(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
(Note: This is a companion case to Mystic Isle Development Corp. v. Perskie & Nehmad, DiTrolio
v. Antiles, and Mortgagelinq v. Commonwealth Title also decided today.)
Argued March 28, 1995 -- Decided August 1, 1995
HANDLER, J., writing for a majority of the Court.
The issue on appeal is whether the entire controversy doctrine applies to a legal-malpractice action
against an attorney who represents a client in the underlying action.
Circle Chevrolet Company (Circle) is a car dealership located in New Jersey. Thomas J. DeFelice,
Sr. (DeFelice) is Circle's president and sole shareholder. Circle is located on land owned by Masward II, a
partnership, in which DeFelice has a one-third interest. In 1972, Circle entered into a thirty-year lease with
Masward II for rental of the property. The lease, drafted by John Giordano of Giordano, Halleran & Ciesla,
P.C. (GH & C), includes four additional option periods at the conclusion of the thirty-year term. The lease
contains a clause that provides for rent increases based on a percentage of increases in the Consumer Price
Index (CPI) at certain times during the lease period.
In March 1985, Circle and Masward II began discussing the first rent increase. At the time,
Masward II was represented by the law firm of Gaughran & Steib (Gaughran), while Circle was represented
by GH & C. Circle agreed to pay the increased rent based on a formula devised by Gaughran, which
calculated the rent increase based on the actual increase in the CPI for certain years. On March 22, 1985,
Gaughran sent a letter containing the amount of the rent increase to Circle's attorney at GH & C who, in
turn, forwarded the letter to DeFelice for review and approval. DeFelice asked his accountants, Petrics,
Meskin, Nassaur & Dambach (Petrics) to review the formula. Petrics found that the calculations were
accurate and GH & C did not question Petrics' review. Unfortunately, the Gaughran formula was incorrect
because it calculated the rent increases based on actual rather than percentage increases in the CPI, as
required under the lease. On February 24, 1988, GH & C discovered the error and notified both Gaughran
and Circle in early March 1988. Circle had overpaid its rent by $37,699.98.
In April 1988, GH & C filed a declaratory action against Masward II on behalf of Circle to reform
the 1985 settlement agreement to reflect the correct rental increase calculation, (hereinafter "the reformation
litigation"). The reformation remedy was based on a theory of mutual mistake of fact. In November 1988,
during the course of the reformation litigation, GH & C withdrew as Circle's counsel because of a conflict of
interest. The law firm of Blaustein & Wasserman (Wasserman) took over representation of Circle in
January 1989. Circle claims that Wasserman never informed it of any possible claims against GH & C and
Petrics while the reformation litigation was pending. Wasserman, on the other hand, claims that Circle was
told of GH & C's potential culpability and the existence of a viable claim against Petrics.
In August 1990, the trial court found that the Gaughran calculations were incorrect as a matter of
law and were not a result of a mutual mistake of fact. A settlement was eventually entered, in which the
court credited the rent overpayment toward future lease payments to Masward II.
On September 6, 1991, Circle instituted a malpractice action against GH & C, alleging that GH & C had negligently reviewed the rental-increase calculations, resulting in an overpayment of rent by Circle and payment of unnecessary legal fees and costs. The complaint was later amended to name Petrics as a
defendant. On April 2, 1993, the trial court granted GH & C's motion for summary judgment to dismiss
Circle's complaint, finding that Circle's action was barred by the entire controversy doctrine.
On appeal, a divided panel of the Appellate Division affirmed the decision of the trial court. The
majority noted that New Jersey courts had applied the discovery rule to legal malpractice actions and that
Circle's cause of action against GH & C and Petrics accrued in March 1988 when Circle had knowledge of
the mistake in the rent calculations and that the entire controversy doctrine barred the malpractice
complaint. One judge dissented, believing that legal malpractice actions should be treated differently under
the entire controversy doctrine, and that the totality of the circumstances here did not require rigid
adherence to the doctrine to bar Circle's claims against GH & C.
Circle appealed to the Supreme Court as of right based on the dissent in the Appellate Division.
HELD: The entire controversy doctrine applies to a client's legal malpractice claims against his or her
attorney, even when the attorney is currently representing the client in an underlying action.
1. The entire controversy doctrine seeks to further the judicial goals of fairness and efficiency by requiring,
whenever possible, that the adjudication of a legal controversy occur in one litigation in one court. That rule
includes the joinder of all affirmative claims that a party might have against another party, including
counterclaims and crossclaims, all parties with a material interest in the controversy, and all constituent
claims that arise during the pendency of the first action that were known to the litigant. Application of the
rule is discretionary and should not be applied when joinder would result in significant unfairness to the
litigants or jeopardy to a clear presentation of the issues and a just result. (pp. 8-10)
2. A party must bring a claim within the statute of limitations period and within the boundaries set by the
entire controversy doctrine. For purposes of the statute of limitations, a cause of action against an attorney
accrues when a client discovers he or she has been injured by that attorney's mistake, even if the full
implication of that error have not yet been ascertained. The limitations period can begin to run even if the
attorney is currently representing the client in the underlying matter and the attorney has an ethical
obligation to advise the client that he or she might have a claim against the attorney. Thus, clients must
either choose between suing the former attorney simultaneously with the pending claim, thereby risking
exposure of previously-privileged information, or completely forfeiting the right to sue the former attorney in
the hope that the underlying litigation is successful. However, the doctrine does not require that the
malpractice claim actually be litigated with an underlying action. What is required is notice to the court of
the existence of all material parties. The trial court has the discretion to devise a litigation plan that is
efficient and fair to all parties and can consider the effects of joinder in respect of the preservation of
attorney-client confidentialities. (pp. 10-15)
3. Exempting legal malpractice claims from the entire controversy doctrine would not further the objectives
of efficiency or fairness. Efficiency is not achieved because the same bundle of rights that the underlying
litigation sought to resolve will be litigated again. Fairness is not achieved because possibly relevant evidence
and parties will be excluded from participating in the underlying and subsequent malpractice actions. (p. 15)
4. The entire controversy doctrine does not apply to bar component claims that are unknown, unarisen, or
unaccrued at the time of the original action. Pursuant to the discovery rule, a professional malpractice claim
accrues when: 1) the claimant suffers an injury or damages; and 2) the claimant knows or should know that
its injury is attributable to the professional negligence. As of March 1988 when Circle was informed by GH
& C that the Gaughran formula was incorrect, Circle knew that it had been injured and that the mistake may
have been attributable to the negligence of GH & C and Petrics. (pp. 15-22)
5. Joinder of GH & C and Petrics advances the goals of the entire controversy doctrine by encouraging a more comprehensive determination of the legal controversy and furthering the interests of party fairness in
aiding GH & C's and Petrics' ability to defend themselves. Joinder also fosters judicial economy and
efficiency. (pp. 22-24)
6. Cogdell, which required mandatory joinder of parties with a material interest, was to apply prospectively
to all cases not already on appeal. Although that reformation litigation was initially filed before Cogdell was
decided, the suit did not conclude until August 1990. Pleadings were filed after the Cogdell decision;
therefore, Circle had ample opportunity to comply with and was aware of the Cogdell mandate. A court may
relieve a party from a final judgment for excusable neglect. Circle has no justification for neglecting to
ascertain that the entire controversy doctrine would bar a subsequent action against its attorneys and
accountants for malpractice. (pp. 24-28)
Judgment of the Appellate Division is AFFIRMED.
