Charity Wierman v. Casey's General Stores

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 10-1362
___________
James Joyce, *
*
Appellant, *
* Appeal from the United States
v. * District Court for the
* Eastern District of Missouri.
Armstrong Teasdale, LLP, *
*
Appellee. *
___________
Submitted: September 23, 2010
Filed: March 29, 2011
___________
Before BYE, BEAM, and SMITH, Circuit Judges.
___________
BYE, Circuit Judge.
On September 12, 2008, James Joyce sued Armstrong Teasdale, LLP, alleging
it had breached a fiduciary duty the law firm owed to him. At the same time the law
firm represented Joyce individually, it prepared several documents for TechGuard
Security, L.L.C. (a company Joyce formed with his wife) granting TechGuard an
exclusive license to sell certain computer firewall technology Joyce had invented.
Joyce later lost half of the patent rights to his invention when he and his wife
divorced. The district court concluded Joyce's alleged claim accrued on January 1,
2001, at the moment he signed the license agreement, and dismissed Joyce's complaint
under Rule 12(b)(6) of the Federal Rules of Civil Procedure based on the ground it
was barred by the five-year statute of limitations applicable to legal malpractice claims

-- 1 of 7 --

in Missouri. See Mo. Rev. Stat. § 516.120(4). Joyce appeals arguing he did not
reasonably discover his injury at the moment he executed the license agreement. We
agree, and therefore reverse and remand for further proceedings.
I
Our factual recitation tracks the allegations in Joyce's complaint,1 keeping in
mind we are "bound to accept as true, for purposes of [a Rule 12(b)(6)] motion, the
facts alleged by the plaintiff." Stephens v. Associated Dry Goods Corp., 805 F.2d
812, 814 (8th Cir. 1986).
At some point prior to 2000, Joyce invented a new computer firewall
technology which he called the Heuristic Firewall. "This Heuristic Firewall more
efficiently detects attacks on computer networks within real time to reduce losses from
external attacks by foiling a broader range of attacks, extends the abilities of firewalls
and increases performance of computer networks." Joyce's First Amended Complaint
at ¶ 5. In February 2000, Joyce and his then-wife, Suzanne Magee Joyce (Magee),
formed a limited liability company, TechGuard, for the purpose of marketing and
selling the new technology.
TechGuard's initial ownership was divided between Joyce (3.9 million units),
Magee (4.9 million units), and another married couple, Andrea Johnson (one million
units) and Jefferey Johnson (300,000 units), so that TechGuard could be certified as
a small disadvantaged business with the Small Business Administration (SBA). After
the SBA rejected TechGuard's application for certification, Joyce transferred 700,000
units of his ownership to Andrea Johnson, who also received Jefferey Johnson's entire
1The original complaint filed on September 12, 2008, was subsequently
amended, and it was the first amended complaint which was dismissed by the district
court. Any references we make to the complaint refer to the first amended complaint.
-2-

-- 2 of 7 --

ownership interest. TechGuard then received the necessary certification from the SBA
and qualified for obtaining government contracts.
The Armstrong Teasdale firm provided legal services to help establish
TechGuard. Armstrong Teasdale also represented the company after it was formed.
The firm's representation included the provision of legal services associated with the
economic exploitation of Joyce's computer firewall technology. Armstrong Teasdale
represented TechGuard from the date of its formation through 2008. During the time
Armstrong Teasdale represented TechGuard, the firm also represented Joyce,
individually, in applying for a patent on his Heuristic Firewall technology. Joyce
alleges Armstrong Teasdale represented him in an individual capacity from April 14,
2000, through February 11, 2003, the day his patent was granted. Joyce alleges the
firm represented him again in February 2006 by filing a provisional application for a
patent which involved the expansion and development of the Heuristic Firewall. The
firm represented Joyce an additional time in November 2006 when it filed an actual
patent based upon the expansion and development of the Heuristic Firewall.
While representing both Joyce and TechGuard, Armstrong Teasdale prepared
three documents – the Confidentiality and Invention Rights Agreement, the Transfer
Agreement, and the Patent License Agreement – on behalf of TechGuard. The three
documents relate to TechGuard's exclusive right to use and sell Joyce's computer
firewall technology. Both Joyce and TechGuard signed the Patent License
Agreement, the last of the three documents, on January 1, 2001. Armstrong Teasdale
advised Joyce to sign the Patent License Agreement and told him it was not necessary
for him to have separate legal counsel. Armstrong Teasdale also advised Joyce as to
his rights in the Heuristic Firewall being sufficiently protected because he and Magee
were majority shareholders in TechGuard. At no time did Armstrong Teasdale inform
Joyce it was only representing TechGuard with respect to the three documents
granting TechGuard the exclusive right to use and sell the Heuristic Firewall
-3-

