Momenian v. Davidson

          Argued September 20, 2017

         Appeal from the United States District Court for the District of Columbia (No. 1:15-cv-00828)

          Christopher G. Hoge argued the cause and filed the briefs for appellants.

          James N. Markels argued the cause for appellee. With him on the brief was Timothy R. Dingilian.

          Before: Pillard and Wilkins, Circuit Judges, and Silberman, Senior Circuit Judge.

          Wilkins, Circuit Judge.

         This legal-malpractice action arises from Defendant Michael M. Davidson's representation of Houshang and Vida Momenian (the "Momenians") in a lawsuit filed in D.C. Superior Court on August 18, 2009 (the "2009 Litigation"). The Momenians settled the 2009 Litigation on October 12, 2010, but allege Defendant failed to explain that the settlement meant all of their claims were fully and finally dismissed. On May 6, 2015, the Momenians (collectively with the Houshang Momenian Revocable Trust, "Plaintiffs") sued Defendant for, inter alia, his allegedly negligent settlement advice. Defendant moved to dismiss pursuant to the three-year statute of limitations, arguing that if Plaintiffs had exercised reasonable diligence investigating their claims, they would have been on notice of the cause of action at some point prior to May 6, 2012. Defendant also moved to dismiss for failure to state a claim on the merits.

         The District Court twice dismissed the complaint as untimely: first with leave to amend, and second with prejudice, concluding that Plaintiffs' amended complaint failed to allege facts sufficient to overcome the timeliness bar.

         The District Court engaged in a thorough and careful analysis of the timeliness issue. However, taking the allegations of the complaint as true and drawing all reasonable inferences in Plaintiffs' favor, we do not agree that Plaintiffs' claims are conclusively time barred at the pleading stage. Under the circumstances of this case, including the parties' attorney-client relationship, Plaintiffs' efforts to check in with Defendant about the 2009 Litigation every three months following the 2010 settlement plausibly fulfilled their duty to investigate their affairs with reasonable diligence. It is therefore plausible that Plaintiffs' claims did not accrue prior to May 6, 2012. Accordingly, we reverse and remand for proceedings consistent with this opinion.

         I.

         The following facts are taken from the operative complaint and assumed true for the purpose of reviewing Defendant's motion to dismiss. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

         The 2009 Litigation resulted from a series of real-estate transactions in Washington, D.C. In 1990, the Momenians purchased three properties from Paul and Amelia Interdonato (the "Interdonatos") with a $265, 000 promissory note (the "Note") secured by the properties' deeds of trust. In January 1998, Paul Interdonato wrote a letter to Houshang confirming the Note's remaining balance of $181, 167.24.

         Over the next four years, Plaintiffs attempted several direct and indirect payments on the Note by transferring real-estate-related assets to the Interdonatos. Specifically, they allege four such payments, in the amounts of $10, 000, $29, 999.46, $50, 000, and an unspecified amount of rent apparently collected by the Interdonatos from tenants of a property owned by Plaintiffs. On January 1, 2002, Plaintiffs and the Interdonatos entered into a Note Modification Agreement stating Plaintiffs' "total outstanding indebtedness to the Interdonatos" was $141, 898.47 and that Plaintiffs would pay that balance at a rate of $1, 300 per month. These payments continued until November 2012, amounting to $197, 600.

         Defendant filed the 2009 Litigation on the Momenians' behalf in August 2009. That complaint alleged the Interdonatos did not properly credit the four payments Plaintiffs claimed to have made on the Note. During discovery, Houshang repeatedly asked Defendant to hire an accountant or have one appointed by the court to "do an analysis and computation of the amounts which should have been credited to Plaintiffs' Note." J.A. 90. No such accountant was ever hired or appointed during the 2009 Litigation.

         On Defendant's advice, the Momenians settled the 2009 Litigation on October 12, 2010, by executing a praecipe stating "the Clerk of [] Court will dismiss with prejudice this action." J.A. 90. Pursuant to the settlement, the Interdonatos agreed to credit $15, 000 to the Note balance immediately. At the time he signed the praecipe, Houshang believed the settlement involved only one of the four claimed credits because, Plaintiffs allege, Defendant did not adequately explain that dismissal of the action "with prejudice" meant all claims were fully and finally dismissed. Houshang believed "other aspects of his claim, having to do with other amounts which he claimed should have been credited to Plaintiffs' Note, would be referred to the Court and/or a Court-appointed accountant." Id.

         Plaintiffs allege Defendant continued to represent them in the 2009 Litigation after the October 2010 settlement. In support they offer an invoice from ...