Court Opinion

ID: 3011698
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Date Created: 2015-10-13 21:02:22.896331+00
Date Added: 2024-06-11T11:46:40.684768
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Opinions of the United
2001 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

4-23-2001

Dixon Ticonderoga Co v. Estate of O'Connor
Precedential or Non-Precedential:

Docket 99-6056

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Recommended Citation
"Dixon Ticonderoga Co v. Estate of O'Connor" (2001). 2001 Decisions. Paper 88.
http://digitalcommons.law.villanova.edu/thirdcircuit_2001/88

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Filed April 23, 2001

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 99-6054, 99-6055, 99-6056

DIXON TICONDEROGA COMPANY,
Appellant in No. 99-6054

v.

ESTATE OF WILLIAM F. O'CONNOR; SCHUMANN
HESSION KENNELLY & DORMENT; SCHUMANN HANLON
& PANEPINTO; HAROLD FRIEDMAN; KIRSTEN, SIMON,
FRIEDMAN, ALLEN, CHERIN & LUTKIN; GREENBERG
MARGOLIS; FRANZBLAU DRATCH & FRIEDMAN;
STRYKER TAMS & DILL; SCHUMANN HANLON
O'CONNOR & MCCROSSIN

HAROLD FRIEDMAN; STRYKER TAMS & DILL,
Third-Party Plaintiffs

v.

DECOTIIS, FITZPATRICK & GLUCK; CONNOLL Y EPSTEIN
CHICCO FOXMAN ENGELMYER & EWING; STEVEN J.
ENGELMYER; LISA E. BRODY,
Third-Party Defendants

HAROLD FRIEDMAN, Appellant in No. 99-6055

FRANZBLAU DRATCH, F/K/A GREENBERG MARGOLIS,
Appellant in No. 99-6056

On Appeal From the United States District Court
For the District of New Jersey
(D.C. No. 96-cv-00810)
District Judge: Honorable Katharine S. Hayden

Argued: February 6, 2001

Before: BECKER, Chief Judge, AMBRO and STAPLETON,
Circuit Judges.
(Filed: April 23, 2001)

       STEVEN J. ENGELMYER, ESQUIRE
        (ARGUED)
       LISA E. BRODY, ESQUIRE
       HEATHER R. WEISS, ESQUIRE
       Kleinbard, Bell & Brecker, LLP
       1900 Market Street, Suite 700
       Philadelphia, PA 19103

       Counsel for Dixon Ticonderoga

       ANDREW M. EPSTEIN, ESQUIRE
        (ARGUED)
       Lampf, Lipkind, Prupis & Petigrow
       80 Main Street
       West Orange, NJ 07052

       Counsel for Harold Friedman

       RICHARD T. GAROFALO, ESQUIRE
        (ARGUED)
       THOMAS D. FLINN, ESQUIRE
       Garrity, Graham, Favetta & Flinn
       One Lackawanna Plaza
       P.O. Box 4205
       Montclair, NJ 07042

       Counsel for Franzblau Dratch

       PETER DeSALVO, JR., ESQUIRE
        (ARGUED)
       Soriano, Henkel, Salerno, Biehl &
        Matthews
       75 Eisenhower Parkway
       Roseland, NJ 07068

       Counsel for Estate of William F.
       O'Connor; Schumann Hession
       Kennelly & Dorment; Schumann
       Hanlon & Panepinto; Schumann
       Hanlon O'Connor and McCrossin

                               2
OPINION OF THE COURT

BECKER, Chief Judge.

These are consolidated appeals from the grant of
summary judgment in favor of the defendants in a two-
tiered legal malpractice action governed by New Jersey law.
The seeds of this case were sown in the early 1980s when
Plaintiff Dixon Ticonderoga Company (Dixon) sold a piece of
industrial property to a company named the Dixon Venture
(Venture). Defendant William O'Connor--who was affiliated
with Defendant Schumann Hanlon & Panepinto (the
Schumann firm)--represented Dixon in connection with the
sale. Between the time Dixon agreed to sell the property to
Venture and the time the sale closed, the New Jersey
Legislature enacted the Environmental Cleanup
Responsibility Act (ECRA), which imposed substantial new
clean-up responsibilities on owners of industrial property
that wished to sell their land.

In the first tier of this action, Dixon char ges that
O'Connor committed malpractice by failing to advise it
about ECRA, and submits that his failure r esulted in its
transaction with Venture being subject to ECRA. Dixon did
not comply with ECRA prior to transferring ownership of
the property to Venture, and V enture sued Dixon to recover
clean-up costs that it was forced to incur in connection
with the sale. Though a trial court originally dismissed
Venture's suit, the appellate courts r einstated it, and
Venture ultimately obtained a substantial judgment against
Dixon. Dixon claims that this judgment was the dir ect
result of O'Connor's negligence.

The second tier of this case involves Dixon's legal
malpractice claims against Defendant Harold Friedman,
who during all relevant times was affiliated with Defendant
Franzblau Dratch. Friedman represented Dixon during
much of the litigation brought against it by V enture. In
1989, Friedman spoke with Dixon's outside counsel about
the possibility of suing O'Connor for malpractice. Dixon
submits that this conversation created an attor ney-client
relationship between it and Friedman with r espect to a

                               3
potential malpractice claim against O'Connor , and alleges
that Friedman breached his professional duties to it by
allowing that claim to become time-barred.

Dixon filed the instant suit against O'Connor , the
Schumann firm, Friedman, and Franzblau Dratch in 1996.
Soon thereafter, O'Connor and the Schumann firm moved
to have the claims against them dismissed pursuant to
Federal Rule of Civil Procedure 12(b)(6) as time-barred.
Though Friedman and Franzblau Dratch opposed this
motion, it was granted by the District Court. Friedman and
Franzblau Dratch appeal from this aspect of the District
Court's judgment. Later, the District Court granted
summary judgment in favor of Friedman and Franzblau
Dratch. The court held that, even assuming that he created
an attorney-client relationship between himself and Dixon
with respect to a potential malpractice action against
O'Connor, Friedman had breached no pr ofessional duty
that he owed to Dixon. Dixon appeals from this portion of
the judgment.

To resolve both tiers of this appeal we must first decide
when Dixon gained and lost the right to sue O'Connor for
malpractice. Under New Jersey law, the time for bringing a
legal malpractice claim expires six years after the claim
accrued. As we will explain, accrual occurs when a
prospective plaintiff gains knowledge of two elements: (1)
that his or her lawyer has been at fault; and (2) that he or
she has been injured due to the lawyer's err or. Because
O'Connor's alleged fault in this case lies in his failure to
inform Dixon about ECRA prior to the closing of the
Venture deal, we conclude that the first element was
satisfied in either late 1984 or early 1985, when Dixon
learned that ECRA had applied to the transaction. We
further determine that Dixon was damaged by O'Connor's
purported error by October 21, 1985, when Dixon incurred
attorneys' fees in responding to V enture's demands that it
comply with ECRA.

In so concluding, we reject several arguments offered by
Friedman and Franzblau Dratch in favor of a later accrual
date. Friedman submits that the limitations period did not
commence until the New Jersey appellate courts first
issued a ruling adverse to Dixon in the suit br ought against

                                4
Dixon by Venture. We disagr ee, both because the Supreme
Court of New Jersey has rejected per se rules in this
context, and because we believe that the necessary
prerequisites for accrual were satisfied long before that
time. Franzblau Dratch submits that the statute did not
begin to run until Venture first sued Dixon, and that the
limitations period was tolled between the time that the trial
court threw out the Venture litigation and the time that the
appellate courts reinstated it. Based on these premises,
Franzblau Dratch contends that the statute of limitations
did not run on Dixon's claim against O'Connor until after
Friedman left Franzblau Dratch, and it submits that it
cannot be held liable as a result. We r eject this submission
because: (1) it is ultimately irrelevant due to our
disagreement with Franzblau Dratch as to when Dixon's
claim against O'Connor accrued; (2) the tolling ar gument
rests on a mistaken view of what O'Connor is alleged to
have done wrong; and (3) the tolling ar gument is
inconsistent with the policies behind New Jersey's statute
of limitations and is unsupported by any relevant New
Jersey case law. We therefore hold that Dixon's claims
against O'Connor and the Schumann firm accrued by
October 21, 1985 and that the limitations period on those
claims ran by October 21, 1991. Because the instant suit
was not filed until 1996, we will affirm the portion of the
District Court's judgment that dismissed the claims against
O'Connor and the Schumann firm.

We will, however, reverse the portion of the District
Court's judgment that granted summary judgment in favor
of Friedman and Franzblau Dratch because we conclude
that there are genuine issues of material fact that preclude
us from determining whether the 1989 conversation
between Friedman and Dixon's outside counsel cr eated an
attorney-client relationship with r egard to a potential
malpractice action against O'Connor, and, assuming that it
did, whether Friedman committed malpractice. Accor ding to
the Restatement of Law Governing Lawyers, whose
standards the parties agree govern this case, an attorney-
client relationship is created with r espect to a given matter
when: (1) a person informs a lawyer that he or she wants
the lawyer to provide legal services with r espect to a given
matter; (2) the lawyer does not refuse; and (3) the lawyer

                               5
knows or should know that the person reasonably relies on
the lawyer to provide such services.