JUSTICE STEIN, dissenting, is of the view that given the indeterminate state of the law, the fact
that the legal malpractice claim had not clearly accrued, and Circle's justifiable belief that its damages were
fully compensable in the reformation action, to apply the entire controversy doctrine and deny Circle its day
in court to adjudicate the merits of its malpractice claim cannot easily be justified. As in Cogdell, simple
fairness dictates that the effect of the Court's ruling not be applied to bar Circle's claim.
CHIEF JUSTICE WILENTZ and JUSTICES POLLOCK, GARIBALDI, and COLEMAN join in
JUSTICE HANDLER's opinion. JUSTICE STEIN filed a separate dissenting opinion. JUSTICE O'HERN
did not participate.
SUPREME COURT OF NEW JERSEY
A-
144 September Term 1994
CIRCLE CHEVROLET COMPANY,
a New Jersey Corporation, and
THOMAS J. DEFELICE, SR.,
Plaintiffs-Appellants,
v.
GIORDANO, HALLERAN & CIESLA,
a Professional Corporation,
Defendant-Third-Party
Plaintiff-Respondent,
v.
PETRICS, MESKIN, NASSUAR & DAMBACH,
ACCOUNTS AND AUDITORS,
Third-Party
Defendant-Respondent.
Argued March 28, 1995 -- Decided August 1, 1995
On appeal from the Superior Court, Appellate
Division, whose opinion is reported at
274 N.J. Super. 405 (1994).
Ronald L. Lueddeke argued the cause for
appellants.
Richard L. Friedman argued the cause for
respondent Giordano, Halleran & Ciesla, etc.
(Giordano, Halleran & Ciesla, attorneys; Mr.
Friedman, of counsel; Mr. Friedman, Lawrence
J. Sharon, and Jodi L. Rosenberg, on the
briefs).
Christopher J. Carey argued the cause for respondent Petrics, Meskin, Nassaur &
Dambach, etc. (Tompkins, McGuire &
Wachenfeld, attorneys; Mr. Carey, of counsel;
Michael S. Miller and Mary Anne McConeghy, on
the briefs).
The opinion of the Court was delivered by
HANDLER, J.
This case involves the scope of the entire controversy
doctrine as it applies to joinder of parties. At issue in this
case, as well as, Mystic Isle Development Corp. v. Perskie &
Nehmad, __ N.J. __, also decided today, is whether the entire
controversy doctrine applies to a malpractice action against an
attorney who represents a client in the underlying transaction.
The case is before us as a result of a dissent in the
Appellate Division. R. 2:2-1(a)(2). On appeal, the Appellate
Division ruled, in a reported opinion,
274 N.J. Super. 405
(1994), that the entire controversy doctrine applied and,
accordingly, dismissed the action.
Plaintiff Circle Chevrolet Co. (Circle) is a privately-owned corporation that operates a car dealership in Shrewsbury, New Jersey. 274 N.J. Super. at 409. Thomas J. DeFelice, Sr. (DeFelice) is the president and sole shareholder of Circle. Ibid. The dealership is located on land owned by Masward II, a partnership consisting of DeFelice, his brother Edward DeFelice, and Albert North, each of whom own a one-third interest. Ibid.
In 1972, Circle entered into a thirty-year lease with
Masward II for rental of the property. The lease, drafted by
John Giordano of Giordano, Halleran & Ciesla, P.C. (GH & C),
includes four additional option periods at the conclusion of the
thirty-year term. Ibid. Pursuant to the lease, base rent for
the land was $24,000 per year for the first ten years. Ibid.
The lease contains a clause that provides for rent increases in
the eleventh, sixteenth and twenty-first years after commencement
of the lease, as well as upon the initiation of any five-year
renewal period. Ibid. The lease provides for rent increases
based on a percentage of increases in the Consumer Price Index
(CPI).See footnote 1
In March 1985, Circle and Masward II began discussions
regarding the first rent increase. At the time of these
discussions, Masward II was represented by the law firm of
Gaughran & Steib (Gaughran), while Circle was represented by
defendant GH & C. Id. at 409-10. The dispute was finally settled
by Circle agreeing to pay the increased rent based on a formula
devised by Gaughran, which calculated the rent increase based
upon the actual increase in the CPI from February 1973 to
February 1983. Id. at 410. On March 22, 1985, Gaughran sent a
letter containing the amount of the rent increases to Circle's
attorney, Thomas Pliskin, a partner at GH & C. Pliskin then
forwarded the letter to Thomas DeFelice of Circle, asking him to
review the letter and advise GH & C as to his desired course of
action. DeFelice asked his accountants, Petrics, Meskin, Nassaur
& Dambach (Petrics) to review the formula. Petrics found that
the calculations were accurate, assuming that the CPI numbers
were correct. Circle's lawyers, GH & C, did not question the
accountants' review, and the formula was incorporated into the
settlement agreement. Ibid.
Unfortunately, the Gaughran formula was wrong. It
calculated the rent increase based upon actual increases in the
CPI. The lease, however, explicitly states that increases would
be based upon percentage increases in the CPI. Id. at 409. It
was not until February 24, 1988, on receipt of notice from
Gaughran that another increase was about to take effect, that
Pliskin reviewed Gaughran's calculations and discovered that an
error had been made. As a result, Circle overpaid its rent by
$37,699.98. Pliskin informed Gaughran of the error by letters
dated March 9, 1988 and March 11, 1988. Ibid. Circle was also
informed of the mistake at that time. Ibid.
