The “Collateral Source Rule” & How it Can Cost (or Make) You Thousands – Part I

Legal malpractice claims in Louisiana are governed by a peremption period that cannot be interrupted or suspended. La. R.S. 9:5605(A) provides that a legal malpractice claim must be brought one year from the date of the alleged malpractice, or within one year from the date the alleged malpractice should have been discovered. However, even when a claim is filed within one year of discovery, it must be filed within three years of the date of the alleged malpractice. If a party fails to assert a legal malpractice claim before the peremption period expires, the right to bring the claim is lost.

The Louisiana Supreme Court holds that “peremption commences to run in a legal malpractice case when a claimant knew or should have known of the existence of facts that would have enabled him to state a cause of action for legal malpractice.” In Crosby v. Waits, Emmett, Popp & Teich, LLC, the court recently examined the types of circumstances that should inform a plaintiff that an act of alleged malpractice occurred, which would trigger the peremptive period in which the plaintiff’s claim must be filed.

The plaintiff in Crosby owned 75% of a company and was in the process of buying out the minority stakeholder. The company was involved in litigation at the time. Initially, the minority stakeholder maintained all of the recovery and risk related to the suit. In April 2016, an attorney advised the plaintiff to accept an offer to split the recovery and risk in the suit 50/50 as part of the sale. The plaintiff then accepted the 50/50 offer. The litigation concluded after the sale, in February 2018, and resulted in an adverse judgment for which the plaintiff was responsible pursuant to the 50/50 agreement.

The plaintiff filed suit on February 12, 2019, within one year of the verdict in the underlying litigation, and claimed that its attorney committed malpractice when he advised that plaintiff accept the offer to split the recovery and risk in the suit. Specifically, it was alleged the attorney failed to examine the nature of the litigation or discover that the seller’s employees were aware the suit bore serious risk. The plaintiff’s representative testified that he did not keep track of the litigation and therefore could not have known the attorney engaged in the alleged malpractice until the jury rendered its verdict in the underlying suit.

However, the minority stakeholder testified that he knew the 50/50 offer was a bad deal for the plaintiff. Another employee testified he thought the risk of loss in the underlying suit was apparent to everyone involved. The court agreed. Based upon the evidence presented, “it should have been obvious to all concerned that the 50/50 option was favorable” to the minority stakeholder, who was adverse to the plaintiff’s interest.

The court held that the plaintiff should have known its attorney may have committed an act of malpractice when he advised it to accept the 50/50 split before the underlying litigation concluded. Accordingly, suit was not filed within one year of when the plaintiff should have known the alleged act of malpractice occurred. The plaintiff’s claims that it lacked such knowledge could not stand up to conflicting evidence. Thus, the claim was peremepted, and the plaintiff’s suit was dismissed.

Case References:

Crosby v. Waits, Emmett, Popp & Teich, LLC, 2022-0395 (La. App. 4 Cir. 11/21/22), 352 So. 3d 145.

Jenkins v. Starns, 2011-1170, p. 15 (La. 1/24/12), 85 So.3d 612, 621.

On August 28, 2015, the Louisiana Supreme Court denied a Writ Application in Leandro Carias v. Vernon A. Loren, et al. This denial signifies that the "sudden emergency" defense may be properly applied at the summary judgment level. The defense in the Carias litigation was handled by Keogh Cox attorneys Gracella Gail Simmons and Collin J. LeBlanc.

In Carias, the defendant operated his 18-wheeler traveling eastbound over the Mississippi River Bridge when, according to his testimony, a "phantom driver" abruptly entered into his lane of travel and forcefully applied their brakes. In the sliver of time allowed, the defendant sought to quickly determine if he could safely move from his lane of travel. Incorrectly, he believed that there was sufficient space in the lane to his right and impacted a truck in that lane. In turn, that vehicle rear-ended the plaintiff.