The existence of the first factor is essentially conceded.
We conclude that there is a genuine issue of fact going to
the second element, because our review of the r elevant
deposition transcripts indicates that there is at least a
conflict as to whether Friedman ever refused to undertake
the representation. Finally, there is a genuine issue as to
whether the third factor is satisfied because: (1) Friedman
and Dixon had a preexisting (and ongoing) r elationship
involving a related matter; (2) Friedman admitted that he
gave Dixon legal advice about suing O'Connor in 1989; and
(3) a reasonable reading of the deposition transcripts
supports an inference that during the 1989 conversation
Friedman promised to discuss the matter with Dixon again
at a later date. Although two letters that Dixon's outside
counsel wrote to Friedman in 1992 could be r ead as
suggesting that Dixon was not relying on Friedman to
provide it with legal advice regar ding a malpractice action
against O'Connor, we do not believe that they so establish
as a matter of law.

If the 1989 conversation created an attor ney-client
relationship, we also believe that ther e is a genuine dispute
as to whether Friedman committed malpractice. A lawyer
who assumes a representation must exer cise reasonable
and ordinary care over the matters entrusted to him or her.
Because the undisputed evidence establishes that
Friedman did nothing at all between the 1989 conversation
and the running of the statute of limitations in 1991, we
conclude that there is a genuine issue as to whether he
breached a professional duty that he owed to Dixon.

I.

A.

As generations of children and standardized test-takers
know, Dixon makes pencils.1 For over a hundred years, it
_________________________________________________________________

1. Appellant Dixon Ticonderoga Company was created by a September
1983 merger of the Bryn Mawr Corporation and the Joseph Dixon
Crucible Company.

                               6
owned a 36-building industrial facility in Jersey City, New
Jersey (the Jersey City property). The events underlying
this appeal began to take shape in 1982 when Dixon
decided to sell the Jersey City property, and r etained
attorney O'Connor to advise it regar ding the sale.

On April 28, 1983, Dixon agreed to sell the Jersey City
property to Morris Industrial Builders, which immediately
assigned its rights to Venture. Under the contract, Venture
was to lease several of the buildings back to Dixon for a
period of two years following the sale; we will r efer to this
as the "lease-back." The contract also contained an "as is"
clause, stating that Venture was acquiring the property
"without any representations as to[the] character or quality
[of the property] except as expressly provided herein."
Closing was made contingent upon Ventur e's obtaining a
zoning variance; the contract provided that closing would
occur within 60 days of it doing so.

Though the variance seems to have been obtained on
October 12, 1983, the sale was not closed within 60 days
of that time. Instead, on October 31, a lawyer for V enture
wrote to O'Connor in his capacity as Dixon's counsel. The
letter represented (falsely, it seems) that the variance had
not yet gone through, and purported to extend the time for
closing as provided in the contract. O'Connor did not
question the basis for the extension, nor did he pr ess for an
immediate closing. On January 27, 1984, however ,
O'Connor wrote to Venture, noting that the contractually-
required conditions had occurred and accusing Venture of
"delaying this closing for reasons which ar e not the concern
of Dixon." O'Connor sent another letter on February 7,
fixing February 24 as the "time of the essence" date for the
closing. The transaction eventually closed on that date.

Unbeknownst to Dixon and Venture, a significant
development had occurred between the time they entered
into the contract on April 28, 1983 and the time the deal
closed on February 24, 1984. In September 1983, the New
Jersey Legislature enacted ECRA, which imposed
significant new clean-up responsibilities on owners of
industrial facilities that wished to transfer their property.2
_________________________________________________________________

2. In 1993, ECRA was renamed the "Industrial Site Recovery Act." See
N.J. Stat. Ann. S 13:1K-6.

                               7
The new rules, however, were made applicable only to
transfers occurring after December 31, 1983. See N.J. Stat.
Ann. S 13:1K-6 (Historical & Statutory Notes; Effective
Date). Though "[t]he passage of ECRA was no secret to the
legal community," neither O'Connor nor counsel for
Venture advised either party about ECRA prior to the
closing. As a result, the parties made no ef fort to close
before the statute's effective date or to deal with its
requirements in their agreement. Dixon did not clean up
the Jersey City property as requir ed by ECRA before
transferring ownership to Venture. Repr esentatives of both
Dixon and Venture have subsequently stated that they
would have attempted to structure their transaction to
avoid ECRA applicability had they known about the statute.

Although neither Dixon nor Venture was aware of ECRA
when they closed, Dixon soon realized its mistake. Dixon's
sale of the Jersey City property had been part of a
corporate-wide process of moving its operations to Florida.
This process also included the selling of its corporate
headquarters, which at that time was also located in Jersey
City. Dixon retained Friedman to assist in this latter sale,
which included getting a letter from New Jersey's
Department of Environmental Protection stating that the
transaction did not implicate ECRA. In the course of
carrying out these responsibilities, Friedman became aware
of Dixon's sale of its Jersey City property, and realized that
the closing date had rendered that transaction subject to
ECRA. Sometime in either late 1984 or early 1985,
Friedman spoke with the man who had served as Dixon's
chief negotiator in the sale of the Jersey City pr operty, and
informed him that ECRA had applied to that sale.

Venture also realized that the closing date on the sale of
the Jersey City property had render ed the transaction
subject to ECRA. On July 15, 1985, it sent a letter
demanding that Dixon comply with ECRA in connection
with the impending termination of the lease-back. On
October 9, 1985, Venture again wr ote to Dixon, noting that
the sale's closing date had rendered it subject to ECRA. The
second letter was addressed to Friedman as Dixon's
counsel, and Friedman directed an associate to draft a
response on behalf of Dixon. Friedman's fir m sent a letter

                               8
to Venture on October 21, 1985. Friedman stated that he
assumed that he billed Dixon for these services.

Venture was eventually forced to engage in an extensive
environmental clean-up of the Jersey City pr operty, and on
May 27, 1986 it sued Dixon in the Superior Court of New
Jersey to recover those costs. We will r efer to this as the
"Venture litigation" (or "action" or "suit"). Venture raised
claims under ECRA and another New Jersey envir onmental
statute, as well as various common law theories. Though
Friedman did not originally represent Dixon in the Venture
action, he was retained to do so in November 1987. The
Superior Court granted summary judgment in favor of
Dixon on February 18, 1988, holding, inter alia , that the
sole remedy for a non-conforming sale under ECRA was
rescission and recovery of affiliated costs. This decision,
however, was reversed by the Appellate Division, which on
July 21, 1989 held that ECRA permits a transferee (like
Venture) to sue a transferor (like Dixon) for damages arising
from a non-conforming sale. See Dixon Venture v. Joseph
Dixon Crucible Co., 561 A.2d 663 (N.J. App. Div. 1989).
Dixon appealed.

Shortly after the Appellate Division decision in 1989,
Friedman spoke with Dixon's outside counsel, Richar d
Joyce. At that time, Joyce raised the possibility of suing
O'Connor for malpractice, based on the latter's failure to
advise Dixon about ECRA prior to the sale of the Jersey
City property. In their depositions, Friedman and Joyce
offered largely consistent accounts of this conversation, but
there were also some discrepancies. Both agreed that
Friedman told Joyce that he doubted that a claim against
O'Connor would have merit, and Friedman admitted that
this "probably" constituted "advice to a client." Both were
also in accord that during the 1989 conversation Friedman
advised Joyce that it might be tactically unwise to sue
O'Connor. Because the Venture action appeared headed to
trial and because O'Connor had represented Dixon in the
underlying transaction, Friedman counseled Joyce that it
might "be helpful to have Mr. O'Connor or some of his firm
available [to assist in that matter] because we weren't quite
sure what all the issues would be, and maybe[knowing]
what went on at the beginning would be helpful."

                               9
The record is also clear that in 1989 Friedman expressed
a certain amount of professional reluctance about suing
O'Connor. Friedman recalled telling Joyce that: "I don't like
to handle claims against lawyers, and I'm not sur e that this
one has any real foundation, and I'm certainly not going to
handle a claim that I don't think has a foundation." Joyce
concedes that Friedman never told him that he would
handle a malpractice claim against O'Connor, and that
Friedman explained that such claims were "not within his
area of expertise." Joyce was unequivocal, however, that
Friedman never expressly refused to handle such a claim.

There is also some disagreement between Friedman and
Joyce as to how they ended the 1989 conversation.
Friedman testified that they left it by concluding that "we
don't have to make that decision [i.e., whether to sue
O'Connor] now, we are going to forge ahead with the
petition for certification and hopefully get the Supreme
Court to do something about" the Appellate Division
decision that had reinstated the Ventur e suit. Joyce's
deposition testimony is murky, but according to the reading
most favorable to Dixon (which we must adopt due the
procedural posture of this case) Friedman ended the
conversation by telling Joyce: "I don't handle[malpractice
cases] personally, but I'll check with my fir m. Maybe they
do, and, if not, I've got others who can."3 Friedman
admitted that he probably billed Dixon for this
conversation. He also conceded that he took no action with
respect to a potential malpractice claim against O'Connor
between 1989 and 1992, i.e., he never resear ched the legal
issues, investigated the underlying facts, or attempted to
find another lawyer for Dixon.

