Background
Cadence Bank sued Maynard Nexsen over legal advice associated with a transaction and alleged losses that later became fully apparent. The firm moved to dismiss or for summary judgment under the Alabama Legal Services Liability Act's limitations provisions.
The Jefferson Circuit Court denied relief but certified a permissive interlocutory appeal asking when the claim accrued, whether the two-year period had expired, and whether the Act's six-month discovery provision or another tolling principle saved the action.
The Court’s Holding
The Supreme Court answered that the claims were untimely. Even under the injury-based accrual approach urged by Cadence, legal injury first occurred when the transaction closed in reliance on the allegedly faulty advice. The limitations clock does not await the full amount of damage or the later development of every adverse consequence.
The Court also rejected reliance on the ameliorative discovery period and asserted tolling grounds on the record presented. It reversed and directed entry of judgment for Maynard. A separate concurrence in the result cautioned against unnecessarily revisiting accrual precedents when the bank lost even under its preferred test.
The opinion’s analysis provides additional detail: “responsible for the insurance claims AIC is unable to pay. But § 6-5- 574(a) states that the limitations period begins to run upon the act or omission complained of, hence the applicability of the "occurrence" rule and not the "damage" rule. All of Cadence's damage stems from Maynard's alleged violation of a duty to advise Cadence that it needed to seek regulatory approval of the loan to AHC. And, although we endorse the occurrence rule in construing § 6-5-574(a), we note that, even in cases applying traditional notions of damage and accrual of causes of action, the Court has held that the limitations period begins to run when the 5Although there is no tolling agreement in the record on appeal, the parties acknowledge that they entered into a tolling agreement that tolled the statute of limitations from March 3, 2023, through the filing of Cadence's ALSLA complaint. By that point, however, the limitations period had expired. first legal injury occurs, regardless of whether the full amount of damage has manifested: "The limitations period begins to run when the plaintiff first suffers 'legal injury,' not when the plaintiff may later pay damages or suffer some compounding of the original injury. Michael v. Beasley, 583 So. 2d 245 (Ala. 1991). In a breach of contract action, for example, the limitations period runs from the time the contract is broken, although substantial damage or loss from the breach is not sustained until afterward. Stephens v. Creel, 429 So. 2d 278 (Ala. 1983). Even if the plaintiff is ignorant of the injury at the time (except in fraud cases), the limitations period begins to run. Garrett v. Raytheon Co., 368 So. 2d 516 (Ala. 1979)." Mississippi Valley Title Ins. Co. v. Hooper, 707 So. 2d 209, 213 (Ala. 1997). Moreover, specifically, there are cases involving transactions that close in reliance on allegedly faulty legal advice, that suggest that legal injury first occurs upon the closing of the transaction. See, e.g. Coilplus- Alabama, 53 So. 3d at 906 (holding that the plaintiff was damaged when it closed on a bond issue in reliance on an incorrect legal opinion regarding the tax-exempt status of the issued bonds); Sirote & Permutt, P.C. v. Bennett, 776 So. 2d”
Key Takeaways
- An Alabama legal-malpractice claim may accrue when a client first acts to its detriment on challenged advice.
- Later enlargement or clearer measurement of damages does not restart the limitations period.
- The ALSLA discovery extension is a limited safety provision, not a general postponement until consequences mature.
Why It Matters
Alabama lawyers evaluating professional-liability exposure should construct a date-specific chronology at the outset: advice, reliance, closing, first expense or impairment, discovery, and filing. The earliest legally cognizable injury may control even if later litigation reveals much larger losses.
Clients and successor counsel should preserve possible claims while the underlying transaction or dispute continues. Waiting for damages to become final can forfeit the claim before the commercial controversy is resolved.