Rebecca Nichols v. James Swindoll and Chuck Gibson

2022 Ark. App. 401

Opinion

Cite as 2022 Ark. App. 401 ARKANSAS COURT OF APPEALS DIVISIONS II & III No. CV-21-417

Opinion Delivered October 5, 2022

REBECCA NICHOLS APPEAL FROM THE PULASKI APPELLANT COUNTY CIRCUIT COURT, FIFTH DIVISION [NO. 60CV-21-1321] V. HONORABLE WENDELL GRIFFIN, JUDGE JAMES SWINDOLL AND CHUCK GIBSON DISSENTING OPINION ON APPELLEES GRANT OF PETITION FOR REHEARING

KENNETH S. HIXSON, Judge

I concur with Chief Judge Harrison’s conclusion that an attorney’s duty to disclose

his1 malpractice and a client’s independent duty to investigate the accuracy of his attorney’s

assurances needs to be revisited. These two concepts have a twisted and intertwined history

that has led us to the predicament we face in the case at bar. Unknown to the client2 and

through no fault of the client, the client’s attorneys simply allowed a statute of limitations to

expire and yet, without explanation, continued to file pleadings for two more years. As a

1 This opinion uses the masculine pronoun “his” throughout instead of using “his or her” or “his/her.” 2 Appellant, Rebecca Nichols, is sometimes referred to herein as simply “the client.” result of the client’s unquestioned lack of knowledge that her lawsuit was dead beyond

resuscitation and the continued filing of these ineffectual pleadings, the client failed to

timely file her lawsuit for attorney malpractice within the general three-year statute of

limitations. The circuit court granted an Arkansas Rule of Civil Procedure 12(b)(6) motion

to dismiss, finding that the statute of limitations for attorney malpractice had expired, and

this court has affirmed the dismissal in the majority opinion.

The majority opinion accurately sets forth the general rule regarding the three-year

statute of limitations for attorney malpractice and further that Arkansas follows the

“occurrence” rule. However, in the case at bar, the client alleged and argued that her

attorneys fraudulently concealed their collective malpractice and that their fraudulent

concealment tolled the statute of limitations. Citing Hutcherson v. Rutledge, 2017 Ark. 359,

533 S.W.3d 77, the majority also accurately explains that “[t]he statute is tolled only when

the ignorance [of the malpractice] is produced by affirmative and fraudulent acts of

concealment. . . . Therefore, to rebut a limitations defense, a plaintiff must describe specific

fraudulent acts committed for the purpose of concealing a cause of action.” Nichols v.

Swindoll, 2022 Ark. App. 233, at 5.

Below is an excerpt from the circuit court’s order of dismissal.

7. There are no facts contained in the Plaintiff’s Complaint or Amended Complaint sufficient to toll the running of the statute of limitation based on fraudulent concealment. There are no facts stated showing the elements of fraud, and there are no facts stated showing the alleged fraud was furtively planned and secretly executed.

2 While this is elementary, for purposes of a Rule 12(b)(6) motion to dismiss, we treat

only the facts alleged in a complaint as true but not a plaintiff’s theories, speculation, or

statutory interpretation. Jenkins v. Mercy Hosp. Rogers, 2021 Ark. 211, 633 S.W.3d 758. The

majority opinion concludes, “The allegations made in Nichols’s complaint do not describe

any overt act to hide information from Nichols or any fraudulent concealment of the alleged

malpractice. Instead, the allegations make sweeping conclusions about what Nichols

believed her attorneys’ intentions were as they proceeded with litigation in the underlying

case.” Nichols, 2022 Ark. App. 233, at 6 (emphases added). Note the three italicized words.

The majority relies on the client’s description of the lack of overt conduct, the lack of hidden

information, and the lack of evidence of the attorneys’ intentions. That should raise red flags

leading one to inquire: How does a client determine whether the attorneys’ concealment was

overt or covert without the benefit of discovery? Are we suggesting that fraudulent

concealment must be overt to be actionable? That is an oxymoron in itself. Fraudulent

concealment by its very nature and definition is covert. Further, how does a client determine

that information was hidden from her by her attorney without the benefit of discovery?

Finally, how does a client ever determine the intent of her attorney’s concealment without

the benefit of discovery? Intent is, by its very nature and definition, subjective.

