Feddersen v . Garvey, et a l . CV-03-323-JD 01/24/05 P UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Frederick Feddersen

v. Civil N o . 03-323 JD Opinion N o .

Carolyn S . Garvey and Douglas, Leonard & Garvey, P.A.

O R D E R

Frederick Feddersen brings a legal malpractice claim against

Carolyn S . Garvey and the law firm of Douglas, Leonard & Garvey,

P.A., arising from their representation of him during his divorce

proceedings. Garvey and the law firm move for summary judgment

on the ground that Feddersen’s claims are barred by the statute

of limitations. Feddersen objects.

Background

Attorneys Charles Douglas and Carolyn Garvey and the firm

that preceded Douglas, Leonard & Garvey, P.A., represented

Frederick Feddersen in his divorce from Shelley (Cannon)

Feddersen between the fall of 1993 and July of 1995. During that

time, Feddersen’s company, FMT Corporation, was involved in

patent litigation with both Nissei Corporation and Constar

Corporation. FMT received a judgment in the amount of $3.5

million in the Nissei case after years of litigation and great expense to the company, but Nissei appealed the judgment. The

Constar case remained pending, although developments in the case

were favorable to Feddersen.

Feddersen and Cannon signed a property stipulation in

December of 1994. They agreed that Cannon would waive her

interest in any proceeds from the Constar case in exchange for a lump sum payment. Because Feddersen did not have enough money on

hand to pay the agreed amount, the parties also agreed, as part

of the divorce stipulation, that he would pay when Nissei paid

FMT, making the divorce stipulation contingent on the payment of

the Nissei judgment. The stipulation was filed in escrow with

the court pending payment of the Nissei judgment. Counsel for

Feddersen and Cannon were granted several extensions of time,

delaying the final divorce hearing while they waited for the

Nissei judgment to be paid, which would finalize the property stipulation. A later request for a stay was denied, however, and

the court scheduled a contested hearing which, after

continuances, was scheduled for July of 1995.

In April of 1995, the Constar case unexpectedly settled for

$11 million, to be paid in installments. On May 3 1 , 1995, FMT

received the first installment payment of $5 million. The Nissei

judgment still had not been paid, and it was not paid until

several months later. Feddersen’s attorney, Charles Douglas,

2 wrote to the court that the “contingency” in the parties’

stipulation had occurred and asked that the case be scheduled

immediately for an expedited uncontested final hearing.

Feddersen’s attorneys sent Cannon’s attorney a check for the

stipulated amount, without disclosing that the Constar case had

settled and that the Constar settlement, rather than the Nissei judgment, was the source of the money paid to Cannon.

Feddersen’s other attorney, Carolyn Garvey, prepared

Feddersen’s financial affidavit for the final hearing. The

affidavit showed the value of FMT Corporation as of December 3 1 ,

1992, because Garvey thought the parties had agreed that

valuation would be used. The affidavit represented that a full

disclosure had been made of all of Feddersen’s assets, although

no disclosure was made of the Constar settlement. The parties’

stipulation, which had been signed in December of 1994, was approved by the court, and the final divorce decree issued on

July 1 4 , 1995.

Three years later, Cannon, now represented by a new

attorney, Patricia Murphy, petitioned for review of child

support. Carolyn Garvey withdrew from representing Feddersen in

May of 1998, and Attorney Steven Grill filed an appearance on his

behalf. The trial on the child support petition and other issues

was scheduled for March 2 3 , 1999. As part of discovery produced

3 in that proceeding, Cannon’s attorney learned just weeks before

trial of the undisclosed Constar settlement, that the value of

FMT Corporation stated in Feddersen’s affidavit was the value in

1992 rather than 1995, and that Feddersen’s income had been

considerably greater than he had indicated in his affidavit.

Cannon’s lawyer, Murphy, told Feddersen’s lawyer, Grill, that these were significant issues. During trial, in a chambers

conference, Murphy raised the issue of whether the circumstances

of the parties’ divorce stipulation violated the requirements of

the New Hampshire Supreme Court’s decision in Shafmaster v .

Shafmaster,

(1994), and indicated that she would

file a motion to set aside the property settlement if the parties

did not settle the child support issue. Because of the

“Shafmaster” issue, the marital master, Peter Bourque, halted the

trial to give the parties an opportunity to mediate. After the trial was suspended, Grill told Feddersen that

Murphy was considering filing pleadings to overturn the divorce

property settlement because the Constar settlement had not been

disclosed. Grill described the problem as a “Shafmaster” issue.

Feddersen immediately called his former attorney, Carolyn Garvey,

who told him that all disclosures required by law had been made

and that Cannon had waived her interest in the Constar case.

Garvey told him that a motion to set aside the property

4 settlement would not be successful. Grill was upset that

Feddersen had called Garvey about the issue.

