On July 17, 2009, the Michigan Supreme Court issued its decision in Seyburn, Kahn, Ginn, Bess, Deitch & Serlin, P.C. v. Bakshi, No. 136436. The Court explained that an attorney's claim for unpaid legal fees under a formal contract for legal services accrues at the time that the attorney-client relationship ends. Because the plaintiff sued to recover its fees more than 6 years after Plaintiff Seyburn Kahn's attorney-client relationship with Defendant Bakshi ended, the Court unanimously held that Seyburn Kahn's claim for unpaid attorney fees was barred by the statute of limitations. The Court affirmed in part, and reversed in part, the decision of the Court of Appeals and remanded the case to the trial court.
In 1989, Bakshi hired the law firm Seyburn, Kahn, Ginn, Bess & Serlin, P.C. to represent him and his companies in multiple matters. Bakshi paid the law firm for its legal services until November 1992, when he informed Seyburn Kahn that he would not make any future payments. Seyburn Kahn continued to represent Bakshi in ongoing litigation into 1993, then moved to withdraw. The Court of Appeals granted Seyburn Kahn's motion on September 30, 1993. In October 1993, Bakshi requested his files, and after reviewing them, Seyburn Kahn reproduced the files for Bakshi. The law firm sent Bakshi a final invoice showing the total unpaid balance for its services and certain costs and fees relating to the return of Bakshi’s files. Bakshi did not pay the invoice.
On October 8, 1999, the law firm sued Bakshi to recover the unpaid legal fees. Bakshi argued that the six-year statute of limitations on this claim had expired, because the breach of contract claim accrued in November 1992 when Bakshi stopped paying the invoices. Bakshi further argued that if the law firm was proceeding under an open account theory, the claim would have accrued in March 1993, before the firm withdrew from representing him and before the firm reviewed his files to return them to him. The law firm responded that it performed legal services for Bakshi on October 12, 1993 when it returned his files, and therefore, the statute of limitations had not expired when the law firm filed its complaint.
The Court of Appeals held that the law firm’s claim accrued on September 30, 1993, the date upon which the Court of Appeals issued its order terminating the law firm’s representation of Bakshi, and therefore, that the statute of limitations had expired when the law firm filed its complaint.
The Michigan Supreme Court granted leave to determine when Seyburn Kahn's claim accrued. The Court rejected Seyburn Kahn's argument that its action was to recover a mutual and open account because the account ceased being mutual in November 1992 when Bakshi refused to make any additional payments and because the relationship was governed by an express written contract.
The Court then considered when the law firm's contractual cause of action accrued. The Court noted that a breach of contract action normally accrues when the breach occurs, e.g. when one party refuses to pay. But because lawyers remain obligated to continue representing their clients in litigation even if the client refuses to pay until the court permits the termination of the engagement, the Court reasoned that a cause of action for recovery of unpaid legal fees in this context terminates upon the termination of the attorney-client relationship. In a footnote, the Court explained that if the attorney and client have an agreement that requires payment on some date after the termination of the relationship, then the cause of action accrues on that date. The Court refused to extend the date of accrual to the date on which Seyburn Kahn provided ministerial file review and copying services in October 1993. Because the Court of Appeals order terminating the attorney-client relationship was issued on September 30, 1993, and Seyburn Kahn did not initiate its action against Baskhi until October 8, 1999, the Court held that the statute of limitations barred Seyburn Kahn's claim except as to the $442 due for file review and copying.