Dixon's hopes that the Supreme Court of New Jersey
would reverse the Appellate Division's decision were dashed
on January 30, 1991, when the Supreme Court affirmed
_________________________________________________________________

3. Joyce was unequivocal that Friedman made a statement to this effect
in 1992. But the transcripts can also be read to say that Friedman made
such a statement in 1989. Because this case is at the summary
judgment stage and because it is the non-movant, Dixon is entitled to
have all ambiguities resolved in its favor . See infra Part II.
Accordingly,
we will read Joyce's testimony as declaring that Friedman also made
such a statement in 1989.

                               10
the Appellate Division's judgment. See Dixon V enture v.
Joseph Dixon Crucible Co., 584 A.2d 797 (N.J. 1991). The
Supreme Court remanded the case to the Superior Court
for trial, see id. at 800, where Dixon was held liable to
Venture for over $3 million, of which just under $1.5
million were awarded as damages on the ECRA claim.

Friedman and Joyce next spoke about suing O'Connor in
the spring of 1992.4 Joyce told Friedman that "it would
seem that we had a malpractice action against the prior
firm, that it seemed--just looking at it, it would seem that
we had some relief in attempting to make the company
whole, that is it something we should consider ." Joyce
claims that Friedman then told him that "he did not
personally handle malpractice cases, that he was not sure
if it was something that his firm would do, something he
could look into, but that he also was aware of attorneys in
and around the area who could handle it for us." Joyce
admitted that Friedman expressed "a pr ofessional
reluctance to ever have to do something like that to, you
know, another attorney."

After this conversation, Joyce stated that he was"under
the impression that [Friedman] was moving forward with
either determining whether or not his fir m would handle it
or he would engage someone on our behalf to make us
whole," but admitted that he had not given Friedman the
authority to hire counsel on Dixon's behalf, and was simply
"waiting for Mr. Friedman to get back to me to tell me how
we were going to proceed." Friedman r ecalled the 1992
conversation somewhat differently. He claimed to have told
Joyce that "I really did not want to pursue a claim [against
O'Connor], that if he wanted, he could." Friedman stated
that he did not recall how he and Joyce had left that
conversation, but he was clear that he did not understand
Joyce to have told him to pursue a claim against O'Connor,
and that he would not have done so had he been asked.

On August 19, 1992, Joyce sent Friedman a letter whose
caption stated that it was about "Dixon V enture v. Dixon
Ticonderoga." Joyce wrote that"it would seem the following
_________________________________________________________________

4. We have omitted details of this conversation that are irrelevant to our
disposition.

                               11
strategic moves would be in order." One such "move" was
suing O'Connor:

       As distasteful as it is for me professionally, it would
       seem that our attorney at the time of closing should
       have known of the ECRA requirements and, therefore,
       a malpractice action should be initiated -- hopefully,
       by your firm.

(emphasis added). Friedman did not respond.

On November 25, 1992, Joyce wrote Friedman another
letter with the same caption. In addition to discussing the
Venture suit, Joyce stated:

       [I]t is clear to me that we were ill-advised by counsel at
       the time of the closing as to our potential ECRA
       responsibility. It has come to my attention, however,
       that there may be stringent statutory time limitations
       on advising counsel of his screw-up. Considering the
       obvious malpractice in this case, I certainly hope we
       are not constrained by a technicality. I'm sur e you
       would agree that we must proceed immediately.

Joyce also referred Friedman to a lawfirm that Dixon had
used "for environmental matters." At the close of the letter,
Joyce wrote: "I should also point out that[this] firm does
handle malpractice (the scum) and insurance work and, if
your firm does not, please feel free to discuss these issues
also."

B.

Having retained other counsel, Dixon commenced this
legal malpractice action in the United States District Court
for the District of New Jersey in March of 1996. The
Complaint named six defendants: the estate of W illiam
O'Connor;5 O'Connor's former law firm, the Schumann firm;
Friedman; Franzblau Dratch, the law firm with which
Friedman had been affiliated during many of the events
underlying Dixon's claim against him; and two other law
firms with which Friedman had been associated at various
_________________________________________________________________

5. O'Connor died in 1992. We will r efer to his estate as "O'Connor"
during the remainder of this opinion.

                               12
times. Friedman's Answer raised cross-claims against two
other law firms and two other attorneys, and both
Friedman and Franzblau Dratch pled rights of
indemnification and contribution against various other
parties. The case was assigned to Judge William G. Bassler.

Rather than answer, O'Connor and the Schumannfirm
filed a motion pursuant to Federal Rule of Civil Procedure
12(b)(6) seeking to have the claims against them dismissed
as time-barred. Dixon did not oppose the motion, but
Friedman and Franzblau Dratch did. The District Court
eventually granted the motion. Further motion practice
resulted in the uncontested dismissal of the claims against
all defendants and third-party defendants except Friedman
and Franzblau Dratch. During this period, the case was
reassigned to Judge Katherine S. Hayden.

Dixon, Friedman, and Franzblau Dratch eventually
moved for summary judgment. On October 16, 1999, Judge
Hayden rendered an oral ruling stating that she would
grant summary judgment in favor of Friedman and
Franzblau Dratch based on her conclusion that, as a
matter of law, Friedman had not been negligent. Dixon filed
a timely notice of appeal, reciting that it was appealing only
the portion of the final order entering summary judgment
in favor of Friedman and Franzblau Dratch. Friedman and
Franzblau Dratch filed cross-appeals, contesting only the
dismissal of the claims against O'Connor and the
Schumann firm. See also Dixon's Opening Br. at 59 ("[T]his
Court should reverse the District Court's grant of summary
judgment in favor of Harold Friedman, Esquir e and
Franzblau Dratch . . ., and remand this case to the District
Court for a trial on the merits consistent with this Court's
opinion.").6

II.

This is a diversity case, and, accordingly, Erie Railroad
Co. v. Tompkins, 304 U.S. 64 (1938), mandates that we
"apply the substantive law produced by . . . the highest
_________________________________________________________________

6. The District Court had subject matter jurisdiction under 28 U.S.C.
S 1332(a). We have appellate jurisdiction pursuant to 28 U.S.C. S 1291.

                               13
court of the [relevant] state." In re Asbestos Litig., 829 F.2d
1233, 1237 (3d Cir. 1987). Statutes of limitations are
substantive for Erie purposes. See Guaranty Trust Co. v.
York, 326 U.S. 99, 110 (1945). The parties agree that New
Jersey law governs the issues of when Dixon's malpractice
claim against O'Connor accrued and expired, and whether
there is a genuine issue of material fact as to whether
Friedman committed malpractice.

New Jersey law provides that "[i]f an attorney shall
neglect or mismanage any cause in which he is employed,
he shall be liable for all damages sustained by his client."
N.J. Stat. Ann. S 2A:13-4. "A legal-malpractice action
derives from the tort of negligence." Grunwald v. Bronkesh,
621 A.2d 459, 463 (N.J. 1993). Accordingly, a plaintiff must
prove the traditional elements: the existence of a duty; a
violation of that duty; and causation of har m. See id. This
case involves two tiers of malpractice claims: (1) Dixon's
claims against O'Connor and the Schumann fir m, based on
the former's failure to advise it about ECRA; and (2) Dixon's
claim against Friedman and Franzblau Dratch, based on
Friedman's allowing Dixon's claims against O'Connor and
the Schumann firm to become time-barr ed.

We are faced with two issues on appeal. Judge Bassler
granted the Rule 12(b)(6) motions brought by O'Connor and
the Schumann firm to dismiss Dixon's claims against them
as time-barred. Friedman and Franzblau Dratch appeal
from that ruling. Our standard of r eview is plenary, i.e., de
novo, see Lake v. Arnold, 232 F .3d 360, 365 (3d Cir. 2000),
and we consider this issue in Part III. The second issue
before us is whether Judge Hayden properly granted
summary judgment in favor of Friedman and Franzblau
Dratch on the ground that--even assuming that an
attorney-client relationship arose with respect to a potential
malpractice action against O'Connor--Friedman br eached
no professional duty that he owed to Dixon. Summary
judgment, of course, is appropriate only when"there is no
genuine issue as to any material fact and . . . the moving
party is entitled to judgment as a matter of law." Fed. R.
Civ. P. 56(c). As the nonmoving party, Dixon is entitled to
have any factual disputes resolved in its favor , and to the
benefit of all reasonable inferences that can be drawn from

                               14
the facts. See, e.g., Gruenke v. Seip, 225 F .3d 290, 298 (3d
Cir. 2000).7 We r eview de novo this aspect of the District
Court's judgment, see, e.g., Watson v. Eastman Kodak Co.,
235 F.3d 851, 854 (3d Cir. 2000), and discuss this issue in
Part IV.

III.

