Voluntary Dismissal as Settlement Strategy Not Saved by Journey’s Account Statute

On Friday, April 29, 2011, the Indiana Court of Appeals addressed the application of IC § 34-11-8-1, the Journey’s Account Statute, to a novel situation in Blinn v. The Law Firm of Johnson, Beaman, Bratch, Beal and White, LLP, ___ N.E.2d ___ (Ind. Ct. App. 2011), Cause No. 27A05-1011-CT-721. In this case, a legal malpractice case against a law firm was voluntarily dismissed as part of a strategy to encourage a settlement with one of the members of that law firm. The question before the Court was whether the plaintiff could revive the suit when the settlement did not occur. The Court held that he could not.

In this case, Blinn sued an attorney and his law firm for legal malpractice. The attorney and firm were represented by different counsel, but both were insured by the same “wasting” malpractice insurance policy, whereby the proceeds of the policy dwindled as the cost of defending the action increased. Blinn was told that the attorney would agree to a policy-limits settlement, but that the firm would not. Therefore, Blinn’s counsel proposed that he dismiss the firm without prejudice, with a conversion of the dismissal to one with prejudice if the settlement was obtained. A stipulation of dismissal was then filed (after the statute of limitations had run).

Settlement negotiations were unsuccessful, so Blinn filed a motion to reinstate the firm as a defendant. The firm opposed that motion and the trial court denied the motion. Blinn then filed a new complaint against the law firm, arguing that the Journey’s Account Statute allowed him to do so. The firm moved to dismiss the case and the trial court dismissed that case. Blinn appealed.

Blinn continued to argue that the Journey’s Account Statute preserved his claim on appeal. However, the Court did not agree. It specifically noted that Blinn failed to elicit an explicit promise from the firm not to contest reinstatement if settlement
negotiations with Beal failed. The firm’s failure to tell Blinn that it would raise a statute of limitations defense if he followed his proposed course of action did not change this outcome because the firm owed Blinn no duty to consider whether Blinn would be able to re-file his complaint if mediation was unsuccessful.

Blinn’s strategy in this case was not ill-advised, it was merely poorly executed. Counsel who wishes to employ the same type of strategy in a future case should get an express agreement from the defendant who will be dismissed without prejudice that they will not contest reinstatement should settlement (or whatever condition) not occur. This express agreement will offer greater protection than the Journey’s Account Statute.

Lessons:

1. Do not expect to reinstate a defendant who has been dismissed without prejudice after the statute of limitations has run if you do not have an explicit agreement to do so upon the occurrence of certain conditions.
2. The Court of Appeals will not apply the Journey’s Account Statute to save a claim absent extraordinary circumstances.