A federal district court recently denied a law firm’s motion to dismiss a legal malpractice suit against it on statute of limitations grounds. Smash Franchise Partners, LLC v. Barber Power Law Grp., PLLC, 2025 WL 2598369 (W.D.N.C. Sept. 8, 2025).
Smash Franchise Partners, LLC (“Smash”) sued its outside franchise counsel alleging legal malpractice and breach of fiduciary duty stemming from counsel’s preparation of two Franchise Disclosure Documents (FDDs) in 2019 and 2020 and representation in an arbitration concerning one of those FDDs. Smash alleged that it made false statements to its franchisees in reliance on counsel’s advice. Based on the false statements, a franchisee sought rescission of its franchise agreement and was awarded $2.8 million in arbitration in May 2022. Three more franchisees demanded rescission and arbitration between December 2022 and November 2023. In its complaint, Smash alleged that counsel’s “last act” giving rise to its claim “occurred in or around late 2021 or early 2022” and that false statements in the 2020 FDD were not reasonably discoverable until franchisees demanded rescission and arbitration in December 2022.
The law firm moved to dismiss Smash’s malpractice suit based on the affirmative defenses of the statutes of limitations and statutes of repose. Under N.C. Gen. Stat. § 1-15(c), North Carolina’s relevant statute of limitations and statute of repose, Smash could only bring an action within three years of counsel’s “last act” unless Smash could show economic loss from malpractice that was not discoverable for at least two years after the expiration of the three-year statute of limitations and Smash sued within one year of discovery of the malpractice. In no circumstance could Smash sue more than four years after counsel’s last act. Citing to factual findings from the May 2022 arbitration award against Smash, the law firm argued that the latest possible “last act” occurred on May 12, 2020. The court rejected this argument and denied OFC’s motion to dismiss, noting that dismissal under 12(b)(6) was inappropriate because “[w]hile Defendants’ statute of limitations defense may ultimately warrant a different conclusion at a later stage, the defense demands a fact-intensive inquiry on a complete evidentiary record.”
*Asad Imam is a Law Clerk for Lathrop GPM who contributed to the writing of this post.