We must first consider when Dixon gained and lost the
right to sue O'Connor. Our resolution of these questions is
critical for two reasons. First, it will dispose of the cross-
appeals brought by Friedman and Franzblau Dratch, which
challenge the District Court's order dismissing the claims
against O'Connor and the Schumann firm as time-barred.
Second, our determination of these issues is a necessary
predicate for resolution of Dixon's appeal of the grant of
summary judgment in favor of Friedman and Franzblau
Dratch. The gravamen of Dixon's claim against Friedman
(and, consequently, against Franzblau Dratch) is that
Friedman failed to advise it as to when the limitations
period would run on a legal malpractice action against
O'Connor. To assess whether ther e is a genuine dispute of
material fact as to whether Friedman acted negligently, we
must, therefore, know when the statute ran.

A.

Under New Jersey law, legal malpractice claims ar e
subject to a six year statute of limitations. See N.J. Stat.
Ann. S 2A:14-1; Grunwald v. Bronkesh, 621 A.2d 459, 461
(N.J. 1993). That period begins to run when a claim
accrues, which is governed by the "discovery rule," which
operates "to postpone the accrual of a cause of action when
a plaintiff does not and cannot know the facts that
constitute an actionable claim." Grunwald, 621 A.2d at
_________________________________________________________________

7. Though Dixon also moved for summary judgment on its claims against
Friedman and Franzblau Dratch, Judge Hayden denied its motion.
Because Dixon has not appealed this aspect of the District Court's
judgment, the only question is whether Judge Hayden properly granted
summary judgment in favor of Friedman and Franzblau Dratch. Dixon is
the nonmoving party for purposes of that inquiry.

                               15
463. A legal malpractice claim accrues when the client
gains knowledge of two elements: "fault" and"injury"
(which is synonymous with "damage"). Id.

A prospective plaintiff acquires knowledge of an
attorney's "fault" when he or she r ealizes that the lawyer
has been negligent, and when he or she knows or should
know that any harm arising out of a given transaction or
matter "is attributable to the attorney's negligent advice."
Id. at 466. The Supreme Court of New Jersey has eschewed
laying down bright line rules for determining when this
requirement is satisfied: A client need not suffer an adverse
judgment before determining that his or her lawyer has
committed malpractice, but neither does the existence of
such a judgment necessarily establish that the client was
thereinafter charged with such knowledge. See id. Indeed,
depending on the circumstances, a client may gain
knowledge of his or her attorney's fault befor e, during, or
after the resolution of an underlying matter . See id.

Damages must be "real and substantial as opposed to
speculative" to start the running of the statute of
limitations, id. at 465, but the Supr eme Court of New
Jersey has broadly defined the concept of"injury." That
Court has held that "[i]t is not necessary that all or even
the greater part of damages have to occur befor e the cause
of action arises." Id. (quotation marks and citations
omitted). And though "actual damages may exist in the
form of an adverse judgment," they may also arise, "in the
form of attorney's fees, before a court has announced its
decision in the underlying action." Id.

B.

To apply these precepts, we must identify three moments
in time: the point when Dixon first had reason to believe
that O'Connor had been negligent; the instant when it was
first harmed by O'Connor's alleged malpractice; and the
moment at which Dixon had reason to believe that the
harms that it had suffered wer e caused by O'Connor's
supposed errors. We believe that Dixon was on notice that
O'Connor had been negligent in either late 1984 or early
1985, when Friedman informed a Dixon r epresentative that

                               16
the Jersey City property's sale date had r endered the
transaction subject to ECRA--a fact that O'Connor had
never mentioned.

It is critical to remember the nature of the malpractice
with which Dixon charges O'Connor. This is not a case
where O'Connor gave Dixon bad advice about ECRA; rather,
the record shows that O'Connor never even mentioned
ECRA or stated that it might apply to the sale of the Jersey
City property. As a result, Dixon closed the Venture deal
without giving any consideration to ECRA. Accor dingly, as
soon as it learned that the transaction's closing date had
rendered it subject to ECRA, Dixon had r eason to believe
that O'Connor had erred by omission.

We next conclude that Dixon was injur ed by O'Connor's
alleged malpractice by October 21, 1985--the date by
which it had incurred an obligation to pay attorneys' fees to
Friedman's firm in connection with r esponding to Venture's
ECRA-based demands. Venture lear ned that ECRA had
applied to the sale of the Jersey City property in the
summer of 1985, and soon realized that Dixon had not
complied with the statute's clean-up requir ements. Venture
sent Dixon letters dated July 15, 1985 and October 9, 1985
demanding that Dixon comply with ECRA; the latter letter
specifically noted that the sale's closing date (February 28,
1984) had triggered ECRA duties. Dixon then r etained
Friedman's firm to respond to V enture's demands.
Friedman directed an associate to prepar e a response on
behalf of Dixon, which was dated October 21, 1985.
Friedman "assume[d]" that he billed Dixon for these
services.

By the time the October 21 letter was sent, O'Connor's
alleged malpractice had injured Dixon. Had O'Connor done
his job, Dixon's argument goes, the sale would never have
been subject to ECRA at all.8 But because O'Connor did not
_________________________________________________________________

8. To have avoided ECRA, Dixon and V enture would apparently have had
to do two things: (1) they would have needed to close prior to December
31, 1983; and (2) Dixon would have needed to for ego the lease-back.
Dixon has submitted evidence that these steps could have and would
have been taken had the parties known about ECRA. Robert Morris, who

                               17
advise Dixon about ECRA prior to the closing, Dixon was
forced to retain Friedman's firm to respond to Venture's
demands. Even if it did not tender payment immediately,
Dixon certainly acquired an obligation to pay Friedman's
firm by the time the October 21, 1985 letter was mailed.
And because Grunwald squarely held that incurrence of
attorney fees can constitute damages for purposes of
starting the statute of limitations, see Grunwald v.
_________________________________________________________________

signed the contract of sale on behalf of Venture, certified that "ECRA's
applicability . . . could have easily been avoided, if I had been aware of
ECRA prior to closing." Specifically, Morris stated that he "would have
tendered the purchase price and closed . .. prior to December 31, 1984,"
and represented that he "had the necessary financing in place to do so."
Morris also claimed that he "would have for egone the lease-back to
Dixon," and that he "would have done so in exchange for a reduction in
the purchase price equal to the present value of the stream of
anticipated profits." Morris submitted that "any reasonable businessman
would have been able to agree to this or similar terms" and noted that
his "contract negotiations with Dixon had gone r easonably well, and we
were able to agree on all other material terms." Gino Pala, who served as
Dixon's CEO during the relevant time period, testified that Dixon was
"ready to leave [the Jersey City pr operty] at any time," and that it
"wanted to get out as soon as possible." David Brewster, who was a
member of Dixon's board at the time of the sale and later served as its
CEO, certified that had he been aware "that ECRA liability could [have
been] avoided by closing the transaction befor e ECRA's effective date,
[he] would have insisted that the transaction close prior to December 31,
1983." Brewster stated that he was "not aware of any reason why the
transaction could not have closed prior to December 31, 1983." Brewster
also represented that he would have agr eed to forego the lease-back
entirely because "even if that resulted in a reduced purchase price . . .
[i]t would have been worth losing a few hundr ed thousand dollars in
order to avoid millions of dollars of ECRA liability." Friedman disputes
these allegations, averring that the scenario of fered by Dixon is "purely
speculative and improbable." Friedman assails the credibility of Pala and
Brewster, contending that what they say now is self-serving and
inconsistent with statements they made earlier . He also avers that it
would have been against Venture's inter est to structure the transaction
so as to avoid ECRA. Lastly, Friedman contends that even had ECRA
been avoided, Venture would have incurr ed other environmental liability
in connection with the sale, and would have sued Dixon to recover those
costs. As will appear, see infra note 15, we do not resolve these issues
here.

                               18
Bronkesh, 621 A.2d 459, 465 (N.J. 1993), we think that
Dixon was injured by O'Connor's purported malpractice by
that time.

We acknowledge that not every claim made against a
client--and not every counsel fee expended in defense of
that claim--triggers the running of the statute of limitations
for a legal malpractice claim. Accrual does not occur until
a prospective plaintiff realizes that his or her lawyer has
been negligent, and that he or she has been har med as a
result of that negligence. The dispositive question, therefore,
is when Dixon knew or should have known that any
damages were attributable to O'Connor's negligent advice.
See id. at 466. We conclude that Dixon had such notice by
the time the October 21, 1985 letter was sent. By early
1985 Dixon had reason to believe that any ECRA costs it
acquired in connection with the Jersey City transaction
were due to O'Connor's failure to advise it about ECRA
prior to the closing. And by October 21, 1985, Dixon had
suffered ECRA-related costs in connection to that sale. We
believe that Dixon was on notice that O'Connor's alleged
malpractice may have caused it harm by that date, and
therefore hold that Dixon's malpractice action against
O'Connor and the Schumann firm accrued by October 21,
1985, and, consequently, expired October 21, 1991, six
years later.

C.

We are unpersuaded by the arguments offered by
Friedman and Franzblau Dratch in support of a later date
for either accrual of Dixon's claim or the running of the
statute of limitations.