In April 1988, GH & C filed a declaratory action against
Masward II on behalf of Circle to reform the 1985 settlement
agreement to reflect the correct rental increase calculation
(hereinafter, the "reformation litigation"). Ibid. The
reformation remedy was premised on the theory that a mutual
mistake of fact had been made. Ibid. While that litigation was
pending, Masward II also filed a suit against Thomas DeFelice in
his individual capacity. That suit was consolidated with the
reformation litigation.
In November 1988, during the course of the reformation
litigation, GH & C withdrew as counsel for Circle because of a
conflict of interest. Id. at 410-11. The law firm of Blaustein
& Wasserman (Wasserman) took over representation of Circle on
January 1989, after an initial meeting between Alan Wasserman and
Circle. Id. at 411. Circle and Wasserman differ on the advice
that Wasserman offered his client. Circle contends that
Wasserman never informed it of any possible claims against GH & C
and the accounting firm of Petrics while the reformation
litigation was pending. Ibid. Circle states that it was advised
of the existence of a claim against GH & C only after the
reformation litigation had ended. Ibid. Wasserman, on the other
hand, claims that not only did he inform Circle of "some
culpability" on the part of GH & C and the existence of a "viable
case against Petrics," but also that he notified Circle that the
firm would not represent Circle if Circle decided to join GH & C
as a defendant because GH & C had referred the case to Wasserman.
Ibid. Wasserman also claims that in response to that
information, Thomas DeFelice indicated that he had no intention
of suing Petrics because of his close relationship with the
accounting firm and that he did not want to sue GH & C. Ibid.
GH & C and Petrics were not joined as defendants in the
reformation litigation. Ibid. However, Circle did call them as
witnesses in the action. Ibid.
The reformation litigation was eventually tried. Ibid. In
August 1990, the trial court found that the Gaughran calculations
were incorrect as a matter of law, and were not the result of a
mutual mistake of fact. Ibid. The litigation ultimately ended
in a settlement that was memorialized in an order of judgment,
filed on December 14, 1990. In the settlement agreement, signed
by the court, the court found that there had been an overpayment
of rent in the amount of $37,699.98. The settlement provided
Circle with a $37,699.98 credit in its lease payments to Masward
II. Thus, the court calculated that Circle did not need to pay
rent for 4.6 months, commencing on September 1, 1990. From
January 1, 1991 onward, Circle's monthly rental payments would be
$5,420.
Subsequently, on September 6, 1991, Circle commenced a
malpractice action against GH & C. Circle alleged that GH & C
had negligently reviewed the rental-increase calculations,
resulting in overpayment of rent by Circle and payment of
unnecessary legal fees and costs. Ibid. GH & C then filed a
third-party complaint against Petrics, and Circle subsequently
amended its complaint to include Petrics as a named party-defendant.
On April 2, 1993, the trial court granted defendant's motion
for summary judgment to dismiss Circle's claim, finding that
Circle's action was barred by the entire controversy doctrine.
Id. at 412. The trial court also dismissed GH & C's third-party
complaint against Petrics with prejudice. Circle appealed.
A divided Appellate Division affirmed. Writing for the
majority, Judge Keefe noted that New Jersey courts had applied
the discovery rule to legal malpractice actions. Id. at 413. He
held that Circle's cause of action against GH & C, as well as
Petrics, accrued in March 1988 when Circle had knowledge of the
mistake in the rent calculations. Id. at 415.
With respect to the entire controversy doctrine, Judge Keefe
found that the doctrine barred a malpractice claim because the
original action, the reformation litigation, was "premised on the
mutual mistake of all parties, and a necessary element of that
theme was GH & C's concession that it had been mistaken in its
interpretation of the lease." Id. at 417. Thus, a malpractice
claim could "easily have been presented in the settlement
reformation suit as an alternative form of recovery in the event
that the 'mutual' mistake theory was rejected." Ibid. Judge
Stern dissented. He believed that legal malpractice actions
should be treated differently under the entire controversy
doctrine, and that the "totality of the circumstances here does
not require rigid adherence to the entire controversy doctrine to
bar the present claims against defendants. . . ." Id. at 422.
Circle appealed. Although Circle failed to file a timely
appellant's brief on its appeal as of right, this Court vacated
its order dismissing the appeal for lack of prosecution and on
January 11, 1995, reinstated its appeal.
We now affirm the majority determination and hold that the
entire controversy doctrine applies to a client's legal
malpractice claims against his or her attorney, even when the
attorney is currently representing the client in an underlying
action.
The entire controversy doctrine seeks to further the judicial goals of fairness and efficiency by requiring, whenever possible, "that the adjudication of a legal controversy should occur in one litigation in only one court." Cogdell v. Hospital Ctr., 116 N.J. 7, 15 (1989). "The point of course, is that a component of the controversy may not be unfairly withheld, and a withholding is by definition unfair if its effect is to render the pending litigation merely one inning of the whole ball game." Wm. Blanchard Co. v. Beach Concrete Co., 150 N.J. Super. 277, 294 (App. Div. 1977) (citation omitted), certif. denied, 75 N.J. 528 (1977). The rule has been extended to include all affirmative claims that a party might have against another party, including counterclaims and cross-claims, Ajamian v. Schlanger, 14 N.J. 483, 487-89 (1954), cert. denied, 348 U.S. 835, 75 S. Ct. 58, 99 L. Ed. 649 (1954), as well as joinder of all parties with
a material interest in the controversy, i.e., those who can
affect or be affected by the judicial outcome of the controversy.
Cogdell, supra, 116 N.J. at 23, 26; R. 4:30A. In DiTrolio v.
Antiles, __ N.J. __, __ (1995) (slip op. at 15), we reiterated
the objectives behind the doctrine: "(1) the need for complete
and final disposition through the avoidance of piecemeal
decisions; (2) fairness to parties to the action and those with a
material interest in the action; and (3) efficiency and the
avoidance of waste and the reduction of delay." (citing Cogdell,
supra, 116 N.J. at 15). Application of the rule, however, is
discretionary and clarification of the limits of the doctrine is
best left to case-by-case determination. Cogdell, supra, 116
N.J. at 27-28; see DiTrolio, supra, __ N.J. at __ (slip op. at
26). For example, the rule should not be applied when "joinder
would result in significant unfairness [to the litigants] or
jeopardy to a clear presentation of the issues and just result."
