Professional Documents
Culture Documents
Feddersen v. Garvey, 427 F.3d 108, 1st Cir. (2005)
Feddersen v. Garvey, 427 F.3d 108, 1st Cir. (2005)
3d 108
Steven M. Latici, with whom McKean, Mattson & Latici, P.A., was on
brief, for appellant.
Peter F. Kearns, for appellees.
Before LIPEZ and HOWARD, Circuit Judges, and RESTANI, * Judge.
LIPEZ, Circuit Judge.
I.
2
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
During the pendency of the divorce, FMT was prosecuting two patent
infringement claims, both related to technology used in 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 $5 million from Constar in May 1995, well before any payment was
received from Nessei.1
Neither Feddersen nor the defendants informed Cannon or her lawyers of the
developments in the Constar case. Instead, on June 1, 1995, the defendants sent
the New Hampshire court and Cannon's lawyers a letter stating that the awaited
"contingency," meaning the receipt of funds sufficient to satisfy the property
settlement in the divorce stipulation, had occurred. Cannon and her lawyers
assumed that the money from Nessei had been delivered.
For a final hearing, the defendants prepared for Feddersen an affidavit of his
current financial standing, which was submitted to the court in accordance with
former New Hampshire Superior Court Rule 158.2 In the affidavit, Feddersen
certified that the value of his interest in FMT corporation was "[$]1,440,000
[b]ased on book value 12/31/92," and that his income was $150,000 per year. A
In late 1998, Cannon petitioned for additional child support payments from
Feddersen. Trial was scheduled for March 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." 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."
10
11
Citing the Shafmaster case, see supra n. 3, Cannon moved, on May 14, 1999, to
set aside the 1995 property settlement. At the 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.
12
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.
13
14
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, 149 N.H. 426, 821
A.2d 1126, 1129 (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
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.
16
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.
17
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., 146 N.H. 166, 768
A.2d 1048, 1049 (2001). The discovery rule, then, does not necessarily allow a
plaintiff to postpone a malpractice suit until a court has confirmed the
defendant's negligence.
18
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 ruled in Cannon's favor. This argument reflects both
misapprehension of the applicable standard and disingenuousness.
20
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
21
22
(1st Cir.2004) (quoting Cantu v. St. Paul Cos., 401 Mass. 53, 514 N.E.2d 666,
669 (1987)).
23
24
25
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" brought by Cannon. There are cases in other jurisdictions that
support this argument. See Clark v. Deloitte & Touche LLP, 34 P.3d 209, 21718 (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.
26
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, 142 N.H. 780, 713 A.2d 373 (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.
27
III.
28
The judgment of the district court is affirmed. Costs are taxed against the
Appellant.
29
So ordered.
Notes:
Payment from Nessei did not arrive until January 1996. The record does not
indicate the reasons for the delay
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 affidavitsSee N.H. Superior Court Rules 19798 (2001) (current version of the same rule).
Cannon's lawyer relied onShafmaster v. Shafmaster, 138 N.H. 460, 642 A.2d
1361 (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.
The defendants' earlier motion to dismiss on the same grounds was denied