Rebecca Nichols v. James Swindoll and Chuck Gibson , 2022 Ark. App. 401 ( 2022 )

Cite as 2022 Ark. App. 401ARKANSAS COURT OF APPEALS
DIVISIONS II & III
No. CV-21-417
Opinion Delivered October 5, 2022
REBECCA NICHOLS APPEAL FROM THE PULASKI
APPELLANT COUNTY CIRCUIT COURT,
FIFTH DIVISION [NO. 60CV-21-1321]
V.
HONORABLE WENDELL GRIFFIN,
JUDGE
JAMES SWINDOLL AND CHUCK
GIBSON DISSENTING OPINION ON
APPELLEES GRANT OF PETITION FOR
REHEARING
KENNETH S. HIXSON, Judge
I concur with Chief Judge Harrison’s conclusion that an attorney’s duty to disclose
his1 malpractice and a client’s independent duty to investigate the accuracy of his attorney’s
assurances needs to be revisited. These two concepts have a twisted and intertwined history
that has led us to the predicament we face in the case at bar. Unknown to the client2 and
through no fault of the client, the client’s attorneys simply allowed a statute of limitations to
expire and yet, without explanation, continued to file pleadings for two more years. As a
1
This opinion uses the masculine pronoun “his” throughout instead of using “his or
her” or “his/her.”
2
Appellant, Rebecca Nichols, is sometimes referred to herein as simply “the client.”
result of the client’s unquestioned lack of knowledge that her lawsuit was dead beyond
resuscitation and the continued filing of these ineffectual pleadings, the client failed to
timely file her lawsuit for attorney malpractice within the general three-year statute of
limitations. The circuit court granted an Arkansas Rule of Civil Procedure 12(b)(6) motion
to dismiss, finding that the statute of limitations for attorney malpractice had expired, and
this court has affirmed the dismissal in the majority opinion.
The majority opinion accurately sets forth the general rule regarding the three-year
statute of limitations for attorney malpractice and further that Arkansas follows the
“occurrence” rule. However, in the case at bar, the client alleged and argued that her
attorneys fraudulently concealed their collective malpractice and that their fraudulent
concealment tolled the statute of limitations. Citing Hutcherson v. Rutledge, 2017 Ark. 359,
533 S.W.3d 77, the majority also accurately explains that “[t]he statute is tolled only when
the ignorance [of the malpractice] is produced by affirmative and fraudulent acts of
concealment. . . . Therefore, to rebut a limitations defense, a plaintiff must describe specific
fraudulent acts committed for the purpose of concealing a cause of action.” Nichols v.
Swindoll, 2022 Ark. App. 233, at 5.
Below is an excerpt from the circuit court’s order of dismissal.
7. There are no facts contained in the Plaintiff’s Complaint or Amended
Complaint sufficient to toll the running of the statute of limitation based on
fraudulent concealment. There are no facts stated showing the elements of fraud,
and there are no facts stated showing the alleged fraud was furtively planned and
secretly executed.
2
While this is elementary, for purposes of a Rule 12(b)(6) motion to dismiss, we treat
only the facts alleged in a complaint as true but not a plaintiff’s theories, speculation, or
statutory interpretation. Jenkins v. Mercy Hosp. Rogers, 2021 Ark. 211, 633 S.W.3d 758. The
majority opinion concludes, “The allegations made in Nichols’s complaint do not describe
any overt act to hide information from Nichols or any fraudulent concealment of the alleged
malpractice. Instead, the allegations make sweeping conclusions about what Nichols
believed her attorneys’ intentions were as they proceeded with litigation in the underlying
case.” Nichols, 2022 Ark. App. 233, at 6 (emphases added). Note the three italicized words.
The majority relies on the client’s description of the lack of overt conduct, the lack of hidden
information, and the lack of evidence of the attorneys’ intentions. That should raise red flags
leading one to inquire: How does a client determine whether the attorneys’ concealment was
overt or covert without the benefit of discovery? Are we suggesting that fraudulent
concealment must be overt to be actionable? That is an oxymoron in itself. Fraudulent
concealment by its very nature and definition is covert. Further, how does a client determine
that information was hidden from her by her attorney without the benefit of discovery?
Finally, how does a client ever determine the intent of her attorney’s concealment without
the benefit of discovery? Intent is, by its very nature and definition, subjective.
