How Long Is Too Long to Wait for Malpractice Actions?
One of the most common problems facing a would-be plaintiff considering a malpractice case is when to file suit. Similarly, those that defend professionals must consider whether to move to stay proceedings if applicable. Especially with accountants and attorneys, causation and damages are difficult to calculate until the underlying matter has concluded. This means that the notoriously long legal process can often come into conflict with the statute of limitations, or create evidentiary problems. The decision is whether to wait many years for the underlying action to conclude and damages to materialize, or continue with the malpractice action in the midst of unresolved issues although the facts are still fresh in witness’s minds. In a recent Texas appellate decision, the court ruled that the case should proceed immediately.
In the underlying matter, the plaintiff sued her accountant for malpractice arising from a tax issue. However, the IRS had not yet ruled on the taxability of the subject transaction. As a result, the trial court then abated the action until either the running of the statute of limitations in 2021, or until such time as the IRS had analyzed the transaction. The accountant appealed, seeking to reinstate the case to the active list.
The appellate court reversed the trial court, finding that a four year delay is “an extraordinary length of time” for a party to wait to resolve a malpractice claim. The court commented that it was not clear if or when the IRS would act, or if any party would appeal. Waiting for these processes to end before proceeding with the malpractice case would prejudice the accountant’s ability to defend himself, and thus the matter should proceed without further delay.
This case is representative of an issue facing some professionals. On the one hand, a favorable opinion from the IRS would moot most, if not all, damages in the malpractice case. However, if there is no end in sight to the IRS review, the litigants could face years of uncertainty. Attorneys in this scenario must weigh the length of time that has passed, the potential exposure, and the likelihood of success in the underlying review before deciding whether to seek a stay of the action or press forward.