1.

Friedman submits that the limitations period did not
commence until at least July 21, 1989--the date that the
Appellate Division reversed the Superior Court's decision
and reinstated the Venture suit. 9 Friedman's argument is
_________________________________________________________________

9. Friedman also argues that the limitations period did not start running
until January 30, 1991, when the Supreme Court of New Jersey affirmed
the Appellate Division's order. For the same reasons that we reject his
submission that Dixon's claims against O'Connor and the Schumann
firm did not accrue until 1989, we r eject this claim as well.

                               19
largely based on the facts of Grunwald v. Bronkesh, 621
A.2d 459 (N.J. 1993).

The plaintiff in that case had sued an attor ney who had
represented him in a real estate transaction. Their
association began when a third party expr essed interest in
acquiring an option to buy a property that the plaintiff
owned in Atlantic City, and the plaintiff r etained the
defendant lawyer to draw up the relevant documents. The
lawyer prepared two items: an option agr eement and a
contract for sale, the latter of which was to be triggered if
the third party exercised the option. The attorney presented
both documents to the third party, instructing it to sign the
option agreement and initial the contract for sale. Instead,
the third party signed both documents.

The lawyer advised the plaintiff that by signing the sales
contract, the third party had assumed an enfor ceable
obligation to buy the property. Relying on this advice, the
plaintiff bypassed another opportunity to develop his
property. The third party, however , never exercised the
option. Still acting on advice of the defendant lawyer, the
plaintiff then sued the third party for specific performance
of the contract for sale. A trial court rejected the plaintiff 's
claim, holding that the third party never incurred an
enforceable obligation to buy the property because it never
intended to do so, and stating that the plaintif f should not
have relied on his lawyer's advice that a binding contract
had been created. This decision was later affirmed on
appeal. The plaintiff then brought a legal malpractice action
against the defendant lawyer, which the attor ney claimed
was time-barred.

The central issue in Grunwald was when the plaintiff 's
claim against the defendant lawyer accrued: The action was
timely if accrual did not occur until after the conclusion of
the appellate process in the plaintiff 's suit against the third
party, but the claim was untimely if the limitations period
had started running at or before the time of the trial court's
initial adverse decision. The Supreme Court of New Jersey
held that the plaintiff 's claim was time-barred because his
claim had accrued at the time the trial court r ejected his
claim against the third party. See Grunwald , 621 A.2d at
467. The Court determined that the plaintif f had been

                               20
injured when the third party first r efused to exercise its
option after the plaintiff had bypassed another offer to
develop the Atlantic City property, and that he had been
injured again when he incurred litigation costs in his action
against the third party. See id. And the Court held that the
plaintiff gained knowledge that his injuries were
attributable to his lawyer's negligence when the trial court
held that he should not have relied on his lawyer's advice
that a binding contract for sale had been cr eated between
the third party and him. See id.

Friedman seeks to persuade us that, under Grunwald, a
client never gains knowledge of his or her lawyer's fault
until a court issues an adverse decision in an underlying
litigation. He notes that the Grunwald court held that the
plaintiff gained knowledge of his lawyer's fault when the
trial court issued its adverse decision and "not when the
third party took a position contrary to the advice the
attorney had given, nor when plaintiff brought suit against
the third party." Drawing an analogy between Grunwald
and this case, Friedman submits that just as the plaintiff
in Grunwald had no reason to feel that he was the victim
of malpractice merely because the third party disagreed
with his lawyer's interpretation of the thir d party's signing
the contract for sale, Dixon had no reason to feel aggrieved
by O'Connor's actions simply because Ventur e sought to
impose "a novel legal liability upon Dixon--one not
specifically set forth in the ECRA statute, and one which
had not been the subject of any prior judicial
determination." And, Friedman opines, because there was
no adverse decision against Dixon in the underlying
litigation until the Appellate Division reinstated Venture's
ECRA suit on July 21, 1989, Dixon had no reason to
believe that O'Connor had committed malpractice prior to
that date.

We disagree. The bright-line rule Friedman seeks is
inconsistent with Grunwald's clear statement that
"knowledge of fault may occur before . . . a judicial
resolution of the underlying action." 621 A.2d at 466. The
ultimate, case-specific question is "when a plaintiff knows
or should know that the damage is attributable to the
attorney's negligent advice." Id. And though the plaintiff in

                               21
Grunwald had no reason to believe that his attorney had
committed malpractice until the first adverse decision in
the underlying matter, the facts here ar e significantly
different. The Grunwald opinion contains no evidence that
anyone (other than, perhaps, the lawyer for the third party)
told Grunwald that his lawyer may have render ed incorrect
advice until the trial court did so in rejecting the plaintiff 's
claim against the third party. Here, in contrast, Friedman
informed Dixon that ECRA had applied to the sale in either
late 1984 or early 1985--long before thefirst adverse
decision. This is not a case where O'Connor gave Dixon
incorrect counsel about ECRA; indeed, if it was there would
be a strong argument that Dixon would not have gained
knowledge of O'Connor's fault until a judicial ruling
repudiated his advice. Instead, the evidence shows that
O'Connor failed even to mention ECRA to Dixon prior to the
closing. Under these circumstances, Dixon should have
realized that O'Connor had made a mistake as soon as it
learned that ECRA had applied to the sale.

2.

Franzblau Dratch presses a more elaborate argument. It
first suggests that Dixon's claim against O'Connor accrued
on May 27, 1986--the day Venture filed suit against Dixon
seeking recovery for its clean-up costs. If true, then the
limitations period would ordinarily have expir ed six years
later on May 27, 1992. But Franzblau Dratch also contends
that the limitations period was tolled for the 518 days
between February 18, 1988, when the Superior Court threw
out the Venture suit, and July 21, 1989, when the
Appellate Division reinstated it. We will refer to this as the
"tolling argument." If correct, then Dixon's time to sue
O'Connor did not expire until October 27, 1993. Franzblau
Dratch notes that Friedman severed his ties with it during
the spring of 1993, and submits that it cannot be held
liable because Friedman left the firm prior to the time that
Dixon lost the right to sue O'Connor.10 We reject this
_________________________________________________________________

10. Friedman and Franzblau Dratch disagree about whether Friedman
left the firm on May 28, 1993 or June 1, 1993, but that dispute is
ultimately irrelevant.

                               22
argument because: (1) we disagree with Franzblau Dratch
as to when Dixon's claim against O'Connor accrued; (2) we
disagree that the elements of "fault" and"damage" were not
present between the time the Superior Court dismissed the
Venture suit and the time the Appellate Division reinstated
it, and, therefore, that Dixon could not have sued O'Connor
during that period; and (3) we disagree that New Jersey law
permits tolling in circumstances such as this one.

The foundation of Franzblau Dratch's tolling ar gument is
its premise that Dixon's claim against O'Connor did not
accrue until Venture sued Dixon. But if we are correct that
the claim against O'Connor actually accrued by October 21,
1985, then the tolling argument fails on its own terms. If
the statute started to run on October 21, 1985, then it
ordinarily would have expired on October 21, 1991. Even if
we were to add 518 days to that date, we would conclude
that the limitations period ran on March 22, 1993--before
Friedman severed his ties with Franzblau Dratch. See supra
note 10. Franzblau Dratch's tolling argument thus makes
no difference unless Dixon's claim accrued on May 27,
1986.

Franzblau Dratch's only argument in favor of May 27,
1986 as the accrual date is its suggestion that this is the
day "found" by Judge Bassler. This ar gument suffers from
two problems. First, because Judge Bassler was acting on
a motion brought pursuant to Federal Rule of Civil
Procedure 12(b)(6), he made no factualfindings. At all
events, our standard of review is plenary. See Lake v.
Arnold, 232 F.3d 360, 365 (3d Cir . 2000). Second, we
disagree with Franzblau Dratch's interpr etation of Judge
Bassler's opinion. Judge Bassler wrote that Dixon "clearly
had knowledge of a claim for damages [against O'Connor] in
either 1985 or at the latest, 1986." Judge Bassler also
noted that Dixon conceded that it had such knowledge by
1986, and ultimately determined that Dixon"clearly
received notice of [Venture's claim against it] by May 1986."
(emphasis added). Because this suit was not filed until
1996, Judge Bassler's determination that Dixon's claim
against O'Connor accrued in 1986 was sufficient to decide
the issue before him: whether the six-year statute of
limitations had run for purposes of a legal malpractice

                               23
action brought by Dixon against O'Connor's estate and the
Schumann firm. There was simply no r eason for Judge
Bassler to decide whether the claim accrued at an earlier
date, and we believe that his opinion makes clear that he
did not. We therefore adher e to our conclusion that Dixon's
claim accrued by October 21, 1985. See supra Part III(B).

Moreover, we disagree with Franzblau Dratch's
contention that the statute of limitations was ever tolled in
this case. The firm asserts that the running of the statute
was tolled because the elements of "fault" and"damage"
necessary for the accrual of a legal malpractice claim were
not present between the time the Superior Court dismissed
the Venture suit and the time the Appellate Division
reinstated it. During that period, Franzblau Dratch avers,
Dixon had no reason to believe that O'Connor had been at
fault or that any negligence on his part had caused it to
suffer any damages.

