Larry C. Flynt Hustler Magazine, Inc. L.F.P., Inc. v. Brownfield, Bowen & Bally C.W. Brownfield Laurence E. Sturtz v. David L. Kahn, Third-Party

882 F.2d 1048, 1989 U.S. App. LEXIS 12128, 1989 WL 90847

• Court: Court of Appeals for the Third Circuit
• Decided: August 14, 1989
• Docket: 88-3597
• Status: Published

Opinions

BOYCE F. MARTIN, Jr., Circuit Judge.

Larry Flynt, Hustler Magazine, Inc. and L.F.P., Inc. brought this diversity action for legal malpractice against the law firm of Brownfield, Bowen & Bally and two of the firm’s attorneys, C. William Brownfield and Laurence E. Sturtz. The district court granted the defendants’ motion for summary judgment on the ground that the plaintiffs’ claims were barred by the applicable Ohio statute of limitations. We affirm the decision of the district court.

I.

In May 1983, Flynt, Hustler and L.F.P. filed this legal malpractice diversity action against the Brownfield firm, Brownfield and Sturtz in federal district court for the Southern District of Ohio. The current action arose from an earlier lawsuit, Guccione v. Hustler Magazine, Inc., No. 77CV-04-1692 (C.P. Franklin Co. 1980), in which the Brownfield firm and its attorneys, Brownfield and Sturtz, represented Flynt and Hustler Magazine, who were defendants in Guccione. Following a jury trial in February 1980, the plaintiffs in Guccione obtained a $40 million award against Flynt and Hustler for libel and invasion of privacy. The plaintiffs accepted a remittitur and the amount of damages was subsequently reduced to approximately $4 million. On October 8, 1981, the Franklin County Court of Appeals affirmed the trial court’s finding of liability in Guc-cione but reversed the award of damages. Guccione v. Hustler Magazine, Inc., No. 80AP-375, 1981 WL 3516 (10th Dist.Ct.App.1981). The Guccione case was remanded to the Franklin County Court of Common Pleas for a retrial on the issue of damages; the retrial has not yet taken place.

Beginning in October 1981, David L. Kahn was employed by Hustler and L.F.P. as General Counsel, and he became dissatisfied with the legal representation provided to Hustler and L.F.P. by the Brownfield firm in the Guccione case. From November 1981 through January 1982, Kahn analyzed the Ohio appellate court opinion in Guccione, reviewed relevant documents in the case, did a significant amount of independent legal research, and discussed the case and the quality of representation provided by the Brownfield firm with several outside attorneys. In his deposition, Kahn stated that, during the period from November 1981 through February 1982, he had “pretty much” concluded that the Brownfield firm had committed malpractice in the Guccione case, although he did not reach the “final conclusion” that the Brownfield firm had committed malpractice until he had discussions with another attorney, John Duffey, in November or December of 1982.

Defendant Laurence Sturtz, a partner with the Brownfield firm, left the firm on January 22, 1982. Sturtz also notified Flynt and Hustler that he would not perform legal services for them after January 22.

On February 16, 1982, the Brownfield firm advised Flynt in a letter signed by C. William Brownfield that the firm would no longer represent L.F.P. or Flynt personally from that day forward. Brownfield did state in the letter that the firm would file the notices and applications for certiorari in the pending Guccione case. On February 23, 1982, Brownfield also notified the Ohio state court personnel that the Brownfield firm would no longer represent L.F.P. or Hustler in the Guccione case, but indicated that he would not file a formal entry of withdrawal until new counsel had been designated.

In response to these actions by the Brownfield firm, Kahn declared in a letter to Brownfield, dated February 23, 1982, that legal action would be commenced against the firm for any damages suffered by L.F.P. as a result of the firm’s withdrawal from the Guccione case. In a letter agreement dated March 12, 1982, the Brownfield firm entered into a limited employment relationship with L.F.P., Hustler and Flynt. The firm agreed that it would file the certiorari petition and the appellate briefs in an appeal of a denial of two specific motions and would complete the appellate process in Guccione. The firm also agreed to provide “whatever other reasonable legal services” that L.F.P.’s new counsel might request during any retrial of the Guccione case. The Brownfield firm performed the services for L.F.P. specified in the letter agreement from February 1982 through September 1982.

In June 1982, Kahn met again with John Duffey. On September 20, 1982, L.F.P. notified Brownfield and the Brownfield firm that Duffey and Alan Isaacman and their respective law firms had been retained as L.F.P.’s counsel of record in the Guccione case.

II.