Cogdell, 116 N.J. at 27 (quoting Crispin v. Volkswagenwerk, A.G.,
96 N.J. 336, 354-55 (1984) (Handler, J., concurring)). A trial
court, however, can establish a particular litigation regime,
such as staying the collateral action, in order to avoid any
administrative unmanageability that may be caused by joining
parties or issues. Id. at 27-28; see DiTrolio, supra, __ N.J. __
(slip op. at 26).
The entire controversy doctrine applies to constituent
claims that arise during the pendency of the first action that
were known to the litigant. DiTrolio, supra, __ N.J. at __ (slip
op. at 24-25); Brown v. Brown,
208 N.J. Super. 372, 382 (App.
Div. 1986); see also Busch v. Biggs,
264 N.J. Super. 385, 398-99
(App. Div. 1993) (determining that entire controversy doctrine
barred property owners' subsequent litigation against township
engineer for alleged negligent acts preventing plaintiffs from
obtaining approval of their subdivision application when
plaintiffs knew of negligence but failed to join engineer in
their original suit against township planning board); Bendar v.
Rosen,
247 N.J. Super. 219, 237 (App. Div. 1991) (determining
that entire controversy doctrine and judicial economy militate in
favor of requiring assertion of cross-claim for contribution in
underlying tort action, even though "technically a right of
contribution does not arise until a tortfeasor has paid more than
his pro rata share").
Plaintiffs in this case and in Mystic Isle, supra, urge the
Court to make an exception for legal malpractice claims that
involve an attorney's negligent conduct in the controversy that
is the subject of the original action. While we recognize that a
client's claim against his or her attorney for malpractice
engenders concerns inherent in the attorney-client relationship,
those concerns may properly be addressed and accommodated under
the principles of the entire controversy doctrine.
The major complication stemming from the attorney-client
relationship that can affect a malpractice claim relates to the
accrual of the cause of action and the capacity of the client to
recognize and respond to such a cause of action when it arises.
We recognize that, for purposes of the statute of limitations, a
cause of action against an attorney accrues when a client
discovers he or she has been injured by that attorney's mistake,
even if the full implications and damages of that error have not
yet been ascertained. See Grunwald v. Bronkesh,
131 N.J. 483,
494 (1993). Thus, the limitations period can begin to run
notwithstanding the fact that the errant attorney is currently
representing the client on the underlying matter. A cause of
action's point of accrual is equally relevant to the entire
controversy doctrine. Cafferata v. Peyser,
251 N.J. Super. 256,
260 (App. Div. 1991). Thus, a client is under a double onus to
bring the claim not only within the statute of limitations, but
also within the boundaries set by the entire controversy
doctrine. The fact that the attorney is one party responsible
for a client's injury neither tolls the limitation period nor
obviates the prohibition against piecemeal litigation.
An attorney has an ethical obligation to advise a client
that he or she might have a claim against that attorney, even if
such advice flies in the face of that attorney's own interests.
The Rules of Professional Conduct (RPC) provide that "[a] lawyer
shall not represent a client if the representation of that client
may be materially limited by the . . . lawyer's own interests,
unless . . . the client consents after a full disclosure of the
circumstances and consultation with the client." RPC 1.7(b)(2).
The RPC also provides that "[a] lawyer shall explain a matter to
the extent reasonably necessary to permit the client to make
informed decisions regarding the representation." RPC 1.4(b).
Thus, an attorney who realizes he or she has made a mistake must
immediately notify the client of the mistake as well as the
client's right to obtain new counsel and sue the attorney for
negligence. Accordingly, application of the entire controversy
doctrine to legal malpractice claims does not infiltrate the
sanctity of the lawyer-client relationship because,
notwithstanding the doctrine, the attorney is under an overriding
ethical obligation to inform the client of the accrual of a
probable claim against that attorney.
Plaintiff claims that by requiring a client to assert its
malpractice claim in the pending lawsuit, the client waives the
attorney-client privilege, and leaves the lawyer open to
interrogation concerning otherwise-privileged communications
involving the very subject matter of the dispute. Indeed, both
the ethics rules and the Rules of Evidence permit an attorney to
reveal confidences in order to establish a defense to a legal
malpractice claim by the client. See RPC 1.6(c)(2) (permitting
attorney to reveal client confidences "to establish a defense to
a . . . civil claim . . . against the lawyer based upon the
conduct in which the client was involved"); N.J.R.E. 504(2)(c)
(stating that the lawyer-client privilege shall not extend "to a
communication relevant to an issue of breach of duty by the
lawyer to his client, or by the client to his lawyer"); N.J.S.A.
2A:84A-20(2)(c) (same). Thus, clients will be faced with the
Hobbesian choice of having to choose between suing the former
attorney simultaneously with the pending claim, thereby risking
the exposure of previously-privileged information, or completely
forfeiting his or her right to sue the former attorney in the
hope that the underlying litigation is advantageous.
While we acknowledge potential for such a dilemma exists in
certain circumstances, the risks of prejudice to the plaintiff
are minimized by other considerations. Once a malpractice action
is commenced, the lawyer is not free to divulge all confidences.
Rather, a lawyer sued for malpractice is obliged to "make every
effort practicable to avoid unnecessary disclosure of information
relating to a representation, to limit disclosure to those having
the need to know it, and to obtain protective orders or make
other arrangements minimizing the risk of disclosure." Model
Rules of Professinal Responsibility Rule 1.6(c) cmt. 18; see RPC
1.6(c) (information may be revealed "to the extent" necessary).
Moreover, defendants are prohibited from taking advantage of the
privilege waiver by alleging cross-claims against the plaintiff
by the requirement that the defendant provide a sufficient
showing of an objective factual basis for the claim.