We reject this "fault" argument for the same reason that
we rejected Friedman's: It rests on a mistaken view of what
O'Connor is alleged to have done wrong. Franzblau Dratch
assumes that the Superior Court's initial decision to
dismiss the Venture suit vindicated O'Connor's actions.
Although this might be correct had O'Connor advised Dixon
that ECRA did not create a private right of action for
damages, that is not what O'Connor did. Instead, Dixon
charges that O'Connor committed malpractice by failing to
mention ECRA at all. The Superior Court's initial decision
that Venture could not recover ECRA-imposed clean-up
costs from Dixon may have limited the damage done by
O'Connor's alleged dereliction, but it did nothing to change
the fact that O'Connor had erred.

We also disagree with Franzblau Dratch's claim that
Dixon had sustained no actionable damages between the
time the Superior Court dismissed the Ventur e suit and the
time the Appellate Division reinstated it. Dixon incurred
counsel fees in responding to Ventur e's pre-suit demands
and in defending the suit prior to the dismissal. Though
Franzblau Dratch rightly points out that the incurring of
counsel fees counts as injury for legal malpractice purposes
only if the client has reason to attribute those fees to his or
her lawyer's negligence, we conclude that that pr ecept is

                               24
satisfied here. Dixon's claim is that O'Connor failed to
advise it about ECRA, and that this failure pr evented Dixon
and Venture from structuring their transaction to avoid the
statute. Under this scenario, if O'Connor had not been
negligent, then ECRA would not have applied to the sale. As
a result, any counsel fees Dixon incurr ed responding to
Venture's demands after it became appar ent that ECRA had
applied to the sale were attributable to O'Connor's
negligence. Though the Superior Court's dismissal of the
Venture suit may have lessened the extent to which Dixon
was harmed, it did not change the fact that Dixon was
forced to spend money defending an ECRA suit that might
have been avoided entirely had O'Connor not (allegedly)
committed malpractice. This is enough under New Jersey
law. See Grunwald v. Bronkesh, 621 A.2d 459, 465 (N.J.
1993) (holding that for a legal malpractice claim to accrue,
a plaintiff need not know the precise extent of his or her
damages, or even have suffered all of the damages
attributable to his or her attorney's negligence).

Finally, Franzblau Dratch's tolling argument is
fundamentally inconsistent with the policies beyond New
Jersey's statute of limitations as expressed in Grunwald,
and it is unsupported by any relevant case law. The
principal consideration underlying New Jersey's statute of
limitations is fairness to defendants. See id. The Supreme
Court of New Jersey has observed that allowing the
limitations period on a legal malpractice claim to be
postponed until the appellate process in an underlying
litigation was complete could leave a lawyer unsur e
whether he or she will be sued for an extraor dinarily long
period of time. See id. In addition to denying peace of mind
to lawyers, long delays would also result in trials being
conducted after memories have faded and evidence has
been lost. See id. Precisely the same could occur under
Franzblau Dratch's proposed approach wher e the statute
would be tolled, as a matter of law, during any period
where the prospective plaintiff appears to have obtained a
victory in an underlying litigation.1 1
_________________________________________________________________

11. Indeed, the facts of this case provide an apt illustration. Dixon
charges that O'Connor committed malpractice in 1983-84, but this suit
was not filed until over a decade later. O'Connor died in 1992, and
counsel for the Schumann firm informed us at oral argument that many
of his records have been destroyed.

                               25
Franzblau Dratch has pointed to no relevant cases that
allowed tolling in a situation such as this one. The only
New Jersey cases it cites are inapposite, because the
defendants in those cases had received notice of the claims
against them within the limitations period. See Galligan v.
Westfield Ctr. Serv., Inc., 412 A.2d 122, 123 (N.J. 1980)
(defendant received notice when the plaintif f brought an
action in federal court); Peloso v. Hartfor d Fire Ins. Co., 267
A.2d 498, 499-500 (N.J. 1970) (defendant insurance
company had received notice when the plaintif f submitted
its request for benefits); Mitzner v. W . Ridgelawn Cemetery,
Inc., 709 A.2d 825, 826 (N.J. App. Div. 1998) (defendant
received notice when the plaintiff br ought an action in New
York state court, which was ultimately dismissed due to
lack of personal jurisdiction).

The principal reason for statutes of limitations is to
provide notice to defendants, see Grunwald , 621 A.2d at
465, and tolling the statute in cases where the defendant
has nevertheless received notice does not under mine this
policy. Critically different here is that there is no evidence
that O'Connor ever received notice that Dixon may sue him
at any time during the limitations period. The only case
Franzblau Dratch references that allowed tolling in a
situation such as this one is Pope County v. Friday,
Eldredge & Clark, 852 S.W.2d 114 (Ark. 1993). In addition
to not being a New Jersey case, Pope County's holding is
based on a premise that the Supreme Court of New Jersey
rejected in Grunwald: that a putative plaintiff has no legal
malpractice claim until an underlying adverse decision is
affirmed on appeal because his or her damages are
speculative until that point. See Pope County , 852 S.W.2d
at 115 (summarizing the court's prior holding in Stroud v.
Ryan, 763 S.W.2d 76 (Ark. 1989)). For all of these reasons,
we reject Franzblau Dratch's tolling ar gument.

D.

We conclude that Dixon's malpractice claim against
O'Connor accrued no later than October 21, 1985 and that
it expired no later than October 25, 1991. W e therefore hold
that the District Court did not err in granting the motions

                               26
by O'Connor and the Schumann firm to dismiss the claims
against them as time-barred.

IV.

Having determined when Dixon's malpractice claim
against O'Connor became time-barred, we tur n to whether
there is a genuine issue of material fact as to whether
Friedman committed malpractice. This inquiry
encompasses two issues: (1) Is there a genuine dispute of
fact as to whether an attorney-client r elationship arose
between Friedman and Dixon concerning a potential
malpractice claim against O'Connor?; and, if so, (2) Is there
a genuine dispute as to whether Friedman breached any
professional duty that arose out of that r epresentation?12
Because we conclude that there are genuinely disputed
facts going to both issues, we will reverse the District
Court's grant of summary judgment in favor of Friedman
and Franzblau Dratch.

A.

The threshold question is whether Friedman cr eated an
attorney-client relationship with Dixon with respect to a
potential malpractice action against O'Connor in 1989.13
_________________________________________________________________

12. The parties have not directed to our attention to any New Jersey case
expressly holding that the first of these questions is a jury issue, but
we
will assume that it is because counsel for both Dixon and Friedman
agreed on this point at oral argument.
13. As we noted supra at Part I(A), Friedman and Joyce also discussed
the possibility of suing O'Connor in the spring of 1992. At that time,
Friedman advised Joyce that it was "clear" that there was no statute of
limitations problem. This advice was based on the Appellate Division's
decision in Grunwald v. Bronkesh, 604 A.2d 126 (N.J. App. Div. 1992)
("Grunwald I"), which was ultimately overruled by Grunwald v. Bronkesh,
621 A.2d 459 (N.J. 1993) ("Grunwald II"). The District Court granted
summary judgment against Dixon in part because it concluded that it
had been reasonable for Friedman to rely upon Grunwald I at the time
of the 1992 conversation. Although Dixon assails this ruling by the
District Court, contending that New Jersey law gover ning the accrual of
a legal malpractice claim was anything but clear in 1992, we need not
resolve this dispute. Because we have deter mined that the statute of
limitations ran on any claim against O'Connor by the fall of 1991,
anything that Friedman said about such a suit in 1992 is immaterial.

                               27
According to the Restatement of the Law Gover ning
Lawyers S 26 (Proposed Final Draft No. 1 1996)--which was
quoted with approval in Herbert v. Haytaian , 678 A.2d
1183, 1188 (N.J. App. Div. 1996), and which both parties
agree accurately states New Jersey law--an attorney-client
relationship is created with respect to a particular matter
when:

       1) a person manifests to a lawyer the person's intent
       that the lawyer provide legal services to the person;
       and either

       (a) the lawyer manifests to the person consent to do so;
       or

       (b)   the lawyer fails to manifest lack of consent to do so,
       and   the lawyer knows or reasonably should know that
       the   person reasonably relies on the lawyer to provide
       the   services.

Because there is a genuine issue of material fact as to
whether an attorney-client relationship was created
pursuant to S 26(1)(b), we do not addr ess S 26(1)(a).

The first question is whether Joyce manifested an intent
that Friedman provide legal services. Friedman has never
seriously disputed the existence of this factor , and with
good reason. Joyce (on behalf of Dixon) clearly manifested
such an intent when, in 1989, he sought Friedman's advice
about the possibility of suing O'Connor for malpractice.

