Terms of Sale commonly include an “escape clause,” which gives the buyer a way out of a contract if unplanned circumstances arise. It is often a lawyer’s obligation to ensure that this clause is present in a contract, because if the lawyer fails to include one, this could result in malpractice. However, in order to receive recovery from the malpractice, the aggrieved party must promptly bring a lawsuit. The Longs family of Long’s Preferred Products, Inc. in Alexandria, LA, learned this the hard way when they sued their lawyer in the Ninth Judicial District Court Parish of Rapides for not including an escape clause in a stock purchase.
Charles Elliot represented the Longs in a stock purchase of $500,000 worth of shares from Linda Minton. On March 28, 2011, both parties agreed to the Terms of Sale and on April 29, 2011, the Longs signed the $500,000 promissory note that promised payment to Linda Minton. The Longs relied on receiving loan approval in order to pay on this note, but on August 11, 2011, the Longs’ loan was denied. Twelve days later, they discovered that they were sued to enforce the promissory note. The Longs hoped that an escape clause in the Terms of Sale would relieve them from the duty to pay; however, their lawyer, Elliot, failed to include one.
In May 2013, the Longs spoke with a different lawyer, and on April 28th, 2014, the Longs sued Elliot for malpractice in the Ninth Judicial District Court. The District Court ruled that this lawsuit was perempted, which means that the Longs lost their right to bring a lawsuit.
Under Louisiana Law, “[p]eremption is a period of time fixed by law for the existence of a right.” La. C.C. art. 3458. Depending on the type of lawsuit, a party only has so long to sue from the date of injury. If a party waits too long, then this right is perempted. For lawyer malpractice cases, individuals have one year from the date that he or she learned, or should have learned, of the alleged malpractice, as long as this date is within three years of when the alleged act occurred. La. R.S.9:5605.
The District Court found that the peremptive period began on March 28th, 2011, when the Longs agreed to the Terms of Sale. The Longs filed their lawsuit more than three years after this date. The Longs argued that the alleged act occurred on April 29th, 2011, when they signed the promissory note, three years minus one day from when they filed their lawsuit. Additionally, the Longs claimed that they did not know about the malpractice until consulting a lawyer on May 24th, 2013, less than a year before their lawsuit. The Longs then appealed to The Louisiana Third Circuit Court of Appeal, which affirmed the District Court’s ruling.
For peremptory review cases, the Court of Appeal must decide only if the District Court made a manifest error in its conclusion. Lomont v. Bennett, 172 So.3d 620 (La. 2015). The Third Circuit found that the Longs knew of the malpractice in August of 2011 when their loan was denied and they were forced to pay on the promissory note. As opposed to taking any legal action at this point, the Longs instead began paying $3,333.33 a month, which they continued to pay. As a result, they failed to bring a lawsuit within one year of August 2011, and thus the lawsuit was perempted.
Even though the Court of Appeal and the District Court came to different conclusions of when the alleged malpractice occurred, in both scenarios, the lawsuit was perempted; therefore, the ruling was affirmed. When filing any lawsuit, such as a malpractice claim, it is important to not delay so that the peremptive period does not pass.
Additional Sources: LONG v. ELLIOT
Written by Berniard Law Firm Blog Writer: Strider Kachelein
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