Further, the entire controversy doctrine does not require
that the malpractice claim be actually litigated with the
underlying action; it merely requires that a party notify the
court of the existence of material parties. See Brown, supra,
208 N.J. Super. at 382 ("a party whose constituent claim arises
during the pendency of the action risks its loss unless he
apprises the court and his adversary of its existence and submits
to judicial discretion the determination of whether it should be joined in that action or reserved"). Moreover, the trial court is vested with the authority and responsibility to devise a litigation plan that is efficient and fair to all parties. DiTrolio, supra, __ N.J. at __ (slip op. at 26); see Baureis v. Summit Trust Co., 280 N.J. Super. 154, 163 (App. Div. 1994) ("[o]ur courts are vested with the judgment and discretion to recognize unrelated claims against non-parties which do not need to be joined"); Brown, supra, 208 N.J. Super. at 381-82. Thus, a trial court will consider the effects of joinder with respect to the preservation of attorney-client confidentialities when dealing with case management. Further, various procedural tools are available to the trial court to prevent excessively complicated or unfair litigation: case management and pretrial conferences, R. 4:25; stipulations of parties as to matters of fact, R. 4:25-7; the use of special verdicts, R. 4:39-1, to help the jury sort out the issues; and the requirement that attorneys obtain protective non-joinder orders. R. 4:30. In addition, the court has the power, under Rule 4:38-2(a), to sever claims "for the convenience of the parties or to avoid prejudice." The "[trial] court, rather than a litigant acting unilaterally, must make the determination of whether the supplementary claim is to be joined or reserved." Brown, supra, 208 N.J. Super. at 381. A party who does not allow the trial court to determine where the interests of substantial justice lay risks losing his or her
right later to bring that claim. See DiTrolio, supra, __ N.J. at
__ (slip op. at 26).
The entire controversy doctrine balances the objectives of
efficiency and fairness. Exempting legal malpractice claims
would not further either of these objectives. First, efficiency
is not achieved because the legal malpractice claim likely will
involve the same "bundle of rights" that the underlying
litigation sought to resolve. Therefore, it will necessarily
result in a re-run of the original litigation. Second, fairness
is not achieved because possibly relevant evidence and parties
will be excluded from participating in the underlying and
subsequent malpractice actions. Without the legal malpractice
claim and its necessary parties, the original action will not be
a comprehensive and complete determination of liability. The
defendants included in the first suit may unjustly be made to
bear the burden of accepting full responsibility and the brunt of
total liability, just as the subsequent group of defendants are
likely to appear wholly at fault before their jury.
The bounds of the entire controversy doctrine, however, are not unlimited. See Cogdell, supra, 116 N.J. at 27-28. The doctrine does not apply to bar component claims that are unknown, unarisen, or unaccrued at the time of the original action. R. 4:30A; DiTrolio, supra, __ N.J. at __ (slip op. at 24-25); Cafferata, supra, 251 N.J. Super. at 260 ("it is well settled
that [the entire controversy doctrine] does not bar
transactionally related claims of which a party was unaware
during the pendency of the prior litigation").
In Grunwald, supra, this Court held that the accrual of a
legal malpractice claim is governed by the discovery rule. The
Court concluded that legal malpractice claims fall within the
special "class of cases" for which the discovery rule was adopted
because "[i]n the context of legal counseling, a plaintiff may
reasonably be unaware of the underlying factual basis for a cause
of action." 131 N.J. at 493. Noting that "[t]he discovery rule
is a rule of equity that ameliorates the 'often harsh and unjust
results [that] flow from a rigid and automatic adherence to a
strict rule of law,'" id. at 492 (quoting Lopez v. Swyer,
62 N.J. 267, 273-74 (1973)), the Court stressed that the discovery rule
focuses on "'an injured party's knowledge concerning the origin
and existence of his injuries as related to the conduct of
another person.'" Ibid. (quoting Lynch v. Rubacky,
85 N.J. 65,
70 (1981)).
Thus, the discovery rule encompasses two
types of plaintiffs: those who do not become
aware of their injury until the statute of
limitations has expired, and those who are
aware of their injury but do not know that it
may be attributable to the fault of another.
[Ibid. (quoting Burd v. New Jersey
Tel. Co.,
76 N.J. 284, 291-92
(1978).]
Accordingly, the Court reasoned that because an "inability readily to detect the necessary facts underlying a malpractice claim is a result of the special nature of the relationship
between the attorney and client," applying the discovery rule to
malpractice actions would "remove [an attorney's] [] incentive to
deceive and thus . . . preserve the fiduciary duty of full
disclosure." Id. at 493-94. The Court held that "the statute of
limitations begins to run only when the client suffers actual
damage and discovers, or through the use of reasonable diligence,
should discover, the facts essential to the malpractice claim."
Id. at 494.
In Cafferata, supra, the Appellate Division stated:
The knowledge of the existence of the cause
of action which will invoke the entire
controversy doctrine is the same as the
knowledge which will trigger the running of
the statute of limitations in those cases to
which the discovery rule of deferred accrual
is applicable.
Accordingly, as Judge Keefe acknowledged, because the discovery rule applies to a determination of when a legal malpractice claim accrues for statute of limitations purposes, the rule is equally applicable to imposition of the entire controversy bar. 274 N.J. Super. at 413-16. Thus, pursuant to the discovery rule, a professional malpractice claim accrues when: (1) the claimant suffers an injury or damages; and (2) the claimant knows or should know that its injury is attributable to the professional negligent advice. Grunwald, supra, 131 N.J. at 494; see Mystic Isle, supra, __ N.J. at __ (slip op. at 15). The accrual of a cause of action occurs when a plaintiff knows or should know the facts underlying those elements, not necessarily
when a plaintiff learns the legal consequences of those facts.
Grunwald, supra, 131 N.J. at 493 (citing Burd v. New Jersey Tel.
Co.,
76 N.J. 284, 291-92 (1978)).
Plaintiff argues that it should not be barred from bringing
its malpractice claim against GH & C and Petrics because at the
time of the reformation litigation, its malpractice claim against
defendants had not yet accrued. Plaintiff contends that because
the extent of its damages were not set until after the
reformation litigation was complete, its cause of action against
defendants did not accrue until after the termination of that
litigation. Additionally, plaintiff asserts that even if it was
aware of the injury caused to it in 1988, it was not aware that
either GH & C or Petrics was responsible for that injury, and
that GH & C's continuing representation of plaintiff prevented
plaintiff from discovering its professional malpractice claims.
We reject both of these arguments.
As in all other instances where the discovery rule has been
applied, injury and attributable fault are the key elements to
satisfying the rule. Grunwald, supra, 131 N.J. at 495. In
assessing the injury element, Judge Keefe recognized that a cause
of action can accrue before the extent of actual damages are
ascertained. "While actual injury to a client may exist in the
form of an adverse judgment, such a judgment is not required in
order for a cause of action to accrue." 274 N.J. Super. at 413
(citing Grunwald, supra, 131 N.J. at 495-96); see also Busch,
supra,
264 N.J. Super. 385 (cause of action challenging township
engineer's recommendation accrued at time property owner brought
action against townshiup planing board, even though effect of
engineer's tortious conduct could not be determined until after
action against township was decided). In Grunwald, we recognized
that a client may suffer injury in the form of legal fees before
final judgment is reached. 131 N.J. at 495. Thus, "[l]egally-cognizable damages occur when a plaintiff detrimentally relies on
the negligent advice of an attorney." Ibid.