Friedman rests primarily on the assertion that he
"manifest[ed] lack of consent to" advise Dixon, but that
argument does not carry the day. Accor ding to Friedman's
deposition, the strongest statement he made in 1989 was:
"I don't like to handle claims against lawyers, and I'm not
sure that this one has any real foundation, and I'm
certainly not going to handle a claim that I don't think has
a foundation." This statement could be interpr eted in at
least two ways: Either Friedman was simply infor ming
Joyce that he would not pursue a malpractice action
against O'Connor unless he concluded that it had merit, or
he was refusing to advise Dixon at all. The pr ocedural
posture of this case mandates that we r esolve ambiguities
in favor of Dixon, and, as a result, we do not read this

                                 28
statement as an affirmative refusal by Friedman. Therefore,
we cannot say that there is no genuine issue of material
fact with respect to this factor.

The final issue in determining whether an attorney-client
relationship arose between Dixon and Friedman with
respect to a malpractice action against O'Connor is whether
Dixon reasonably relied on Friedman to pr ovide such
services and whether Friedman knew or should have
known that it was doing so. Though the question is close,
three things convince us that there is a genuine dispute of
material fact as to this issue.

First, at the time of the 1989 conversation, Friedman was
also representing Dixon in the Venture litigation. The
Venture suit and the potential malpractice action against
O'Connor arose out of the same set of historical events:
Dixon's sale of the Jersey City property to V enture. The fact
that Dixon was already relying on Friedman for advice and
representation in a closely related matter supports an
inference that Dixon expected Friedman to advise it about
a potential malpractice action against O'Connor and that
Friedman knew or should have known that fact.

Second, despite his purported reluctance to do so,
Friedman admitted that he gave Dixon legal advice about
suing O'Connor during the 1989 conversation. Friedman
originally claimed that his 1989 conversation with Joyce
was not actually about bringing an action against
O'Connor, but rather was concerned with determining
whether Friedman was willing to undertake such a
representation. But when directly asked whether his
statement to Joyce that he doubted that any claim against
O'Connor would have merit constituted "advice to a client,"
Friedman admitted that it "probably" did. The fact that
Friedman gave such advice on one occasion could support
an inference that Dixon reasonably expected him to do so
in the future, and that Friedman knew or should have
known that Dixon would so rely.

Finally, though the depositions are unclear as to how
Joyce and Friedman left their 1989 conversation, we believe
that the reasonable reading most favorable to Dixon
supports an inference that Dixon expected Friedman to get

                               29
back to it about a potential malpractice claim against
O'Connor and that Friedman knew or should have known
of that expectation. According to Friedman, he told Joyce
that there was no need to decide whether to sue O'Connor
at that time because they were going to attempt to convince
the Supreme Court of New Jersey to throw out the Venture
suit. This statement, particularly in light of the parties' on-
going relationship, might reasonably be understood as a
promise by Friedman to revisit the matter with Joyce once
the underlying appeal was complete.

This conclusion is also supported by Joyce's deposition.
Reading his deposition most favorably to Dixon, see supra
note 3 and accompanying text, Joyce recalled that
Friedman told him he did not "handle" malpractice actions
"personally" but that he would "check with[his] firm" to see
if another lawyer would, and, if not, he would find another
lawyer for Dixon. This testimony supports an infer ence
that, at the very least, Dixon was relying on Friedman to
find a lawyer to "handle" the malpractice action against
O'Connor, and that Friedman knew or should have known
that it was doing so.

Cutting most strongly against the conclusion that Dixon
was relying on Friedman to advise it about a malpractice
action against O'Connor are the letters Joyce wrote to
Friedman in 1992. In the August 19, 1992 letter Joyce
wrote that "[a]s distastefully as it is for me professionally,
it would seem that our attorney at the time of closing [i.e.,
O'Connor] should have know of the ECRA requirements
and, therefore, a malpractice action should be initiated --
hopefully by your firm . . . ." Joyce got no response to this
letter, and wrote Friedman another dated November 25,
1992. At the end of this second letter, Joyce informed
Friedman that he had been speaking with another lawyer
about the Venture litigation, pr ovided Friedman with that
lawyer's phone number, and stated that "his firm does a lot
of malpractice (the scum) and insurance work and, if your
firm does not, please feel free to discuss these issues also."

These letters could be understood as indicating that
Dixon was not relying on Friedman to advise it about a
malpractice suit against O'Connor because they imply that
Joyce himself did not believe that Friedman had agr eed to

                                30
advise Dixon in such a suit. This is not the only r eading of
the evidence, however. First, as pointed out by Dixon at
oral argument, the fact that Friedman may have
communicated to Dixon that he would not personally
litigate a malpractice action against O'Connor would not
preclude a finding that he agreed to advise Dixon about
one, and an agreement to give advice is all that is necessary
to establish an attorney-client relationship. Second, to the
extent the letters shed light on Dixon's state of mind, they
do so primarily in terms of what Joyce was thinking in
1992. The question before us, however, is not whether
Dixon was relying on Friedman to provide legal advice in
1992. Rather, it is whether Dixon was so r elying between
1989 (when the first conversation between Joyce and
Friedman occurred) and the fall of 1991 (when the statute
of limitations ran on any claim against O'Connor). The
relevant time period ended in the fall of 1991, but Joyce's
letters were not sent until the summer of 1992. In the
interim, Joyce and Friedman had at least one additional
conversation about suing O'Connor, and that conversation
may have changed Joyce's understanding of the state of
affairs between Friedman and Dixon. Because of this, the
letters are not dispostive as to Joyce's (and thus Dixon's)
understanding of the situation between 1989 and 1991.

We therefore hold that ther e is a genuine issue of
material fact as to whether Friedman created an attorney-
client relationship between himself and Dixon in 1989 with
respect to a potential malpractice claim against O'Connor.

B.

The final issue before us--assuming an attorney-client
relationship existed--is whether ther e is a genuine dispute
as to whether Friedman breached a professional duty that
he owed to Dixon. "[L]awyers owe a duty to their clients to
provide their services with reasonable knowledge, skill, and
diligence." Ziegelheim v. Apollo, 607 A.2d 1298, 1303 (N.J.
1992). But because " `[w]hat constitutes a reasonable degree
of care is not to be considered in a vacuum but with
reference to the type of service the attor ney undertakes to
perform,' " the Supreme Court of New Jersey has
formulated the standard of care"in rather broad terms." Id.

                                31
(quoting St. Pius X House of Retreats v. Diocese of Camden,
443 A.2d 1052 (N.J. 1982)); see also Conklin v. Hannoch
Weisman, 678 A.2d 1060, 1069 (N.J. 1996) ("Malpractice in
furnishing legal advice is a function of the specific situation
and the known predilections of the client.").

Some general precepts are nevertheless clear. A lawyer
"must take `any steps necessary in the pr oper handling of
[a] case,' " and these steps "include, among other things, a
careful investigation of the facts of the matter, the
formulation of a legal strategy, the filing of appropriate
papers, and the maintenance of communication with the
client." Ziegelheim, 607 A.2d at 1303 (quoting Passanante v.
Yormark, 350 A.2d 497 (N.J. App. Div. 1975)). A lawyer is
also "obligated to keep the client informed of the status of
the matter for which the lawyer has been retained, and is
required to advise the client on the various legal and
strategic issues that arise." Id.

1.

The District Court granted summary judgment against
Dixon partly because it read the recor d as saying that
during the 1989 conversation Friedman told Joyce that
Dixon need not decide whether to sue O'Connor at that
time "because there was no imminent statute of limitations
problem." Even if Dixon was ultimately corr ect that its
claim against O'Connor accrued in the fall of 1985 and
expired in the fall of 1991 (and we have deter mined that it
was), the District Court stressed that Dixon still had over
two years to sue O'Connor at the time of the 1989
conversation, which occurred during the summer of that
year. Accordingly, to the extent that Friedman counseled
Dixon that there was no "imminent" statute of limitations
problem in the summer of 1989, his advice was sound. And
because the advice was correct when given, the District
Court reasoned that it was non-actionable "due to the legal
principle that [a] plaintiff suf fers no damage as a result of
receiving correct advice."

To the extent that the District Court concluded that
Friedman's actions in 1989 alone would not support
malpractice liability, we have no quarrel with its analysis.

                               32
Disagreeing, Dixon infers from the court's holding that it
relied on the "judgmental immunity defense" recognized in
Procanik v. Cillo, 543 A.2d 985 (N.J. App. Div. 1988).
Acknowledging that law is not always static and
predictable, Procanik shields fr om malpractice liability
lawyers who offer a "reasoned pr ofessional evaluation"
based on the "exercise of an informed judgment"--even if
their advice later turns out to have been incorrect. Id. at
994. Because Friedman admits that he did no r esearch
regarding the statute of limitations in 1989, Dixon contends
that Friedman is ineligible for this defense. Though Dixon's
argument on this point is sound, it is also irrelevant. What
it misses is that "advice" that the District Court understood
Friedman as having given Dixon in 1989, i.e., that there
was no "imminent" statute of limitations pr oblem, was
accurate. And, like the District Court, we fail to see how
receiving correct legal advice could ever cause harm to a
client.

2.

