Oregon Supreme Court Confirms Outside Deadline for Legal Malpractice Claims

On November 28, 2023, the Oregon Supreme Court confirmed the existence of an outside deadline for pursuing legal malpractice claims apart from the statute of limitations. At issue in Marshall v. Pricewaterhouse Coopers, 371 Or. 536 (2023) was the applicability of a statute of repose to actions in which clients alleged that their lawyers’ bad advice had caused them to expend over $2 million in legal fees defending an Internal Revenue Service claim for back taxes and bear exposure of approximately $20 million in back taxes, penalties, and interest.

The law firm rendered the allegedly negligent advice in 2003, and the clients did not file their action against the law firm until 2017.Despite the passage of some 14 years, the statute of limitations apparently did not bar the claim because, as the Court noted, statutes of limitation generally limit the time a party has to initiate an action once a claim has accrued, which generally occurs when the injured party knows or should know that it has been injured. (Shasta View Irrigation Dist. V. Amoco Chemicals, 329 Or. 151,161 (1999))

The law firm in the Marshall matter argued that, even if the discovery of the alleged error did not occur until many years after the advice was rendered, a statute of repose bars the claim. In general, statutes of repose reflect "the public policy of allowing people, after the lapse of a reasonable time, to plan their affairs with a degree of certainty, free from the disruptive burden of protracted and unknown potential liability." (Johnson v. Star Machinery Co., 270 Or. 649, 701 (1974)) Although Oregon (like many other states) does not have a statute of repose that is intended to apply specifically to legal malpractice claims, the law firm asserted that a more general statute of repose, ORS 12.115 (1), covered the alleged malpractice here. The statute provides that "[i]n no event shall any action for negligent injury to person or property of another be commenced more than 10 years from the date of the act or omission complained of." In considering whether this statute applies to legal malpractice, the Oregon Supreme Court noted there was no question that, in this matter, the law firm’s conduct occurred more than 10 years before the clients commenced their action and the malpractice claim constitutes an “action for negligent injury.” Thus, the only remaining issue was whether the action constituted an action for negligent injury “to person or property.” (Emphasis added).

After reviewing the text of the statute, and considering the context and legislative history, the court concluded that “the legislature did not intend to spare actions for negligent injury to economic interests from the ultimate cut-off date” under ORS 12.115 (1) for "any action for negligent injury to person or property." (371 Or 536, ___). The Supreme Court rejected the notion that injury to “property” in this context must involve physical damage to existing tangible property or relate to the ownership and disposition of property. The Supreme Court concluded that the trial court had correctly rejected the clients’ argument that a claim against their lawyers for purely economic losses was not subject to the 10-year repose statute. The Supreme Court remanded the case to the Court of Appeals, which had reached the opposite conclusion (Marshal lv. PricewaterhouseCoopers, 316 Or. App. 416 (2021)), for consideration of further arguments raised by the law firm’s clients.

The decision by the Supreme Court was 5-2, with the two dissenting justices writing separate opinions addressing the manner in which “property” is defined under ORS 12.115 (1). For different reasons, the dissenting justices concluded that the statute as currently worded cannot be read to include purely economic interests within the scope of “property.”

This recent decision by the Oregon Supreme Court highlights the fact that some states have created a statute of repose to supplement the more commonly recognized statute of limitations. The Marshall v. PricewaterhouseCoopers decision recognizes a statute of repose in Oregon for legal malpractice actions that may or may not have been in the legislature’s view when it passed the statute of repose applicable to negligence to person or property. By their nature, statutes of repose are not tied to the discovery of an attorney’s alleged error or the timing of actual injury to the client. Some statutes of repose, such as ORS 12.115 (1), cut across various types of negligence claims, while other statutes of repose apply to specific categories of claims (e.g., construction defect: ORS 12.135).

Practitioners defending or prosecuting legal malpractice claims in a new jurisdiction will wish to consult state-level authority relating not only to the statute of limitations but also, potentially, a statute of repose. If the state statutes do not specifically address deadlines applicable to legal malpractice actions, practitioners will wish to familiarize themselves with statutes that may govern even if they do not specifically identify legal malpractice claims as being within their purview. Although the statute of repose deemed applicable to the law firm clients discussed above (ORS 12.115 (1)) was enacted in 1967, it was not until last month that the Supreme Court had occasion to confirm its applicability to legal malpractice actions involving purely economic loss (the type of loss in most legal malpractice actions), after the Oregon Court of Appeals had reached the opposite conclusion.