In Grunwald, we recognized that "although an adverse
judgment may increase a plaintiff's damages, it does not
constitute an indispensable element to the accrual of a cause of
action. Id. at 495-96. Moreover, while acknowledging that it
was possible for damages to be extinguished or modified on
appeal, we nonetheless held that such a result did "not alter the
time when the underlying injury or harm occurs and becomes
cognizable for purposes triggering the accrual of a cause of
action." Id. at 496.
Thomas Pliskin of GH & C informed plaintiff that the
Gaughran formula was incorrect in March 1988. Thus, at this time
it is clear that plaintiff knew it had been injured because it
had been overpaying rent according to a mistaken formula. In
fact, plaintiff's complaint against Masward II in the reformation
litigation mentions several times that the rent is based on an
erroneous calculation. Thomas DeFelice's affidavit in support of
plaintiff's motion for summary judgment states that the rent
calculations were based on an erroneous calculation. His
affidavit also admits that the overpayment of rent "was made
simply because of the mistake in calculation . . . which we did
not scrutinize and was mistakenly paid."
Plaintiff asserts that GH & C's continuing representation of
Circle, up until January 1989, prevented Circle from discovering
its professional malpractice claims. Moreover, Circle contends
that Wasserman, who became Circle's legal counsel after GH & C's
departure during the reformation litigation, failed to inform it
of its possible claim against either GH & C or Petrics for the
undetected mistake in the rent-increase formula. Wasserman, on
the other hand, testified that he did notify plaintiff of the
potential liability of both GH & C and Petrics, and that
plaintiff responded that it did not intend to bring suit against
either entity. Although the testimony regarding notification is
indeterminate, the record demonstrates that plaintiff
nevertheless had knowledge of the potential claim against both GH
& C and Petrics even prior to plaintiff's initial January 26
meeting with Wasserman.
The record indicates that plaintiff knew in March 1988 that
its rent overpayments were in part attributable to GH & C because
the law firm admitted it was mistaken in the rent calculations.
In his March 9, 1988 letter to Gaughran informing the firm of its
mistaken calculation, Thomas Pliskin wrote, "All those persons
involved with the determination of the rent, including me, have
to the point of this letter been mistaken." (emphasis added).
Plaintiff's brief submitted in support of summary judgment, in
the settlement-reformation action, also states, "All parties and
attorneys in the 1985 litigation mistakenly believed the
calculations for the 'percentage' increase in the C.P.I. as
stated by the attorney, Mr. Gaughran." (emphasis added).
Therefore, plaintiff did have actual knowledge of GH & C's
negligence as early as March 1988.
A malpractice action accrues when a party suffers damages
and discovers or through reasonable diligence should discover,
that the damage is attributable to a professional's negligent
advice. Given GH & C's clear admission of error for the purposes
of the reformation litigation (Petrics also testified during the
litigation that it was mistaken), it is reasonable to hold Circle
to constructive knowledge of the malpractice claims. Reasonable
diligence would have revealed to Circle the possibility of claims
against GH & C and Petrics. Plaintiff's claim that GH & C's
continuing representation prevented it from discovering a
possible malpractice claim is misplaced. GH & C withdrew from
representation in November 1988, almost two years prior to the
termination of the reformation litigation. Thus, as determined
by the Appellate Division, 274 N.J. Super. at 416, no genuine
attorney-client conflict was present for the majority of the
litigation.
The joinder requirements of the entire controversy doctrine
would not have been negated, however, even if GH & C had
maintained representation of Circle throughout the course of the
litigation. A litigant must present all claims, even those
against different parties, that stem from the same
transactionally related facts in one controversy before one
court. Ditrolio, supra, __ N.J. at __ (slip op. at 22). The
trial court must be given the opportunity to structure the
litigation in the most efficient and most equitable manner
available. Fragmented litigation and piecemeal adjudication are
not a party prerogative.
Joinder of GH & C and Petrics also advances the goals of the entire controversy doctrine. First, joining them as parties would have encouraged a more comprehensive determination of the legal controversy--whether the mistaken calculations were a mutual mistake of fact, a mistake of law, or the result of negligent review by Circle's retained professionals. As the Appellate Division specifically found:
GH & C's failure to advise Circle that GH & C and Petrics could be sued was an issue inextricably tied to the settlement reformation litigation and was, thus a part of that controversy; the controversy being who, if anyone, was responsible for Circle having to pay more rent than the lease required.
Second, the interests of party fairness favor joinder of defendants in the underlying action. The defendants' ability to defend themselves has been prejudiced. Thomas DeFelice, the
president and sole shareholder of Circle, is now deceased. His
claims cannot be subjected to cross-examination.See footnote 2
Third, joinder fosters judicial economy and efficiency.
Chief Justice Vanderbilt observed that "the fundamental object of
the entire controversy doctrine is to prevent any single action
from being nothing more than 'the trigger which * * * would start
the chain reaction of other litigation to resolve the balance of
the issues raised by the entire controversy.'" Wm. Blanchard
Co., supra, 150 N.J. Super. at 294 (quoting Vacca v. Stika,
21 N.J. 471, 476 (1956)). Clearly, it would have been more
efficient for Circle to have joined GH & C and Petrics in the
1988 litigation instead of commencing another lawsuit grounded in
the same set of facts.
Lastly, we agree with the Appellate Division that "no reason
exists why the [discovery] rule should not apply to [accounting-malpractice actions] as well," especially considering that
numerous other jurisdictions already apply the discovery rule to
such actions. 274 N.J. Super. at 414-15 (citing other
jurisdictions applying discovery rule to accounting malpractice
actions). Consequently, Circle's actions against Petrics accrued
in March 1988, when Circle was first notified that the Gaughran
calculations were wrong. In April 1985, Circle specifically
asked Petrics to review the Gaughran formula. Petrics reviewed
the formula and informed Circle that the calculations were
correct. Clearly, Petrics' review was incorrect and constitutes
a prima facie case of negligence.
Plaintiff argues that it should be spared the preclusive effect of the entire controversy bar because the party-joinder component of the rule mandated by this Court's decision in Cogdell, supra, was decided on July 24, 1989, approximately 15 months after the reformation litigation was instituted. Plaintiff maintains that it was unaware at the time of the reformation litigation that the entire controversy doctrine applied to bar subsequent professional-malpractice claims, especially those involving attorneys involved in the underlying litigation.