-- 3 of 7 --

technology, or that he should consult with other legal counsel before signing the three
agreements.
In 2003, TechGuard had the Heuristic Firewall technology valued by a
company specializing in the valuation of computer technology. At that time, the
licensing royalty value of Joyce's invention was estimated in the high hundreds of
millions of dollars. TechGuard did not, however, make its first sale of Joyce's
patented Heuristic Firewall until sometime in 2005. Joyce quit working for
TechGuard shortly thereafter in 2006. In 2007, Joyce and Magee divorced. In the
divorce decree, Magee was awarded 50% of the Heuristic Firewall patent.
On September 12, 2008, Joyce brought this suit against Armstrong Teasdale.
The complaint alleged, inter alia, as to Armstrong Teasdale having breached a
fiduciary duty by acting in conflict with Joyce's interests in representing TechGuard
with respect to the economic exploitation of his computer firewall technology. Joyce
further alleged he was damaged by such breach of fiduciary duty, claiming he "has
lost and will continue to lose considerable income from not having a proper and fair
licensing agreement for the patented Heuristic Firewall technology and/or its
improvement[.]" Id. at ¶ 29.
Armstrong Teasdale filed a motion to dismiss Joyce's complaint pursuant to
Rule 12(b)(6). Armstrong Teasdale argued Joyce's claim was barred by Missouri's
five-year statute of limitations for legal malpractice claims. See Mo. Rev. Stat.
§ 516.120(4). Armstrong Teasdale argued the wrongdoing and damage alleged in
Joyce's complaint flowed entirely from the three agreements (the transfer agreement,
confidentiality and invention rights agreement, and patent license agreement), all of
which were signed more than five years before Joyce filed this action. The district
court concluded Joyce's damages were ascertainable when he signed the license
agreement on January 1, 2001, because it was obvious based on the plain language of
the agreements Joyce relinquished all rights to his computer firewall technology. The
-4-

-- 4 of 7 --

district court granted Armstrong Teasdale's motion to dismiss. Joyce filed this timely
appeal.
II
As a general rule, "the possible existence of a statute of limitations defense is
not ordinarily a ground for Rule 12(b)(6) dismissal unless the complaint itself
establishes the defense." Jessie v. Potter, 516 F.3d 709, 713 n.2 (8th Cir. 2008) (citing
Varner v. Peterson Farms, 371 F.3d 1011, 1017-18 (8th Cir. 2004)). The district court
concluded Joyce's complaint established the statute of limitations had run on his claim.
We review such conclusion de novo. Krentz v. Robertson, 228 F.3d 897, 905 (8th
Cir. 2000).
In Missouri, the limitations period does not begin to run at the time of the
wrongdoing, but when the damages from the wrong are incurred and are reasonably
capable of being ascertained by the injured party. See Mo. Rev. Stat. § 516.100
("[F]or the purposes of [§ 516.120], the cause of action shall not be deemed to accrue
when the wrong is done . . . but when the damage resulting therefrom is sustained and
is capable of ascertainment."). Missouri courts have interpreted this statute to mean
the limitations period commences when a "reasonably prudent person [is] on notice
of a potentially actionable injury." Powel v. Chaminade Coll. Preparatory, Inc., 197
S.W.3d 576, 582 (Mo. 2006).
Armstrong Teasdale argues the complaint itself establishes a statute of
limitations defense. The law firm contends Joyce was on notice of a potentially
actionable injury at the very moment he signed the agreements because their effect –
the transfer of his rights to TechGuard – could be gleaned from the agreements'
obvious language and would therefore be ascertainable to a reasonably prudent person
upon the signing of such agreements. We disagree as to Joyce's knowledge of the
-5-

