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Iowa Court of Appeals Holds That Divorce Malpractice Claim Accrued On Date of Divorce Decree

One of the more common issues that arise in a legal malpractice case is when did the claim arise? In Schwab v. Zarhadnik, 18-1118, the Iowa Court of Appeals held that a divorce malpractice claim accrued on the date of the divorce decree. Plaintiff alleged that her attorney failed to pursue certain claims in the divorce proceeding, including a medical malpractice claim filed by husband after the divorce. The Court of Appeals held that Schwab had no claim and that, even if she did have a claim. the claim was barred by the five-year statute of limitations for legal malpractice. The discussion:

In order to determine when Schwab’s damages occurred, we must determine how Schwab was injured. Settlement payments received before dissolution are marital property. In re Marriage of Schriner, 695 N.W.2d 493, 497 (Iowa 2005). “The proceeds of a personal injury claim are divided according to the circumstances of each case.” In re Marriage of Plasencia, 541 N.W.2d 923, 926 (Iowa Ct. App. 1995) (citing In re Marriage of McNerney, 417 N.W.2d 205, 206 (Iowa 1987)). Settlement proceeds do not automatically belong to either party. McNerney, 417 N.W.2d at 208. Rights not specifically preserved in the dissolution decree are forfeited. Iowa Code § 598.20 (2009); see also Plasencia, 541 N.W.2d at 926. Moreover, benefits and proceeds received after a divorce is final are the separate property of the injured spouse. In re Marriage of Schmitt, No. 15-1207, 2016 WL 3556462, at *4 (Iowa Ct. App. June 29, 2016). We have held a spouse does not have “a right to any part of a future recovery made after the dissolution.” In re Marriage of Jervik, No. 15-0766, 2016 WL 5930425, at *7 (Iowa Ct. App. Oct. 12, 2016).

Even if we found Schwab had a right to a part of Musel’s recovery and found Zahradnik violated a duty to Schwab in failing to preserve that right, the statute of limitations would bar Schwab’s claim against Zahradnik. The dissolution decree was entered in 2009, more than five years before Schwab commenced this action on January 5, 2017. Therefore Iowa Code section 614.1(4) bars Schwab’s action unless a legal doctrine tolls the limitations period. See Skadburg, 911 N.W.2d at 793.

Schwab argued that she did not discover the injury until several years after the divorce decree. The court rejected the application of the discovery rule to her case because Schwab had sufficient knowledge that she had a claim on the date of the divorce decree.  The court held that Schwab had no right to any portion of husband’s medical malpractice recovery. Additionally, the claim was time-barred because Schwab was aware of sufficient facts for her to have filed the claim when the divorce decree was entered.

Schwab seeks to apply the discovery-rule exception, which tolls the limitations period until the plaintiff has actual or imputed knowledge of all the elements of the action. See id. at 794. As the party attempting to avoid the limitations period, Schwab has the burden of demonstrating any exception. See id. at 793. When a plaintiff has information alerting “a reasonable person of the need to investigate, the plaintiff `is on inquiry notice of all facts that would have been disclosed by a reasonably diligent investigation.'” Id. at 794 (citation omitted). The plaintiff’s cause of action accrues when the plaintiff has imputed knowledge, i.e., knows or should have known sufficient facts to recognize the problem existed. See id. at 795.

Schwab asserts there remains a genuine issue of material fact precluding summary judgment on her legal-malpractice claim because Musel informed her he was not going to pursue a medical-malpractice action and she only became aware this was not true when she read of his settlement in 2013. However, it is undisputed Schwab was aware Musel had suffered a personal injury during their marriage. Schwab knew of the possibility of Musel’s medical-malpractice action, even if she did not know it would be pursued. Schwab consented to a dissolution of marriage decree that did not preserve any claim with respect to Musel’s personal injury. Schwab knew at the time the decree was entered that it did not preserve for her any rights to any future recovery by Musel. While the amount of the potential damages was not discovered until 2013, Schwab was on inquiry notice from the time the decree was filed—any claim accrued at that time.

Schwab had no right to any recovery Musel obtained following the dissolution of their marriage. Iowa Code § 598.20; see also Jervik, 2016 WL 5930425, at *7. Because she had no right to Musel’s post-dissolution recovery, Schwab was not injured upon discovery of Musel’s settlement of his medical-malpractice claim.[3]The marital property division, including the parties’ respective rights and obligations, occurred at the time of dissolution in 2009, and Schwab at that time knew sufficient facts to put her on inquiry notice and have imputed knowledge of her potential claim. Without the parties agreeing otherwise, Schwab was not injured when Musel settled his malpractice claim, and any claim arising from her lack of a right to a portion of his settlement accrued at the time of the dissolution decree.

The take-away point is that the claim for malpractice usually accrues when the court enters judgment in the underlying case. So the time started to run when the divorce decree was entered.

If you have a question about the statute of limitations for a potential legal malpractice claim, please call me to discuss it.

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