This Court issued the Cogdell decision with the direction that it be applied "prospectively and to all cases not already on appeal." 116 N.J. at 28; cf. id. at 28-29 (Clifford, J., dissenting) (arguing that the interests of fairnes require retrospective application of the decision). Lower courts have interpreted the phrase "all cases not already on appeal" to mean pending cases involving "the first lawsuit arising out of a common occurrence or transaction." Reno Auto Sales, Inc. v. Prospect Park Sav. & Loan Ass'n, 243 N.J. Super. 624, 627 n.2, 630 (App. Div. 1990).
Judge Keefe correctly recognized that the reformation
litigation was the first lawsuit addressing the mistaken rent-increase calculation resulting in excess rents paid by Circle.
274 N.J. Super. at 412. Although the reformation litigation was
initially filed before Cogdell was decided, the suit was not
terminated until August 1990, one year later. Complaints,
answers and other pleadings were filed after the Cogdell
decision. Before and during this time the malpractice of the
attorneys and the accountants had become implicated in the
underlying litigation. As noted, the cause of action for
malpractice against the attorneys and the accountants had accrued
in March 1988. Thus, Circle was poised to consider initiating
legal action against these defendants and should have been aware
of the mandatory party-joinder rule and the consequences of
failing to join all material parties while the litigation against
Masward II was pending. Circle had more than sufficient
opportunity to comply with the Cogdell mandate. See Reno Auto
Sales, supra, 243 N.J. Super. at 630.
Moreover, the record itself indicates Circle's knowledge of
the party-joinder rule. Circle's brief in support of summary
judgment is dated October 13, 1989. In particular, the pleadings
of Masward II's suit against Thomas DeFelice in his individual
capacity were filed in the fall of 1989. Masward II's complaint
was filed on October 10, 1989 and the last responsive pleading,
Thomas DeFelice's amended answer to the complaint, was received
by the court on August 1, 1990. Notably, DeFelice's amended
answer incorporated Cogdell's rule of mandatory party-joinder.
The twenty-sixth separate defense states that the plaintiffs are
barred from recovery for failure to include the "mandatory
joinder of all parties in the within litigation."
Generally, an attorney's conduct in relation to the
processing of claims is imputed to the client. In re Matter of
Roy,
142 N.J. Super. 594, 599-601 (App. Div.), certif. denied,
71 N.J. 504 (1976). Thus, an attorney's failure to join a claim or
a party in a legal proceeding usually bars the client from later
bringing that claim.
Under Rule 4:50-1, however, a court may relieve a party from
a final judgment for "mistake, inadvertence, surprise, or
excusable neglect . . . or [for] any other reason justifying
relief from the operation of the judgment or order." R. 4:50-1(a), (f). The rule "'is designed to reconcile the strong
interests in finality of judgments and judicial efficiency with
the equitable notion that courts should have authority to avoid
an unjust result in any given case.'" Baumann v. Marinaro,
95 N.J. 380, 392 (1984) (quoting Manning Eng'g, Inc. v. Hudson
County Park Comm'n,
74 N.J. 113, 120 (1977)).
Excusable neglect is that carelessness "attributable to an
honest mistake that is compatible with due diligence or
reasonable jurisprudence." Mancini v. EDS,
132 N.J. 330, 335
(1993) (citation omitted). Only where a mistake of law is
reasonable and there is some justification for a lack of
determination of the correct law will the court grant equitable
relief. Demendoza v. New Jersey Transit Bus Operations, Inc.,
194 N.J. Super. 607, 614 (1984) (citing Lutz v. Semcer,
126 N.J.
Super. 288, 294 (Law Div. 1974). Mere ignorance of the law,
however, is not a sufficient basis to excuse compliance with the
requirements of an established rule of law, especially when that
ignorance is premised on the failure of the attorney to look up
the relevant legal principle. Lutz, supra, 126 N.J. Super. at
297; see DiTrolio, __ N.J. at __ (slip op. at 27).
Clearly, plaintiff has no justification for neglecting to
ascertain that the entire controversy doctrine would bar a
subsequent action against its attorneys and accountants for
malpractice. Wasserman's testimony indicates Circle was notified
of the potential professional malpractice claims during the
pendency of the litigation. Wasserman also testified that he
informed DeFelice that any malpractice action should be brought
with the Masward II litigation. Whether plaintiff's decision not
to bring the malpractice claims then was based on a desire to
maintain the representation of Wasserman, who had indicated he
would resign from the case should Circle choose to sue GH & C
because of a conflict, or other personal or tactical
considerations is of no significance. The fact remains that
Circle failed to bring the malpractice action at the moment when
the trial court was already involved in determining
responsibility for the mistaken calculation, and now asks this
Court to allow for a relitigation of that very issue with respect
to a new defendant. Such clear disregard of our rules of joinder
cannot be countenanced in the name of equity and fairness. There
is "nothing in the circumstances of the case or considerations of
fairness to justify depriving these defendants of the benefit of
a rule that . . . advances the goals of judicial economy and
efficiency." Cogdell, supra, 116 N.J. at 28-29 (Clifford, J.,
dissenting).
Plaintiff is barred by the entire controversy doctrine from bringing its malpractice claim against defendants. The judgment of the Appellate Division is affirmed.
CHIEF JUSTICE WILENTZ and JUSTICES POLLOCK, GARIBALDI, and
COLEMAN join in JUSTICE HANDLER's opinion. JUSTICE STEIN filed a
separate dissenting opinion. JUSTICE O'HERN did not participate.
SUPREME COURT OF NEW JERSEY
A-
144 September Term 1994
CIRCLE CHEVROLET COMPANY,
a New Jersey Corporation, and
THOMAS J. DEFELICE, SR.,
Plaintiffs-Appellants,
v.
GIORDANO, HALLERAN & CIESLA,
a Professional Corporation,
Defendant-Third-Party
Plaintiff-Respondent,
v.
PETRICS, MESKIN, NASSUAR & DAMBACH,
ACCOUNTS AND AUDITORS,
Third-Party
Defendant-Respondent.
STEIN, J., dissenting.
I agree with the Court's determination that attorney-malpractice claims are not exempted from the entire-controversy
doctrine. However, because Circle Chevrolet Company (Circle)
acted reasonably in choosing not to join as parties in the
reformation action its former attorneys who had represented
Circle in the underlying transaction, Giordano, Halleran & Ciesla
(GH & C), principles of fairness dictate that the doctrine should
not apply in this case.