On May 24, 1983, Flynt, Hustler and L.F.P. filed this diversity action for legal malpractice against the Brownfield firm, Brownfield and Sturtz, alleging that the firm and the individual attorneys provided negligent representation in the Guccione trial and appeal in 1980 and 1981. The defendants subsequently moved for summary judgment on the ground that the action was barred by the applicable Ohio law, which provides a one-year statute of limitations for malpractice claims. Ohio Revised Code § 2305.11(A). According to Ohio law controlling at the time the defendants’ motion for summary judgment was filed, a cause of action for legal malpractice accrued and the statute of limitations began to run when the client discovered, or, in the exercise of reasonable care and diligence should have discovered, the resulting injury. Skidmore & Hall v. Rottman, 5 Ohio St.3d 210, 450 N.E.2d 684 (1983). In their motion, the defendants argued that the plaintiffs did discover or should have discovered the alleged malpractice by late 1981, well over one year before the malpractice action was filed in May 1983.

In its order of December 5, 1984, the district court concluded that the “discovery rule” announced in Skidmore on June 29, 1983 did not apply retroactively to bar the plaintiffs’ malpractice action, which had been filed in May 1983. Instead, the district court found this action to be controlled by Keaton Co. v. Kolby, 27 Ohio St.2d 234, 271 N.E.2d 772 (1971), which was in effect at the time this action was filed but was later specifically overruled by Skidmore. Under Keaton, a cause of action for malpractice accrued, at the latest, when the attorney-client relationship terminated. Applying Keaton to this case, the district court assumed that the attorney-client relationship between the parties terminated on September 20, 1982, when L.F.P. informed the Brownfield firm by letter that other attorneys had been retained as L.F.P.’s counsel of record. The district court accordingly concluded that the plaintiffs’ malpractice claims were not barred by the one-year statute of limitations.

In 1987, the defendants filed two separate motions for summary judgment, again contending that the malpractice action was barred by the one-year statute of limitations. In its March 29, 1988 order, the district court refused to reconsider the retroactive application of the Skidmore discovery rule, but did conclude that its prior assumption regarding the date of the termination of the parties’ attorney-client relationship was not supported by the newly-substantiated record. Specifically, the district court found that: (1) by leaving the Brownfield firm on January 22, 1982, Sturtz terminated his professional relationship with the plaintiffs as of that date, over one year before this action was filed; (2) Brownfield and the Brownfield firm terminated their attorney-client relationship with the plaintiffs by letter on February 16, 1982, over one year before this action was filed; and (3) the parties’ relationship arising out of the March 12, 1982 letter agreement was separate and distinct from the parties’ attorney-client relationship existing prior to February 16, and all of the malpractice claims against defendants arose from the defendants’ handling of the Guc-cione trial and appeal, which occurred during the parties’ attorney-client relationship before February 16, 1982. Accordingly, the district court concluded that, for purposes of the statute of limitations, all of the plaintiffs’ claims accrued on February 16, 1982, when the attorney-client relationship terminated. Because the plaintiffs’ malpractice claims were not asserted until May 1983, the district court held the claims barred by the one-year statute of limitations and granted summary judgment to defendants.

III.

On appeal, the parties agree that Ohio law governs the resolution of this case. Based upon our interpretation of the applicable Ohio law and our review of the findings of the district court, we conclude that the district court did not err in granting summary judgment to defendants.

In their appeal, the plaintiffs argue that, under Ohio law in effect when this action was filed in May 1983, the district court erred by granting summary judgment to defendants on the ground that the statute of limitations had run because there is a genuine issue of material fact as to when the parties’ attorney-client relationship terminated. Specifically, the plaintiffs contend that, pursuant to the letter agreement of March 12, 1982, the defendants continued to perform legal services for plaintiffs until September 20, 1982, when defendants were replaced as counsel of record. According to plaintiffs, the attorney-client relationship between the parties did not terminate on February 16, 1982 but continued until September 20, 1982. Because a genuine issue of fact concerning the termination date of the parties’ attorney-client relationship exists, the district court consequently erred in granting summary judgment to defendants on the ground that, for purposes of the Ohio statute of limitations, all of the plaintiffs’ claims accrued on February 16, 1982. Omni-Food & Fashion, Inc. v. Smith, 38 Ohio St.3d 385, 528 N.E.2d 941 (1988); Muir v. Hadler Real Estate Mgmt. Co., 4 Ohio App.3d 89, 446 N.E.2d 820 (Franklin Co.1982).

We disagree with the plaintiffs’ contention. We conclude that, under the applicable Ohio law ¹ the district court correctly found the parties’ attorney-client relationship to have been terminated by the February 16, 1982 letter from Brownfield to Flynt and therefore did not err in granting summary judgment to defendants on the ground that the one-year statute of limitations had run.