-- 5 of 7 --

effect of the agreements, standing alone, serving as notice of a potentially actionable
injury under the circumstances pleaded in Joyce's complaint.
Joyce, of course, knew the effect of the agreements was to transfer his rights in
the Heuristic Firewall to TechGuard. To prevail on its statute of limitations defense,
however, Armstrong Teasdale must prove a reasonably prudent person in Joyce's
position would not only know the effect of the agreements, but would also know the
effect of the agreements would give rise to a potentially actionable injury. Armstrong
Teasdale cannot prove such a point based on the complaint itself because Joyce
alleged Armstrong Teasdale advised him at the time he signed the agreement he would
not be injured. The complaint specifically states "[t]he Defendant Armstrong
Teasdale attorney also told [Joyce] that since [Joyce] and his then wife were majority
shareholders, that his interests in the Heuristic Firewall were sufficiently protected."
First Amended Complaint at ¶ 19.
Armstrong Teasdale represented Joyce when the firm allegedly told him he
would not be injured by signing the agreements, and thus he had a right to rely upon
such representation. During the course of an attorney-client relationship, Missouri
does not impose upon a layperson the duty to double-check the attorney's work or to
understand that an attorney's conduct caused harm unless a source external to the
attorney-client relationship reasonably puts the layperson on notice the attorney has
caused harm. See Klemme v. Best, 941 S.W.2d 493, 497 (Mo. 1997) (indicating the
plaintiff "was under no duty to double check [his attorney's] work as long as [he] was
his attorney" and concluding the statute of limitations did not begin to run until the
plaintiff retained separate counsel and "the fact of damage could have been discovered
or made known."); Zero Mfg. Co. v. Husch, 743 S.W.2d 439, 441 (Mo. Ct. App.
1987) (indicating a plaintiff was reasonably put on notice of his contract attorney's
wrongdoing only after opposing counsel identified the error in the ensuing contract
negotiations); see also Wright v. Campbell, 277 S.W.3d 771, 777 (Mo. Ct. App. 2009)
("In the absence of any known or reasonably knowable circumstances which would
-6-

-- 6 of 7 --

impose on the client a duty to double-check the attorney's proper performance of his
professional obligations, the mere passage of a mandatory time deadline on an
underlying claim is not sufficient to commence the limitations period on a legal
malpractice action.").
Joyce filed his complaint on September 12, 2008. Thus, in order to prevail on
its statute of limitations defense, Armstrong Teasdale has to prove Joyce's cause of
action accrued more than five years prior to that date. The complaint itself does not
establish such a fact. The complaint does indicate Armstrong Teasdale represented
Joyce in a personal capacity from April 2000 through February 2003, and again in
February 2006 and November 2006. The complaint further alleges Armstrong
Teasdale told Joyce that signing the agreements would not cause him harm.
Armstrong Teasdale represented Joyce at the time it is alleged to have told him he
would not be harmed by signing the agreements, and nothing in the complaint
establishes that a source outside of Joyce's attorney-client relationship has put Joyce
on notice that signing the agreements would cause him harm. As a result, Armstrong
Teasdale has not shown – at least at the Rule 12(b)(6) stage – that Joyce's cause of
action accrued more than five years before it was filed.
III
We reverse and remand for further proceedings.
______________________________
-7-

-- 7 of 7 --