This Court has recognized that "justice is the polestar [of our judicial system] and our procedures must be moulded and applied with that in mind." New Jersey Highway Auth. v. Renner, 18 N.J. 485, 495 (1955); see also Handelman v. Handelman, 17 N.J. 1, 10 (1954) (stating that "rules of procedure were not designed to create an injustice and added complications"). Accordingly, we have consistently held that "the paramount policies of our law require * * * that the plaintiff be afforded an opportunity to have the claim adjudicated on the merits." Crispin v. Volkswagenwerk, A.G., 96 N.J. 336, 338 (1984); see also X-L Liquors, Inc. v. Taylor, 17 N.J. 444, 454 (1955) (stating that dismissal pursuant to statute of limitations "would effectively defeat the plaintiff's action without any determination whatever on the ultimate merits--a result wholly inconsistent with the principles underlying our new judicial structure"). That overarching judicial policy is reflected by Rule 1:1-2, which provides that any Rule may be relaxed "if adherence to it would result in an injustice." See also ADCO Assocs. v. Admiral Corp., 165 N.J. Super. 437, 440 (App. Div. 1979) ("[Rule 1:1-2] confers general power to relax any rule of practice if adherence to it would result in injustice.").
"The joinder requirements of the entire controversy doctrine are designed to achieve economy in litigation by avoiding the waste, inefficiency, delay and expense of piecemeal and fragmented litigation." Cafferata v. Peyser, 251 N.J. Super.
256, 261 (App. Div. 1991); see Cogdell v. Hospital Ctr.,
116 N.J. 7, 15 (1989). However, in our application of that doctrine, we
have "proceed[ed] on a step-by-step basis recognizing that the
doctrine is one of judicial fairness and will be invoked in that
spirit." Crispin, supra, 96 N.J. at 343. "[T]he doctrine must
be invoked flexibly and sensibly." Id. at 352 (Handler, J.,
concurring); see also Cogdell, supra, 116 N.J. at 23 (stating
that "party fairness is critical in the application of the entire
controversy doctrine"). In addition, "[i]t must be noted too
that the limits of a policy favoring mandatory joinder of claims
and nonparties with an interest in the controversy that is the
subject of the litigation are reached when the joinder would
result in significant unfairness." Crispin, supra, 96 N.J. at
354 (Handler, J., concurring). Because the entire-controversy
doctrine is fundamentally predicated on a principle of fairness,
we have been cautious not to "convert the entire controversy
doctrine from an equitable device into a trap for the
unsuspecting." Cafferata, supra, 251 N.J. Super. at 263.
Despite the commendable purposes of the entire-controversy doctrine, the unique factual circumstances present in this case suggest that strict adherence to the doctrine would be unfair. Given the state of the law in August 1990, when the reformation litigation was eventually tried, whether Circle's cause of action
against its former attorneys had accrued was unclear. For Circle
to have assumed at that time that any legal-malpractice claim it
might have had against GH & C would not have accrued until either
the case underlying the malpractice claim was disposed of on
appellate review, or the time to appeal expired, would have been
entirely reasonable. An attorney who had surveyed the national
case law in 1990 concerning legal-malpractice actions would have
found that many jurisdictions subscribed to the view that the
client was not injured, and therefore his or her claim against
counsel did not accrue, until the plaintiff's underlying case was
unfavorably disposed of on appeal. See, e.g., Woodruff v.
Tomlin,
511 F.2d 1019, 1021 (6th Cir. 1975); Bowman v. Abramson,
545 F. Supp. 227, 231 (E.D. Pa. 1982); Amfac Distribution Corp.
v. Miller,
673 P.2d 792, 794 (Ariz. 1983); Haghayegh v. Clark,
520 So.2d 58, 59 (Fla. Dist. Ct. App. 1988); Diaz v. Piquette,
496 So.2d 239, 240 (Fla. Dist. Ct. App. 1986), review denied,
506 So.2d 1042 (Fla. 1987). That perception was subsequently
confirmed by the Appellate Division in Grunwald v. Bronkesh,
254 N.J. Super. 530, 538 (1992) ("Postponing the accrual of a legal
malpractice cause of action until appellate disposition of or the
expiration of the time to appeal the case underlying the
malpractice claim is consistent with decisions in many other
jurisdictions.").
Application of the entire-controversy doctrine, "as in the
case of all other preclusionary doctrines, * * * requires, as a
matter of first principle, that the party whose claim is being
sought to be barred must have had a fair and reasonable
opportunity to have fully litigated that claim in the original
action." Cafferata, supra, 251 N.J. Super. at 261. A plaintiff
is denied a fair and reasonable opportunity to litigate a claim
when the entire-controversy doctrine is applied to bar that
claim, especially when that claim arguably is not ripe for
judicial review at the time that it theoretically should have
been asserted.
Surely, Circle could not reasonably have forecast that this
Court, thirteen months after the Appellate Division's decision in
Grunwald, would reverse and determine instead that "the statute
of limitations begins to run * * * when the client suffers actual
damage and discovers * * * the facts essential to the malpractice
claim,"--an injury that could accrue prior to the completion of
the appellate process. Grunwald v. Bronkesh,
131 N.J. 483, 494
(1993). But even if Circle could have predicted the law as it
was to be, whether Circle would have known that it had suffered
actual damage attributable to GH & C's conduct until such time as
it was inadequately compensated in the underlying litigation is
another highly debatable issue.
"A legal-malpractice action derives from the tort of
negligence. Therefore, a legal-malpractice action accrues when
an attorney's breach of professional duty proximately causes a
plaintiff's damages." Grunwald, supra, 131 N.J. at 492 (citation
omitted). Because this Court has "conclude[d] that the discovery
rule applies in legal-malpractice actions[,] the statute of
limitations begins to run only when the client suffers actual
damage and discovers, or through the use of reasonable diligence
should discover, the facts essential to the malpractice claim."
Id. at 494. Thus, an injured party's knowledge concerning the
origin and existence of his or her injuries involves two
elements: injury and fault. Id. at 492-93. Leaving aside the
determination whether GH & C was at fault, whether Circle in fact
was injured by GH & C at the time it brought the reformation
action is less than clear. Rather, on this record, Circle was
reasonable in not filing suit against GH & C based on the
assumption that both the excessive rent payments and the attorney
fees expended in the reformation action would be recovered in
that action.
The