Case From Statute Of Limitations

The First Department has issued its decision in Kremen v. Morelli, 54 A.D.3d 596 (1st Dept. 2008), dismissing a legal malpractice case where the plaintiff had argued that the law firm failed to raise a novel legal theory to save her case.  In this case, the plaintiff had a bilateral mastectomy thirteen years ago.  She claimed that she only had the surgery because she had been wrongfully diagnosed with cancer, while the doctors claimed she knew it was prophylactic.  Six years after the operation, she brought a lawsuit.  The case was dismissed because New York's statute of limitations for medical malpractice is only two-and-a-half years. Her lawyers had tried to bring the case by arguing that there was fraudulent concealment, which would have prevented the doctors from asserting a statute of limitations defense. 

The plaintiff then sued her attorneys for legal malpractice.  She had declared bankruptcy prior to filing the first lawsuit, and claimed that her lawyers would have won the case if they had argued that her claims were timely because a bankruptcy trustee is permitted two extra years to bring claims that are timely when a bankruptcy is filed. 


The law firm moved to dismiss the case for failure to state a claim, arguing that only the trustee can assert the bankruptcy toll (the medical malpractice case had been abandoned by the bankruptcy estate prior to being dismissed), and that the bankruptcy toll cannot revive a limitations period that had already expired (because fraudulent concealment is an estoppel, it does not stop the limtiations period from expiring). 

The trial court denied the motion to dismiss, and the decision received a fair amount of media coverage.  It made the front page of the New York Law Journal, here; Andrew Lavoot Bluestone's Attorney Malpractice Blog covered the case twice, here and here;  and Overlawyered's coverage of the case, here, generated some interesting comments.

Now, the Appellate Division has reversed the lower court's decision and dismissed the legal malpractice action. The Appellate Division agreed with both arguments offered by the law firm, finding, one: 

The bankruptcy toll was not triggered because the statute of limitations had already run... To hold otherwise would alter the elements of fraudulent concealment so as to excuse the due diligence inquiry, thus changing, rather than applying, the applicable non-bankruptcy law

and, two: 

Plaintiffs lack standing to bring this action.  Once the bankruptcy estate was fully administered and the trustee abandoned the claim, the cause of action revested solely in plaintiffs' names. When a trustee abandons a claim as to the debtor, the latter may no longer invoke the benefit of 11 USC § 108(a)(2).