Grill sent Feddersen a letter dated March 2 6 , 1999, that

outlined his review of the divorce case, noting that the

affidavit, filed in 1995, used Feddersen’s 1993 income, the 1992

value of FMT, and failed to disclose the Constar settlement. He wrote, “You should also be aware that it was Chuck Douglas (or

Carolyn Garvey of his office) who prepared the Financial

Affidavit that you submitted to the Court in connection with the

final hearing approving the Permanent Stipulation.” Def. Ex. 5

at 0643. Grill stated that the affidavit filed was not a

“current affidavit and therein lies the problem. The bottom line

is that this is a complicated and potentially very dangerous

issue for you.” Id. at 0644. He strongly recommended that

Feddersen settle the matter with Cannon. Grill also reiterated his concern about Feddersen having contacted Garvey on his own,

and he warned Feddersen that “having been alerted to the

potential problem with your June 1995 Financial Affidavit,

Attorney Douglas may attempt to protect himself against any

potential malpractice claim.” Id. Grill filed a motion to

withdraw as counsel in April of 1999, before Murphy filed the

motion to set aside the property settlement.

Feddersen met with Attorneys Matthew Cairns and Garry Lane

5 of the Ransmeier & Spellman law firm on April 1 4 , 1999.1

Feddersen described his understanding of the problem with the

property settlement to them. He said that his former wife was

challenging the property settlement on the ground that he had not

disclosed information about the Constar settlement and had used

the 1992 value of FMT in his 1995 financial affidavit. With

regard to the 1992 value, he explained that he did not know why

Garvey put that reference in the affidavit. He also said that

Grill had told him that those omissions were fraud and that he

tried to explain it was not fraud because when he signed the

stipulation the representations were true. Cairns did not raise

or discuss the possibility of a malpractice suit against Douglas,

Garvey, or their firm, while he represented Feddersen.

Murphy filed a motion to set aside the divorce decree and

permanent stipulation on May 1 4 , 1999. Cairns, on behalf of

Feddersen, sent copies of the motion to Feddersen and Garvey.

Cairns’s cover letter to Garvey explained that Feddersen had

suggested contacting her to confirm his recollection that the

Nissei and Constar settlements were both discussed in reaching

the stipulation in December of 1994. Cairns also wrote that

Cannon’s divorce attorney, Ronna Wise, had told Cannon’s present

1 The meeting was recorded, at Feddersen’s request, and was later transcribed.

6 attorney, Patricia Murphy, that she, Wise, had no idea of the

magnitude of the value of the patent settlements at the time of

the divorce. Cairns filed an objection to the motion but also

submitted an offer to Murphy proposing to settle all of the

pending issues between Cannon and Feddersen by assigning twenty

percent of any settlement amount or judgment FMT received in its then pending patent litigation with another company, Aoki, less

attorneys’ fees and costs. Cairns and Feddersen believed the

offer was worth in the range of two million dollars. The offer

was eventually rejected. Cairns withdrew from the case in

December of 1999.

Feddersen then retained Attorney William Brennan to

represent him. The motion to set aside the divorce decree and

permanent stipulation was litigated separately from the child

support issues that had begun the proceedings in 1998. A hearing was held on the motion to set aside in June of 2001. Garvey

testified at the hearing that she had no obligation under

Superior Court Rule 158 or Shafmaster to disclose the Constar

settlement. Douglas’s deposition testimony was also used at the

hearing. The marital master issued his decision on September 5 ,

2001, finding that Cannon had been entitled to know about the

Constar settlement before the final divorce decree issued. The

master granted Cannon’s motion and set aside the property

7 division aspects of the final divorce stipulation. On March 1 9 ,

2003, the New Hampshire Supreme Court affirmed the decision of

the marital master.

The child support issues proceeded separately. The marital

master recommended a temporary modification of child support

which was approved in December of 2000. See In the Matter of Feddersen,

9 4 , 196 (2003). A hearing was held on those

issues in March of 2002, following which the master issued a

final modification of the child support order.

The supreme

court affirmed the modification in February of 2003. Id. at 201.

Feddersen states in an affidavit that he learned in

February of 2002 that Cannon had filed a malpractice suit against

Wise who represented her during the divorce. He also states that

he called Douglas who told him that his firm had done nothing

wrong. Feddersen alleges in his complaint that after receiving the decision from the New Hampshire Supreme Court in February of

2003, he paid Cannon $1.3 million to settle all of the issues

between them. Feddersen contacted Attorney Steven M . Latici, and

on July 2 9 , 2003, Latici filed suit on Feddersen’s behalf against

Garvey and the law firm. Garvey notified her insurance carrier

of the lawsuit on August 1 3 , 2003.

8 Standard of Review

Summary judgment is appropriate when “the pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving party

is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(c). The party seeking summary judgment must first demonstrate

the absence of a genuine issue of material fact in the record.