Ohio case law reveals relatively few cases discussing termination of the attorney-client relationship², but we believe the existing cases, particularly Brown v. Johnstone, 5 Ohio App.3d 165, 450 N.E.2d 693 (Summit Co.1982), make clear that the February 16 letter from Brownfield to Flynt terminated the parties’ attorney-client relationship. In Brown, an Ohio court of appeal held that the trial court had properly granted summary judgment to a defendant attorney in a legal malpractice case on the ground that the statute of limitations had run because no genuine issue as to the termination of the parties’ attorney-client relationship existed. The court stated that conduct dissolving the “essential mutual confidence between attorney and client signals the termination of the professional relationship.” The court moreover explicitly agreed with the defendant attorney that “the attorney-client relationship is consensual in nature and the actions of either party can affect its continuance.” Thus, the Brown court held that the plaintiff client’s initiation of grievance proceedings against the defendant attorney before the local bar association evidenced the plaintiff’s loss of confidence in his attorney such as to indicate a termination of the professional relationship, despite the plaintiff’s statement that he considered the defendant to be his attorney even after he contacted the bar association. According to the court in Brown, the plaintiff’s initiation of proceedings with the bar association and his receipt of a letter from the bar association stating that the defendant attorney had been reprimanded and that he should seek the aid of another attorney dissipated “any semblance of a professional relationship” between the plaintiff and the defendant and constituted an “affirmative act” sufficient to put the plaintiff on notice that his attorney-client relationship with the defendant had terminated. For these reasons, the appellate court in Brown found the defendant attorney entitled to judgment as a matter of law.

Applying Brown to the facts of this case, we similarly conclude that the defendants were entitled to summary judgment. On February 16, 1982, Brownfield advised Flynt in a letter that the Brownfield firm would “no longer represent L.F.P., Inc., any of its affiliated entities or you [Flynt] personally from this day forward” and that Flynt should “take steps to acquire new counsel here and elsewhere as soon as possible.” The letter additionally stated that, although the Brownfield firm would insure the preservation of Flynt’s appellate rights in the pending Guccione case by filing the requisite notices and applications for cer-tiorari, the firm would immediately be filing notices of its withdrawal as Flynt’s counsel in pending actions. As stated in Brown, the attorney-client relationship is consensual and the actions of either party can affect its continuance. The February 16 letter clearly expressed the Brownfield firm’s intent to terminate its professional relationship with the plaintiffs, and, in our opinion, this letter constitutes, in the language of Brown, an “affirmative act” sufficient to put the plaintiffs on notice that their attorney-client relationship with defendants had terminated. Furthermore, we agree with the district court’s finding that the relationship between the parties arising from the March 12 letter agreement was a new relationship, which was separate and distinct from the attorney-client relationship existing prior to February 16. The agreement of March 12 was a limited arrangement under which the Brownfield firm agreed to provide specifically described services in specifically identified legal matters. The Brownfield firm, however, apparently agreed to enter into this limited relationship with L.F.P. only after L.F.P. threatened, in the February 23, 1982 letter, to take “prompt and appropriate legal action” against the Brownfield firm and Brownfield personally. We do not believe that the arrangement between plaintiffs and defendants, as evidenced by the March 12 letter, constitutes a continuation of the parties’ previous attorney-client relationship. In the language of Brown, the “mutual confidence” so essential to the attorney-client relationship must be regarded as lacking in the carefully limited professional arrangement that the defendants entered into in response to threatened legal action by the plaintiffs. Based upon our interpretation of Ohio law as stated in Brown, we conclude that the district court did not err in holding as a matter of law that all of the plaintiffs’ claims accrued on February 16, 1982, when the parties’ attorney-client relationship terminated. Because there exists no genuine issue of material fact as to when the parties’ attorney-client relationship terminated, the grant of summary judgment by the district court was appropriate.

