Stanley v. Trinchard, 579 F.3d 515, 51 Bankr. Ct. Dec. 278 (5th Cir. 2009)

Brief Summary
Bankruptcy trustees who wish to pursue causes of action on behalf of debtors’ estates are not governed by a state’s shorter statute of repose, but rather by the federal bankruptcy law’s two-year period.

Complete Summary
Bankruptcy trustee Stanley (“Trustee”) brought a legal malpractice claim on behalf of a bankruptcy debtor’s estate against law firm Trinchard & Trinchard LLC 13 months after the debtor knew or should have known of his legal injury. The district court granted Trinchard & Trinchard’s summary judgment because the Trustee’s claim was barred by Louisiana’s one-year peremptive period, which is the civil law equivalent of a statute of repose in a common law jurisdiction. 

Bankruptcy Code § 108(a) allows a trustee to commence an action on behalf of a debtor’s estate within the period allowed by state law for such an action, or within two years after the order for relief, whichever is later. Louisiana law allows a party to bring an action for legal malpractice under two statutes, a statute of limitations and a period of peremption. The former is a period in which an action may be commenced, while the latter represents the lifespan of a substantive right. On the Trustee’s appeal, the question before the Court was whether Louisiana’s one-year peremptive statute was exempt from Bankruptcy Code § 108 because of its status as a statute of repose.  

Trustee argued that the time period established under Bankruptcy Code § 108(a) preempted all time period limitations under state law, not just statutes of limitation. Trinchard & Trinchard, however, argued that Bankruptcy Code § 108(a) was limited to statutes of limitations; otherwise, the Bankruptcy Code would impermissibly resurrect substantive rights otherwise extinguished by state law.

The Fifth Circuit agreed with Trustee and reversed. The Court noted the purpose of the Code is to afford trustees extra time to assess and pursue the estate’s assets. Furthermore, Congress drew no distinction between the state periods of limitation and repose governing time limits for filing suit. Thus, the Fifth Circuit held that Bankruptcy Code § 108(a) extends Louisiana’s legal malpractice peremption period.  

Significance of Opinion
This opinion addresses a matter of first impression on appeal, and lawyers and insurers in matters with statutes of repose that would expire during the two-year bankruptcy limitations period should take note of the holding. Although statutes of repose, such as Louisiana’s peremptory period, are generally not subject to extension, this opinion creates a substantial exception to that rule.

This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.

REGISTER NOW for the Ninth Annual Legal Malpractice & Risk Management Conference

March 3-5, 2010
The Westin Chicago River North Hotel
320 North Dearborn Street
Chicago

Attend the industry's premier annual event focused on current and important developments in the law and litigation of malpractice claims, legal malpractice insurance and risk management strategies. Each conference panel examines recent case law and significant developments throughout the last year. One and one-half days will be devoted to legal malpractice (March 3-4), and one and one-half days will be devoted to risk management (March 4-5).

Earn up to 15 hours of CLE credit, including up to 6.50 ethics credit!

Conference Topics

Legal Malpractice Sessions (March 3-4)

• Standing to Sue, Privity and Duty of Disclosure
• Significant Developments in Litigating Legal Malpractice Claims
• What's Your Little Secret? They Want to Know
• Judgmental Immunity — A Modern Look at the Legal Profession's Oldest Defense 
• Insurance Coverage Update: The Year in Review – Prior Knowledge Redux and the Definition of Professional Services
• 2009 LMRM Case Updates and Statutory Causes of Action
• Stump the Panel

Legal Malpractice/Risk Management Cross-Over Sessions (March 4)

• The Insurance Marketplace and Considerations
• Who is the Client and Standing to Sue – Successor Entities, Affiliates and Subsidiaries
• Advance Conflict Waivers, Screening and How to Do It

Risk Management Sessions (March 4-5)

• The General Counsel Forum
• Suits for Fees/Mandatory Fee Arbitration
• Risk Management Considerations in Restructuring and Winding-Up Law Firms
• Managing Client and Law Firm Data, and What Gives When Client and Firm Policies Conflict?
• On the Horizon – The Slow Motion Revolution

Registration Fees

$1,300 for the Entire Conference - March 3-5
$925 for the Legal Malpractice Sessions Only - March 3-4
$925 for the Risk Management Sessions Only - March 4-5

Discounts (maximum 15% discount per registration)

Returning registrants receive 5% off the conference price
Multiple registrants receive 15% off when two or more colleagues from the same company register for the conference 

For more information, please visit www.LMRM.com or click here to Register Now!

To speak with the Conference Planner, Katherine McCormack, please call 312-704-3329.