See Celotex Corp. v . Catrett,

1 7 , 323 (1986). A party

opposing a properly supported motion for summary judgment must

present competent evidence of record that shows a genuine issue

for trial. See Anderson v . Liberty Lobby, Inc.,

4 2 ,

256 (1986). All reasonable inferences and all credibility issues

are resolved in favor of the nonmoving party. See id. at 255.

Discussion

Feddersen alleges that Attorney Garvey and the law firm,

Douglas, Leonard & Garvey, P.C., were negligent in their

representation of him in his divorce proceeding. As a result, he

contends, he has incurred substantial legal fees in defending

Cannon’s motion to set aside their property settlement and has

had to pay Cannon an extra $1.3 million as part of the modified

property settlement. The defendants seek summary judgment on the

9 ground that Feddersen’s claims against them are time barred.

Under New Hampshire law, which applies in this diversity

case, a legal malpractice claim must be brought within three

years of the date of “the act or omission complained o f , except

that when the injury and its causal relationship to the act or

omission were not discovered and could not reasonably have been discovered at the time of the act or omission . . . .” N.H. Rev.

Stat. Ann. (“RSA”) § 508:4; Draper v . Brennan,

8 0 , 783

(1998). If the basis for the claim was not and could not

reasonably have been discovered at the time of the defendants’

act or omission, then “the action shall be commenced within 3

years of the time the plaintiff discovers, or in the exercise of

reasonable diligence should have discovered, the injury and its

causal relationship to the act or omission complained of.” RSA

508:4; see also Furbush v . McKittrick,

(2003). The plaintiff bears the burden of showing that the discovery rule

or another exception to the statute of limitations applies to his

case.

“To establish legal malpractice, a plaintiff must prove:

(1) that an attorney-client relationship existed, which placed a

duty upon the attorney to exercise reasonable professional care,

skill and knowledge in providing legal services to that client;

(2) a breach of that duty; and (3) resultant harm legally caused

10 by that breach.” Carbone v . Tierney,

, at *4

(N.H. Dec. 1 0 , 2004). In this case, if Attorney Garvey and her

firm were negligent in their representation of Feddersen as

Feddersen alleges, it appears to be undisputed that their

malpractice occurred between December of 1994 and July of 1995.

Because Feddersen did not file suit against them until July of 2003, his claims are time barred unless, as he contends, the

discovery rule applies.

Feddersen does not address the harm element of the discovery

rule. Harm, for purposes of the discovery rule, occurs when the

plaintiff incurs legal fees to address problems created by the

defendant’s alleged negligence. See Pichowicz v . Watson Ins.

Agency, Inc.,

(2001); see also Rosen Constr.

Ventures v . Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.,

(1st Cir. 2004). Therefore, Feddersen was harmed when he began paying legal fees to address the

“Shafmaster” issue which he began to d o , at the latest, when his

attorneys responded to Cannon’s motion to set aside the divorce

decree and permanent stipulation, filed in May of 1999.

With respect to the knowledge element of the rule, Feddersen

contends that he did not know and could not reasonably have known

of his former attorneys’ possible malpractice until he received

the marital master’s decision in September of 2001, setting aside

11 the property settlement portion of the divorce decree. Garvey

and the law firm argue that Feddersen knew of their alleged

negligence long before that decision issued because Attorney

Grill had warned Feddersen of the problem, that the problem was

caused by his former attorneys, and of the possibility of

malpractice, and, after those warnings, Murphy filed the motion to set aside the divorce and permanent stipulation, as Grill had

predicted.

In support of his position that a reasonable person would

not have known of the defendants’ possible malpractice until he

received the marital master’s decision, Feddersen points to the

New Hampshire Supreme Court’s decision in Shaheen, Cappiello,

Stein, & Gordon v . Home Ins. Co.,

5 , 41-42 (1998),

holding that the firm provided timely notice to its insurer of a

potential malpractice claim after receiving the court’s decision against its client. There, however, the question was not when a

reasonable person would know that he had been injured by his

attorney’s malpractice, for purposes of the discovery rule, but

when the policy required an attorney to report a potential claim

for purposes of insurance coverage.

at 3 9 . The court found

that the policy terms required insureds to use their professional

judgment as to when a claim against them was reasonably expected

and that, in the circumstances of the case, the firm properly

12 reported the possibility of a claim after receiving the court’s

decision against the firm’s client.

.

Because the decision in Shaheen involved the interpretation

of an insurance policy for purposes of determining coverage, the

analysis is not consonant with the discovery rule. The question

in Shaheen was when the firm, in its professional judgment, would reasonably have expected a claim to be brought against i t . In

contrast, for the purposes of the discovery rule, the question is

when the plaintiff knew or reasonably should have known that he

was injured because of his former lawyers’ actions. Therefore,

Shaheen does not establish a rule, as Feddersen urges, that a

reasonable client would not know he had been injured by his

attorney’s misfeasance until a court decision informed him of the

problem.