Although Brown defines what constitutes the termination of an attorney-client relationship more concretely than any other Ohio case, we believe our resolution of this appeal is also supported by the Ohio Supreme Court’s most recent discussion of the statute of limitations for legal malpractice. In Omni-Food, & Fashion, Inc. v. Smith, 38 Ohio St.3d 385, 528 N.E.2d 941 (1988), the court held that, in a legal malpractice case, the tolling of the statute of limitations should be limited to “continuous legal representation regarding a particular undertaking or transaction.” (emphasis added). According to the court, a different standard could allow a client with knowledge of an attorney’s malpractice to “unduly perpetuate the attorney’s potential liability and exposure to suit.” The reasoning of the Ohio Supreme Court in Omni-Food is particularly applicable to this case in which the district court refused to toll the one-year statute of limitations during the limited arrangement between the parties that arose from the March 12, 1982 letter agreement but held that the plaintiffs’ claims accrued on February 16, 1982, when the parties’ attorney-client relationship terminated. The legal representation provided by the defendants was clearly not, in the language of Omni-Food, “continuous,” given the explicit termination of the attorney-client relationship by Brownfield’s letter of February 16 and the subsequent creation of a new, limited relationship by the March 12 letter. Thus, under the rationale of Omni-Food, the district court’s refusal to toll the statute of limitations while the defendants were providing legal services to plaintiffs under the limited arrangement existing after March 12 was warranted. The district court’s holding that the plaintiffs’ claims accrued on February 16 is further supported by the court’s concern in Omni-Food that, under certain circumstances, a client could “unduly perpetuate” an attorney’s exposure to suit. In this case, the defendants entered into the limited professional relationship evidenced by the March 12 letter at least in part because the plaintiffs threatened to commence legal action. To hold that the limited professional arrangement entered into by defendants because of threatened legal action by plaintiffs could toll the running of the statute of limitations for legal malpractice would allow the plaintiffs to perpetuate the defendants’ “potential liability and exposure to suit” indefinitely by coercing the defendants into the arrangement. The district court’s decision in this case therefore prevents the plaintiffs from employing their threat to take legal action against the defendants to “unduly perpetuate” the defendants’ exposure to suit for malpractice. Based on our interpretation of Ohio law as expressed in Brown and Omni-Food³, we conclude that the district court did not err in finding the plaintiffs’ claims against Brownfield and the Brownfield firm to be time-barred and in granting summary judgment to these two defendants.

We also affirm the district court’s grant of summary judgment to defendant Sturtz. The plaintiffs contend that, under Ohio partnership law, Sturtz may be held liable for partnership acts committed while he was a partner in the Brownfield firm; according to the plaintiffs, it is irrelevant that Sturtz left the Brownfield firm in January 1982, after he and his firm committed the alleged acts of malpractice. We agree with the plaintiffs that Sturtz can be held jointly and severally liable with the Brownfield firm, if the Brownfield firm can be held liable for its acts of malpractice. However, as previously discussed in this opinion, the Brownfield firm cannot be held liable for its alleged malpractice due to the running of the applicable statute of limitations. Because the statute of limitations has run as to the Brownfield firm, the statute has also necessarily run as to defendant Sturtz, a partner at the firm, for any acts of malpractice committed by the firm. In addition, the one-year statute of limitations has run as to Sturtz individually to bar any individual liability for any individual acts of malpractice committed by him because Sturtz terminated his attorney-client relationship with the plaintiffs on January 22, 1982, when he left the Brownfield firm and notified the plaintiffs that he would no longer perform legal services for them.

Based upon our review of the record and our understanding of the applicable Ohio law, we affirm the district court’s decision granting summary judgment to all defendants. The judgment of the district court is affirmed.

1 . The parties on appeal do not directly challenge the riding of the district court that the "termination rule” of Keaton Co. v. Kolby, 27 Ohio St.2d 234, 271 N.E.2d 772 (1971), governs the accrual of the malpractice claims in this case. Because the parties do not assert that the district court erred in applying Keaton, we will also apply the "termination rule” of Keaton in resolving this appeal.

2 . Our research did discover several cases involving the termination of the physician-patient relationship in the context of a medical malpractice claim, and we note that the Ohio Supreme Court has approved of the trial court ruling as a matter of law as to the date of termination of the physician-patient relationship. See, e.g., Ishler v. Miller, 56 Ohio St.2d 447, 384 N.E.2d 296 (1978); Millbaugh v. Gilmore, 30 Ohio St.2d 319, 285 N.E.2d 19 (1972) in which the trial court’s granting of a defendant doctor’s motion for judgment notwithstanding the verdict was held proper because reasonable minds could come to only one conclusion on the issue of the termination of the physician-patient relationship.

3 . We note that the plaintiffs rely heavily on the case of Muir v. Hadler Real Estate Mgmt. Co., 4 Ohio App.3d 89, 446 N.E.2d 820 (Franklin Co. 1982), in which the court of appeals reversed the trial court’s grant of summary judgment to the defendant attorney on the ground that there was a genuine issue of material fact as to the date of termination of the attorney-client relationship. The plaintiffs’ reliance on Muir is inapposite. In Muir, the parties had a loose relationship over a ten-year period involving representation by the defendant attorney in a series of many eviction cases; thus, the appellate court in Muir found a factual issue as to whether there was a single on-going attorney-client relationship existing throughout the ten-year period or whether a new attorney-client relationship was created for each eviction case.