Break in Representation Bars Attempt to Toll Statute of Limitations Under Continuous Representation Doctrine

On November 27, 2018, Justice Bransten of the New York County Commercial Division issued a decision in Boesky v. Levine, 2018 NY Slip Op. 33017(U), holding that a break in representation barred an attempt to toll the statute of limitations under the continuous representation doctrine, explaining:

With respect to Levine, the complaint alleges that he initially promoted the remainder interest tax strategy in 2002 and then proceeded to form the LLCs needed to execute the strategies from 2002 to 2004. Between 2002 and 2004, plaintiffs invested various amounts in these entities and claimed charitable deductions based upon the strategy from 2002 to 2005. Pursuant to CPLR 214(6), an action for nonmedical professional malpractice must be commenced within three years of the date of accrual. Claims for legal malpractice accrue when the malpractice is committed, not when the client learns of it. Therefore, any claims sounding in professional malpractice that are based upon Levine's advice to participate in the remainder interest tax strategy and the services he provided in order to implement the strategies are untimely under the three year statute of limitations set forth in CPLR 214(6).

Plaintiffs assert, however, that the complaint pleads allegations that Levine continued to represent them in connection with the remainder interest tax strategy until 2016 by advising them on how to proceed with the IRS 'sand the NYSDF's challenges to their use of the strategy. Therefore, plaintiffs contend, the continuous representation doctrine applies to toll the statute of limitations. Pursuant to the doctrine of continuous representation, the time within which to sue on the claim is tolled until the attorneys continuing representation of the client with regard to the particular matter terminates. The continuous representation doctrine tolls the running of the statute of limitations on a cause of action against a professional defendant only so long as the defendant continues to represent the plaintiff in connection with the particular transaction which is the subject of the action and not merely during the continuation of a general professional relationship. For the doctrine to apply, there must be a mutual understanding of the need for further representation on the specific subject matter underlying the malpractice claim.

Here, the complaint does not allege that there was an express, mutual agreement to advise plaintiffs on the effect of the remainder interest tax strategy after Levine's original advice.

Plaintiffs seemingly rely on the principle that the law recognizes that the supposed completion of the contemplated work does not preclude application of the continuous representation toll if inadequacies or other problems with the contemplated work timely manifest themselves after that date and the parties continue the professional relationship to remedy those problems. In this regard, a notion to dismiss pursuant to CPLR 3211(a)(5) will be denied unless the facts establish that a gap between the provision of professional services on the particular matter is so great that the representation cannot be deemed continuous as a matter of law.

Here, the complaint alleges that plaintiffs received counsel from Levine between 2002 to 2004 regarding the tax strategy, However, it was not until three years later, in 2007, that Levine began to counsel them on the same subject matter -- i.e., how to handle the IRS's and NYSDTF's challenges to the strategy. This three-year gap between the provision of Levine's services on this matter is so great that the representation cannot be deemed continuous. As such, any claims based upon the advice rendered by Levine from 2002 through 2004 are untimely.

(Internal quotations and citations omitted).

It is not unusual for the statute of limitations to be an issue in complex commercial litigation. Contact Schlam Stone & Dolan partner Erik Groothuis at egroothuis@schlamstone.com if you or a client have questions regarding whether a claim is barred by the statute of limitations.