Canon v. Hirsch Law Office, P.C. (CA1 7/14/09)

In this case the court decided that it needed to figure out what “litigation” is.

Canon hired Hirsch to represent her as a creditor in a Chapter 13 bankruptcy; she had lent the debtors money and had a security interest in some property. Hirsch had the property sold at auction but it brought only a small amount. Meanwhile, the Chapter 13 was converted to a Chapter 7.  The deadline for filing an objection to discharge was December 27, 2004; Hirsch did not file one and the debtors were discharged on January 4, 2005. Canon sued him for malpractice, filing her Complaint on January 3, 2007. Hirsch moved for summary judgment, arguing the statute of limitations. The trial court granted it. The Court of Appeals reversed and remanded.

If malpractice occurs during the course of litigation, the claim does not accrue until the litigation is concluded. Canon argued that Hirsch’s malpractice occurred during the course of the Chapter 7 proceeding and that her claim did not accrue until its conclusion (the January 4 discharge). Hirsch argued, apparently (its a shame that a 28-page opinion requires some reading between the lines to figure out what one of the parties argued), that a non-adversarial bankruptcy proceeding isn’t “litigation.” (A Chapter 7 isn’t considered adversarial until the creditor files an objection, which is what Hirsch didn’t do; until then its a ministerial process that happens pretty much automatically.)

To figure out what “litigation” is, the court first spends five pages analyzing Arizona cases before deciding that they don’t answer the question. Most of this this does nothing whatever to advance the analysis – perhaps the court thought we would find its stream of consciousness entertaining – except perhaps for one case that says that “bankruptcy litigation” is “litigation.”

The court then reads the dictionary, and definitions in a few cases, and decides that “litigation” is an adversarial proceeding. The aforementioned “bankruptcy litigation” is adversarial. The court spends four pages explaining that there is a difference between adversarial and non-adversarial  Chapter 7  proceedings. That’s the explanation you got in the parentheses a couple of paragraphs ago: before creditor’s objection, not  adversarial; after creditor’s objection, adversarial.

The court therefore held that Hirsch wasn’t doing litigation for Canon.

The dissent argued that this is a “hypertechnical analysis” and that “litigation,” according to one dictionary, means to subject to legal proceedings. In response, the majority pointed out what should have been a principal point of its analysis: if you don’t have an adversarial proceeding there’s no reason to toll the statute until the end of it. The point of tolling is that you don’t know what the damage will be, or whether there will be damages at all, until after trial, appeal, etc. But Canon’s claim was dead on December 28; nothing that happened later could change that. The majority’s analysis is not hypertechnical, it just seems so because its made in such a silly, awkward way.

That isn’t the end of the opinion or the case, though, thanks to the discovery rule. In analyzing this the court first spends an inordinate amount of time deciding that the claim accrued when Hirsch missed the filing deadline (not entirely the appellate court’s fault, perhaps, as the trial court seems to have focused on the auction rather than the missed deadline). Why it bothers to do that isn’t crystal clear since it then says, wrapping things up abruptly, that since  the record doesn’t show that Canon knew or should have known of the negligence before  January 4, 2005, Hirsch can’t get summary judgment.

This question might have been clearer in the days before every bureaucrat was a “judge.” Once upon a time we called them bankruptcy referees, industrial commission hearing officers, etc. But neither they nor the lawyers who dealt with them liked that; they decided that lawyers who dealt with real judges in real courts looked down on them – which was often true, for pretty good reason. So nowadays everybody is a judge in a courtroom, and the rest of us are all “litigators,” whether we try cases in front of juries or file paperwork with some executive-branch clerk.