Recall our standard of review in these cases. In testing the sufficiency of the

complaint on a motion to dismiss, all reasonable inferences must be resolved in favor of the

complaint, and the pleadings are to be liberally construed. Jenkins, supra. Even in criminal

cases, our supreme court has often stated that a defendant’s intent or state of mind is seldom

3 capable of proof by direct evidence and must usually be inferred from the circumstances.

Wright v. State, 2022 Ark. 103, 644 S.W.3d 236. Moreover, our supreme court has explained

that because intent cannot be proved by direct evidence, the jurors can draw upon their

common knowledge and experience to infer it from the circumstances. Id. The only way for

a client to gather indirect evidence (or direct evidence) and to shed discriminating light on

overt or covert concealment, hidden information, or the subjective intent of her attorneys is

to conduct meaningful discovery. However, because the circuit court granted the attorneys’

Rule 12(b)(6) motion to dismiss, the client’s ability to participate in meaningful discovery

was foreclosed.

A cursory review of the seventy-five-paragraph amended complaint reveals that the

client alleged sufficient facts to survive a Rule 12(b)(6) motion to dismiss under our standard

of review. Some excerpts from the amended complaint are set forth below.

42. Defendants maliciously, willfully, and purposefully attempted to keep Rebecca from knowing she could no longer successfully litigate against the John Doe defendants in order to preclude her from suing them for malpractice on or before November 23, 2020. Defendants willfully and maliciously and purposefully committed fraud and deceit by not informing her that she could no longer successfully litigate against the John Does defendants as of March 22, 2018.

....

58. After March 13, 2020, Defendant Swindoll informed Rebecca that he and Defendant Gibson had committed malpractice be failing to serve her complaint along with the summons of Precoat Metals Corp.; however, Defendant Swindoll assured Rebecca there was still a possibility the judge would excuse the malpractice and allow her to continue with the lawsuit because they had technically served Precoat Metals Corp. with notice of the lawsuit. Rebecca did not know or should have known acting with reasonable diligence that Defendants had committed malpractice until after

4 March 13, 2020, or that they could have been fraudulently hiding their malpractice from her.

(Emphasis added.) In paragraphs 59–61, the amended complaint sets forth the details

surrounding the attorneys’ failure to serve the defendants timely. Thereafter, the amended

complaint alleges the following:

63. The above material acts of malicious, willful and purposeful negligence and breach of fiduciary duty and material omissions were so secretly planned and executed by the Defendants as to keep Rebecca’s claim for malpractice against the Defendant’s hidden from her.

....

69. ...

c. [The defendants negligently] purposely and fraudulently and maliciously on March 22, 2018, and afterwards failed to advise Rebecca that by them failing to request an extension on or before March 22, 2018, to serve the John Doe defendants, Rebecca’s further litigation efforts were useless; had the Defendants acted with a reasonable degree of care they would have immediately after March 22, 2018, informed Rebecca of their malpractice to put her on notice she needed to sue them.

....

e. [The defendants negligently] purposefully and fraudulently and maliciously continued to fruitlessly litigate Rebecca’s lawsuit against the John Doe defendants after March 22, 2018, in order to hide their malpractice from Rebecca long enough so she would be barred by the three-year statute of limitations from suing them[.]

These allegations are sufficient, in my opinion, to withstand a Rule 12(b)(6) motion to

dismiss. When all reasonable inferences are resolved in favor of the complaint, and the

pleadings are liberally construed, appellant did allege specific facts from which a fact-finder

could infer that her attorneys fraudulently concealed their collective malpractice and that

their fraudulent concealment tolled the statute of limitations. I would reverse the granting

5 of the Rule 12(b)(6) motion to dismiss and the order dismissing the case with prejudice and

remand to the circuit court.

I turn now to my earlier statement that an attorney’s duty to disclose his malpractice

and a client’s independent duty to investigate the accuracy of his attorney’s assurances needs

to be revisited. Chief Judge Harrison’s dissent thoroughly sets forth the recent evolution of

these concepts, and it need not be repeated herein.

The majority opinion makes two statements that are pertinent to the attorney’s duty

to disclose vis-à-vis the client’s duty to investigate. First, it states, “Nichols made the

conclusory allegations that her attorneys were acting with intent to drag out pointless

litigation in the underlying case in the hopes that her right to sue them for legal malpractice

would expire before she figured out what happened.” Nichols, 2022 Ark. App. 233, at 3. The

majority opinion also states, “[T]he circuit court remarked that nowhere in the complaint

could it find ‘when the allegedly fraudulent hiding of their malpractice occurred.’” Id.