Feddersen argues that in Draper, 142 N.H. at 786-87, the New Hampshire Supreme Court adopted a rule that the date of an

adverse decision triggers the statute of limitations for a legal

malpractice case. Feddersen is mistaken. In Draper, the court

noted that the client could have been on notice of his attorney’s

negligence sooner, but that he was certainly notified by the

trial court’s decision against him, which was issued more than

three years before his malpractice suit began. Id. at 786.

Draper argued that the limitations period should be tolled until

13 the appellate process was complete, but the court declined to so

rule. Id. at 787. Therefore, the court did not establish a

triggering rule in Draper, but instead applied the usual

discovery rule principles, affirming the lower court’s decision

that the claims affected by the discovery rule were nevertheless

untimely. Feddersen also relies on the analysis in Rosen Constr.

Ventures,

. In that case, Rosen hired the law

firm, Mintz, Levin, in April of 1995 to draft a contract to

memorialize its agreement with a company, O’Donnell Sand and

Gravel, for fill to be used at a construction site in Everett,

Massachusetts, and for certain interests in a piece of property

O’Donnell owned that was close to Rosen’s site.

.

Almost a year after the contract was signed, O’Donnell claimed

that it had extinguished Rosen’s opportunity for any permanent interest in O’Donnell’s neighboring property.

. Rosen

disagreed with that interpretation of the agreement.

A new law firm brought suit on Rosen’s behalf in

Massachusetts state court in November of 1996. In April of 1998,

the court granted O’Donnell’s motion for summary judgment, and

the judgment was affirmed two months later.

Rosen then

claimed that Mintz, Levin had been negligent in drafting the

contract and in advising it on obtaining an easement from

14 O’Donnell.

The parties agreed that if the malpractice claim

accrued before September of 1996 it was time barred, but if it

accrued afterward it was timely.

.

The First Circuit framed the standard under Massachusetts

law a s : “the limitation period begins to run once a client or

former client knows or reasonably should know that he or she had sustained appreciable harm as a result of the lawyer’s conduct.”

(internal quotation marks omitted). The court found

that Rosen was harmed when it began to pay legal fees to

challenge O’Donnell’s position on the contract, leaving only the

question of when it knew or reasonably should have known of the

cause of the harm.

Relying on the doctrine of continuing

relationship, under Massachusetts law, the First Circuit

concluded that because Mintz, Levin continued to assure Rosen

that its position was correct and Rosen did not acquire actual knowledge of the cause of the harm from another source, it did

not know the cause of its harm until the state court issued its

decision.

.

Even if this court were to apply the doctrine of continuing

representation, which the New Hampshire Supreme Court has not yet

adopted, the doctrine tolls the limitation period only while the

defendant attorney continues to represent the plaintiff client or

remains actively involved in his case.

. Garvey and

15 her law firm did not represent Feddersen after July of 1995. To

the contrary, in 1998 and 1999, Feddersen was represented by

Grill who made it clear that Feddersen should not have contacted

Garvey or her firm while being represented by him and his firm.

Grill also made it clear to Feddersen that his interests were in

conflict with those of his former attorneys. After that, Feddersen was represented by the Ransmeier & Spellman firm, and

then Brennan, before he contacted Latici about the malpractice

case.

More importantly, however, the record in this case

demonstrates that Feddersen knew or should have known that

Garvey’s preparation of the financial affidavit and

representations about the permanent stipulation had caused him

harm because he was paying additional attorneys’ fees to address

those issues after the marital master suspended the trial in March of 1999. Grill told Feddersen on several occasions that he

had a serious problem because of the Shafmaster issue arising

from the affidavit prepared by Garvey and her firm. Feddersen

demonstrated his understanding of the problem in his explanation

of his case to Attorneys Cairns and Lane in April of 1999. Their

efforts to settle the case, offering a significant amount of

money, reinforced Feddersen’s understanding of the seriousness of

the problem.

16 Under these circumstances, it is undisputed that Feddersen

knew by the spring or summer of 1999 that he had been harmed by

the alleged negligence of Garvey and Douglas, Leonard, and

Garvey, P.A. Since he did not bring his malpractice action

against them until July of 2003, at least four years later, his

claim is barred by the statute of limitations. The defendants are entitled to summary judgment on both claims in the complaint.

Conclusion

For the foregoing reasons, the defendants’ motion for

summary judgment (document n o . 29) is granted on both of the

plaintiff’s claims.

The clerk of court shall enter judgment accordingly and

close the case.

SO ORDERED.

Joseph A . DiClerico, J r . United States District Judge January 2 4 , 2005

cc: Peter F. Kearns, Esquire Benjamin T . King, Esquire Steven M . Latici, Esquire

17