Dixon's primary contention, however, is not that
Friedman committed malpractice by giving it incorr ect
advice in 1989. Instead, it submits that Friedman br eached
his professional duties by doing nothing whatsoever
between the 1989 conversation and when the statute of
limitations ran on any claim against O'Connor in 1991.
Specifically, Dixon alleges that Friedman committed
malpractice by: (1) advising Dixon in 1989 to delayfiling a
claim against O'Connor; (2) assuring Dixon that he would
revisit the issue again; (3) neglecting to r esearch when the
limitations period would run; and (4) failing to r evisit the
issue or to advise Dixon further about a claim against
O'Connor until after the statute of limitations ran in 1991.

When the evidence is read in the light most favorable to
Dixon, we believe that there is a genuine issue of material
fact as to whether Friedman committed malpractice. W e
have already determined that ther e is a genuine issue as to
whether Friedman created an attorney-client relationship
between himself and Dixon with regard to a potential
malpractice action against O'Connor. If such a relationship
arose, Friedman assumed a duty to take any steps

                               33
necessary for the proper handling of the matter , to
communicate about the matter with Dixon, and to advise it
about the legal and strategic issues involved in the
representation. See Ziegelheim v. Apollo, 607 A.2d 1298,
1303 (N.J. 1992). Substantial New Jersey case law supports
the proposition that a lawyer has a specific duty to
research, monitor, and advise his or her clients about
statutes of limitations. See Sommers v. McKinney , 670 A.2d
99, 104 (N.J. App. Div. 1996) (observing that "[i]n rare
cases, expert testimony is not required in a legal
malpractice action where the duty of car e to a client is so
basic that it may be determined by the court as a matter of
law" and referencing the example of a lawyer who fails to
file suit before the running of the statute of limitations);
Brizak v. Needle, 571 A.2d 975, 982-83 (N.J. App. Div.
1990) (finding the evidence sufficient to support a jury's
finding of malpractice in a case where a lawyer failed to
advise a client about the statute of limitations based on his
mistaken view of when the claim accrued); Fuschetti v.
Bierman, 319 A.2d 781, 784 (N.J. Law Div. 1974) ("The
failure of an attorney to commence an action within the
time of the statute would ordinarily be considered
neglect.").

In Brizak, the Appellate Division held that there was
enough evidence to support a jury's verdict in favor of the
plaintiff in a legal malpractice action. See 571 A.2d at 982-
85. The plaintiff had retained the defendant lawyer to
represent her in a medical malpractice action. The lawyer
never counseled the plaintiff about the statute of limitations
because of his erroneous belief that a medical malpractice
claim does not accrue until a plaintiff secur es an opinion
by another doctor that the doctor he or she wishes to sue
was negligent. See id. at 980, 982. This evidence, the
Appellate Division held, was sufficient to support the jury's
finding that the defendant lawyer had been negligent. After
surveying applicable New Jersey case law, see id. at 981-
82, the court determined that, based on "the state of the
law when defendant made his judgment[,] ther e was no
reasonable basis for his belief " as to when the plaintiff 's
medical malpractice claim would accrue. Id. at 982.
Moreover, the court indicated that it would have sustained
the jury's verdict even had the defendant's mistaken belief

                               34
been reasonable because the defendant had failed "to warn
plaintiff that her claim could be time-barr ed sooner in the
event his belief [as to when her medical malpractice claim
would accrue] was wrong." Id.

In light of both the general standards laid down by the
Supreme Court of New Jersey and the specific precedent of
Brizak, we hold that there is a genuine dispute of fact as to
whether Friedman was negligent.14 The record establishes
that Friedman did nothing with regar d to a claim by Dixon
against O'Connor at any time between the initial
conversation in the summer of 1989 and when the statute
of limitations expired in the fall of 1991. Friedman never
revisited the issue with Dixon during that time, he did no
research to determine when the statute of limitations might
expire, he did not file suit on Dixon's behalf, and he made
no effort to secure another attor ney for Dixon. Under these
circumstances, we think there is a genuine issue of
material fact as to whether Friedman exercised reasonable
and ordinary care and diligence.

One might argue that Friedman did not br each a
professional duty because, at most, he agr eed only to find
a lawyer to handle Dixon's malpractice claim--not to
research, monitor, and advise Dixon about the statute of
_________________________________________________________________

14. Brizak can be read as indicating that some attorneys who fail to
advise or misadvise their clients about statutes of limitations are liable
for malpractice as a matter of law. Such a rule might be viable in two
sorts of cases: (1) where a lawyer never mentions the statute of
limitations or the risks inherent in late-filing prior to the time the
underlying claim expires; or (2) where a lawyer falsely describes muddy
legal waters as clear. Indeed, Brizak suggests that liability may attach
if
a filing deadline is missed because a lawyer failed to counsel a client
that the lawyer's opinion as to the status of the governing standards is
vulnerable and might turn out to be wr ong in light of lurking problems
with respect to the stability of precedents that inform the lawyer's
opinion. In this case, however, we have no occasion to predict whether
the Supreme Court of New Jersey would so hold. As we noted previously,
Dixon has not appealed the District Court's denial of its motion for
summary judgment; it has appealed only the grant of summary
judgment in favor of Friedman and Franzblau Dratch. The only question
before us, therefore, is whether the record would support a finding that
Friedman committed malpractice--not whether it compels one.

                               35
limitations. We conclude, however, that this argument is
not sufficient to compel summary judgment in Friedman's
favor. First, there is no evidence that Friedman took any
action with respect to getting Dixon another attorney
between 1989 and 1991. Even if he assumed an obligation
only to do that one thing, Friedman was obligated to do
what he promised and there is no evidence that he did.

Additionally--assuming that an attorney-client
relationship was created--we disagr ee that Friedman was
obligated to do nothing more than find Dixon another
lawyer. This argument conflates two different inquiries: (1)
whether an attorney-client relationship was created
between Friedman and Dixon with respect to a malpractice
action against O'Connor; and, assuming it was (2) whether
Friedman breached a professional duty. As we have
explained above, the evidence suggesting that Friedman
promised to look into getting another lawyer to handle the
matter is probative as to whether Friedman cr eated an
attorney-client relationship with r espect to the O'Connor
matter. Assuming that such a relationship was created,
however, we do not believe that Friedman is entitled to
summary judgment on the grounds that that is all he
agreed to do. Once an attorney-client r elationship is created
with respect to a given matter, New Jersey's Rules of
Professional Conduct states that a lawyer may only "limit
the objectives of representation" if"the client consents after
consultation." New Jersey Rules of Professional Conduct,
Rule 1.2; see also Baxt v. Liloia, 714 A.2d 271, 275 (N.J.
1998) (Rules of Professional Conduct ar e relevant to,
though not dispositive of, the question whether a lawyer
committed malpractice). We do not believe that the evidence
establishes as a matter of law that Friedman expressly
informed Dixon that he would do no mor e than see if he
could find it another attorney, much less that Dixon ever
consented to this limitation.

We therefore conclude that if Friedman created an
attorney-client relationship with r espect to a malpractice
claim against O'Connor (an issue on which we have already
concluded that there is a genuine issue of material fact),
there is a genuine issue of material fact as to whether he
breached the professional duties such r epresentation

                               36
imposed. We will therefore r everse the District Court's order
granting summary judgment in favor of Friedman and
Franzblau Dratch.15

V.

The Judgment in Nos. 99-6055 and 99-6056, dismissing
the claims against O'Connor's estate and the Schumann
firm, will be affirmed. The Judgment in No. 99-6054,
granting summary judgment in favor of Friedman and
Franzblau Dratch, will be reversed and the case remanded
for further proceedings consistent with this opinion. Parties
to bear their own costs.
_________________________________________________________________

15. On appeal, Friedman and Franzblau Dratch pr offer another basis for
affirming the judgment in their favor . Dixon's action against Friedman is
based on its contention that he caused it to lose its malpractice claim
against O'Connor. But even if Friedman was negligent, his dereliction
caused no harm to Dixon unless it had a valid claim against O'Connor.
Friedman and Franzblau Dratch argue that Dixon and Venture would
not have been able to avoid ECRA even had O'Connor advised Dixon
about it. If this is true then any negligence by O'Connor caused no harm
to Dixon, and Dixon had no valid malpractice claim against Friedman.
This is a straightforward example of the case-within-a-case phenomenon
that often arises in professional malpractice litigation.

Dixon offered evidence in response to Friedman and Franzblau
Dratch's charges. See supra note 8. Although the District Court
described this issue as being "problematic" for Dixon, the court never
resolved it. We could certainly consider this argument given our plenary
standard of review, see, e.g., Hudson United Bank v. LiTenda Mortgage
Corp., 142 F.3d 151, 159 (3d Cir. 1998), but we decline to do so.
Determining whether there is a genuine dispute of fact over whether
Dixon and Venture could have avoided ECRA had O'Connor told Dixon
about it will require a highly fact-intensive, and ultimately
counterfactual inquiry (because O'Connor did not, in fact, ever tell Dixon
about ECRA). We therefore believe that the sounder course of action is
to give the parties an opportunity to focus on this complicated issue
during a further round of briefing and to allow the District Court to rule
on it in the first instance.

                               37
A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

                               38