A Motion for Summary Judgment was filed and won based upon the sudden emergency defense, which provides that one is not negligent when they fail to take reasonable measures to avoid an accident when they were presented with: 1) a sudden emergency; 2) which was not of their making; and, 3) which did not allow sufficient time for deliberation. In opposition to the Motion, the plaintiff cited testimony that the defendant was "following too closely," and contended that the defendant was therefore at fault and unable to seek the protections of the defense. In response, it was argued that whether the defendant driver allowed sufficient space between his vehicle and the vehicle to the front was non-material when it was the actions of the phantom driver which exclusively created the sudden emergency.

Plaintiff appealed the grant of summary judgment to the Louisiana First Circuit. Prior to Carias, the Louisiana First Circuit had questioned whether the sudden emergency defense could ever be used at the dispositive motion stage. On this subject, the Louisiana First Circuit stated as follows in Manno v. Gutierrez, 05-0476 (La. App. 1st Cir. 3/29/06); 934 So. 2d 112, 117-118: "while we cannot say that it would never be possible to apply the doctrine on a motion for summary judgment, our research has disclosed no cases from this court that have so applied it, and by the nature of the sudden emergency doctrine, it would seem rarely appropriate on a motion for summary judgment." Nevertheless, the First Circuit upheld the Carias summary judgment finding that, unlike earlier cases, there was no conflicting testimony regarding the defendant's lack of opportunity to assess the situation or take other evasive actions.

In the Writ Application to the Supreme Court, the plaintiff cited to a "split in the Circuits" concerning whether the sudden emergency defense may be used at the summary judgment stage.　 In response, it was argued that the decades of jurisprudence following the Louisiana Supreme Court’s establishment of the sudden emergency defense in Hickman v. Southern Pacific Trans. Co., 262 La. 102, 113-114, 262 So.2d 385, 389 (1972) demonstrate that the lower courts have not struggled with this doctrine and that nothing in Hickman nor the Summary Judgment Article prevent a consideration of the sudden emergency defense through motion practice.

As a practical matter, summary judgment may still be difficult to obtain in the context of the sudden emergency defense because of the highly factual context into which the defense is often sought for application. Nevertheless, after Carias, it appears likely that there is no legal prohibition to the use of the doctrine in support of a dispositive Motion for Summary Judgment

Written by:

Gracella Gail Simmons and Collin J. LeBlanc

Can a nonresident corporation, who is not a party to a pending action, be compelled to respond to discovery in Louisiana? The Louisiana Fifth Circuit says YES. See Molaison v Cust-O-Fab Specialty Services, LLC, a case where Keogh Cox successfully handled the appeal.

The Molaison case involved an industrial accident claim where catastrophic injuries were alleged. In this context, the appellate court found that a non-resident company has sufficient presence in Louisiana to subject it to the court’s subpoena power. However, the trial court must first assess the scope of discovery to ensure it is calculated to lead to discoverable evidence and is not too onerous.

In Molaison, the owner of an industrial plant who employed the plaintiff claimed that its nonresident status prevented the parties from requiring it to respond to discovery by deposition or otherwise. The plant owner cited a Louisiana Supreme Court case that held personal jurisdiction, without more, did not subject a nonparty, out-of-state defendant to submit to discovery in this state.

But, in this case, the nonparty maintained a facility in Louisiana and employed the plaintiff. As a consequence, the Molaison court found that the Louisiana “discovery rules control” and “the trial court did not err in finding that (the company) was subject to the subpoena power of a Louisiana court.”

The contractor established it issued the subpoena to obtain evidence from the chemical plant owner that was relevant to the allocation of fault under Louisiana’s pure comparative fault tort system. Therefore, the appeal court reasoned that the nonresident plant owner was subject to the subpoena, “even if (the company) is not obligated to pay in tort by operation of workers compensation immunity.”

Of note, the court also held that the review of a discovery order that finds a nonresident company subject to the subpoena power is a final appealable judgment, as opposed to an interlocutory order subject the discretionary review on supervisory writ.

Case Reference: Molaison v Cust-O-Fab Specialty Services, LLC, 21-585 (La. App 5 Cir. 6/1/22); 343 So. 3d 866.