Recall our standard of review in these cases. In testing the sufficiency of the
complaint on a motion to dismiss, all reasonable inferences must be resolved in favor of the
complaint, and the pleadings are to be liberally construed. Jenkins, supra. Even in criminal
cases, our supreme court has often stated that a defendant’s intent or state of mind is seldom
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capable of proof by direct evidence and must usually be inferred from the circumstances.
Wright v. State, 2022 Ark. 103, 644 S.W.3d 236. Moreover, our supreme court has explained
that because intent cannot be proved by direct evidence, the jurors can draw upon their
common knowledge and experience to infer it from the circumstances. Id. The only way for
a client to gather indirect evidence (or direct evidence) and to shed discriminating light on
overt or covert concealment, hidden information, or the subjective intent of her attorneys is
to conduct meaningful discovery. However, because the circuit court granted the attorneys’
Rule 12(b)(6) motion to dismiss, the client’s ability to participate in meaningful discovery
was foreclosed.
A cursory review of the seventy-five-paragraph amended complaint reveals that the
client alleged sufficient facts to survive a Rule 12(b)(6) motion to dismiss under our standard
of review. Some excerpts from the amended complaint are set forth below.
42. Defendants maliciously, willfully, and purposefully attempted to keep Rebecca
from knowing she could no longer successfully litigate against the John Doe
defendants in order to preclude her from suing them for malpractice on or before
November 23, 2020. Defendants willfully and maliciously and purposefully
committed fraud and deceit by not informing her that she could no longer successfully
litigate against the John Does defendants as of March 22, 2018.
....
58. After March 13, 2020, Defendant Swindoll informed Rebecca that he and
Defendant Gibson had committed malpractice be failing to serve her complaint along
with the summons of Precoat Metals Corp.; however, Defendant Swindoll assured
Rebecca there was still a possibility the judge would excuse the malpractice and allow
her to continue with the lawsuit because they had technically served Precoat Metals
Corp. with notice of the lawsuit. Rebecca did not know or should have known acting
with reasonable diligence that Defendants had committed malpractice until after
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March 13, 2020, or that they could have been fraudulently hiding their malpractice
from her.
(Emphasis added.) In paragraphs 59–61, the amended complaint sets forth the details
surrounding the attorneys’ failure to serve the defendants timely. Thereafter, the amended
complaint alleges the following:
63. The above material acts of malicious, willful and purposeful negligence and
breach of fiduciary duty and material omissions were so secretly planned and executed
by the Defendants as to keep Rebecca’s claim for malpractice against the Defendant’s
hidden from her.
....
69. ...
c. [The defendants negligently] purposely and fraudulently and maliciously on March
22, 2018, and afterwards failed to advise Rebecca that by them failing to request an
extension on or before March 22, 2018, to serve the John Doe defendants, Rebecca’s
further litigation efforts were useless; had the Defendants acted with a reasonable
degree of care they would have immediately after March 22, 2018, informed Rebecca
of their malpractice to put her on notice she needed to sue them.
....
e. [The defendants negligently] purposefully and fraudulently and maliciously
continued to fruitlessly litigate Rebecca’s lawsuit against the John Doe defendants
after March 22, 2018, in order to hide their malpractice from Rebecca long enough
so she would be barred by the three-year statute of limitations from suing them[.]
These allegations are sufficient, in my opinion, to withstand a Rule 12(b)(6) motion to
dismiss. When all reasonable inferences are resolved in favor of the complaint, and the
pleadings are liberally construed, appellant did allege specific facts from which a fact-finder
could infer that her attorneys fraudulently concealed their collective malpractice and that
their fraudulent concealment tolled the statute of limitations. I would reverse the granting
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of the Rule 12(b)(6) motion to dismiss and the order dismissing the case with prejudice and
remand to the circuit court.
I turn now to my earlier statement that an attorney’s duty to disclose his malpractice
and a client’s independent duty to investigate the accuracy of his attorney’s assurances needs
to be revisited. Chief Judge Harrison’s dissent thoroughly sets forth the recent evolution of
these concepts, and it need not be repeated herein.
The majority opinion makes two statements that are pertinent to the attorney’s duty
to disclose vis-à-vis the client’s duty to investigate. First, it states, “Nichols made the
conclusory allegations that her attorneys were acting with intent to drag out pointless
litigation in the underlying case in the hopes that her right to sue them for legal malpractice
would expire before she figured out what happened.” Nichols, 2022 Ark. App. 233, at 3. The
majority opinion also states, “[T]he circuit court remarked that nowhere in the complaint
could it find ‘when the allegedly fraudulent hiding of their malpractice occurred.’” Id.(emphasis added).