(emphasis added).

The majority relies, in part, on two cases: Delanno, Inc. v. Peace, 366 Ark. 542, 237

S.W.3d 81 (2006). and Rice v. Ragsdale, 104 Ark. App. 364, 292 S.W.3d 856 (2009). I write

separately to consider, or reconsider, the appropriate scope of a client’s duty to investigate

the assurances of his own attorney. This is important because it can affect every attorney-

client relationship. At first blush, it appears that Delanno and Rice stand for the proposition

that a client must second-guess his attorney’s advice and assurances, and if he fails to

investigate that advice and the assurances, the client has not preserved his future right to

6 assert a claim for attorney malpractice. However, the holdings in Delanno and Rice are not

that broad and should be isolated and distinguished.

In Delanno, supra, an attorney-malpractice case, the circuit court dismissed the claim

as time-barred. The client had received independent information from a reliable source (the

State of Arkansas Department of Finance and Administration) that his attorney’s advice was

incorrect. The Delanno court stated the following:

In the instant case, attorney Peace made a representation to Delanno that conflicted with the information that Delanno had received from the State; at that point, Delanno was on notice that either his attorney or the State was incorrect, but he made no effort to contact the State to investigate the situation any further. As stated above, if a plaintiff, by the exercise of reasonable diligence, might have detected the fraud, he is presumed to have had reasonable knowledge of it.

Delanno, 366 Ark. at 548, 237 S.W.3d at 86. So, it is clear from Delanno that the client was

“put on notice” that he should investigate the accuracy of his attorney’s assurances only after

he received reliable conflicting information from the State of Arkansas.

Rice, supra, was also an attorney-malpractice case. The circuit court dismissed the

plaintiff’s malpractice complaint as time-barred. The circuit court’s order provided the

following in pertinent part: “Plaintiffs had an independent duty to investigate the accuracy

of Defendants’ assurance, and that their failure to do so bars their claim that the three-year

statute of limitations was tolled by Defendants’ alleged fraudulent concealment.” Rice, 104

Ark. App. at 367, 292 S.W.3d at 860. In affirming the dismissal, the Rice court quoted

language found in Delanno, which stated, “We are unwilling to say that the fiduciary duty

owed by an attorney to his client eliminates the client’s duty to exercise reasonable diligence

7 in analyzing the accuracy of the attorney’s statements. Clients cannot be absolved of all

responsibility for testing the veracity of statements made by their lawyers.” Rice, 104 Ark.

App. at 374, 292 S.W.3d at 865 (quoting Delanno, 366 Ark. at 548, 237 S.W.3d at 86). The

Rice court then stated that the clients received information from an authoritative source that

contradicted the assurance of counsel and that appellants had the independent duty to

reconcile the contradiction.3 Rice, 104 Ark. App. at 375, 292 S.W.3d at 865.

So, the holdings of Delanno and Rice are narrower than at first blush. Both Delanno

and Rice actually stand for the proposition that if a client receives reliable information from

an authoritative source that contradicts his attorney’s assurance, a client may have the duty

to reconcile the contradiction and investigate the assurances of his own counsel. 4

In the case at bar, the circuit court dismissed appellant’s complaint with prejudice

after it granted a Rule 12(b)(6) motion. We review a circuit court’s decision on a motion to

dismiss a complaint by treating the facts alleged in the complaint as true and by viewing them

in the light most favorable to the plaintiff. Jenkins, supra. A review of the record reveals that

the client did not receive any contradictory reliable information from a third party, and her

3 A close reading of Rice reveals that the opinion does not identify the authoritative source that contradicted the assurance of counsel. We can only presume the record contained such evidence.

4 Even this narrower view of Delanno and Rice gives pause and is perhaps why, in my opinion, the whole concept of an attorney’s duty to disclose his malpractice vis-à-vis a client’s independent duty to investigate the accuracy of his attorney’s assurances needs to be revisited.

8 attorneys do not even make that allegation. Since there was no contradictory reliable

information in the record, the client was not “put on notice” to investigate her own

attorneys’ assurance; therefore, Delanno and Rice have limited application herein.

I would reverse the granting of the Rule 12(b)(6) motion to dismiss and reverse the

order dismissing the case with prejudice and remand to the circuit court.5 Having said this,

I express no opinion on the merits of the alleged attorney-malpractice claims.

5 Contrary to statements made in the majority supplemental opinion, the issues addressed in this dissent were appropriately and timely raised below.