The majority relies, in part, on two cases: Delanno, Inc. v. Peace, 366 Ark. 542, 237
S.W.3d 81 (2006). and Rice v. Ragsdale, 104 Ark. App. 364, 292 S.W.3d 856 (2009). I write
separately to consider, or reconsider, the appropriate scope of a client’s duty to investigate
the assurances of his own attorney. This is important because it can affect every attorney-
client relationship. At first blush, it appears that Delanno and Rice stand for the proposition
that a client must second-guess his attorney’s advice and assurances, and if he fails to
investigate that advice and the assurances, the client has not preserved his future right to
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assert a claim for attorney malpractice. However, the holdings in Delanno and Rice are not
that broad and should be isolated and distinguished.
In Delanno, supra, an attorney-malpractice case, the circuit court dismissed the claim
as time-barred. The client had received independent information from a reliable source (the
State of Arkansas Department of Finance and Administration) that his attorney’s advice was
incorrect. The Delanno court stated the following:
In the instant case, attorney Peace made a representation to Delanno that
conflicted with the information that Delanno had received from the State; at that
point, Delanno was on notice that either his attorney or the State was incorrect, but
he made no effort to contact the State to investigate the situation any further. As
stated above, if a plaintiff, by the exercise of reasonable diligence, might have detected
the fraud, he is presumed to have had reasonable knowledge of it.
Delanno, 366 Ark. at 548, 237 S.W.3d at 86. So, it is clear from Delanno that the client was
“put on notice” that he should investigate the accuracy of his attorney’s assurances only after
he received reliable conflicting information from the State of Arkansas.
Rice, supra, was also an attorney-malpractice case. The circuit court dismissed the
plaintiff’s malpractice complaint as time-barred. The circuit court’s order provided the
following in pertinent part: “Plaintiffs had an independent duty to investigate the accuracy
of Defendants’ assurance, and that their failure to do so bars their claim that the three-year
statute of limitations was tolled by Defendants’ alleged fraudulent concealment.” Rice, 104
Ark. App. at 367, 292 S.W.3d at 860. In affirming the dismissal, the Rice court quoted
language found in Delanno, which stated, “We are unwilling to say that the fiduciary duty
owed by an attorney to his client eliminates the client’s duty to exercise reasonable diligence
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in analyzing the accuracy of the attorney’s statements. Clients cannot be absolved of all
responsibility for testing the veracity of statements made by their lawyers.” Rice, 104 Ark.
App. at 374, 292 S.W.3d at 865 (quoting Delanno, 366 Ark. at 548, 237 S.W.3d at 86). The
Rice court then stated that the clients received information from an authoritative source that
contradicted the assurance of counsel and that appellants had the independent duty to
reconcile the contradiction.3 Rice, 104 Ark. App. at 375, 292 S.W.3d at 865.
So, the holdings of Delanno and Rice are narrower than at first blush. Both Delanno
and Rice actually stand for the proposition that if a client receives reliable information from
an authoritative source that contradicts his attorney’s assurance, a client may have the duty
to reconcile the contradiction and investigate the assurances of his own counsel. 4
In the case at bar, the circuit court dismissed appellant’s complaint with prejudice
after it granted a Rule 12(b)(6) motion. We review a circuit court’s decision on a motion to
dismiss a complaint by treating the facts alleged in the complaint as true and by viewing them
in the light most favorable to the plaintiff. Jenkins, supra. A review of the record reveals that
the client did not receive any contradictory reliable information from a third party, and her
3
A close reading of Rice reveals that the opinion does not identify the authoritative
source that contradicted the assurance of counsel. We can only presume the record
contained such evidence.
4
Even this narrower view of Delanno and Rice gives pause and is perhaps why, in my
opinion, the whole concept of an attorney’s duty to disclose his malpractice vis-à-vis a client’s
independent duty to investigate the accuracy of his attorney’s assurances needs to be
revisited.
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attorneys do not even make that allegation. Since there was no contradictory reliable
information in the record, the client was not “put on notice” to investigate her own
attorneys’ assurance; therefore, Delanno and Rice have limited application herein.
I would reverse the granting of the Rule 12(b)(6) motion to dismiss and reverse the
order dismissing the case with prejudice and remand to the circuit court.5 Having said this,
I express no opinion on the merits of the alleged attorney-malpractice claims.
5
Contrary to statements made in the majority supplemental opinion, the issues
addressed in this dissent were appropriately and timely raised below.
9