Malicious Prosecution: Bad News
By Michael C. Denison
Edited by Peg Healy
After rejoicing over a civil verdict for the defense, defense lawyers often hear their clients ask, "Now, can we sue them for malicious prosecution?" Despite the impulse of the successful defendant to sue a perceived persecutor, malicious prosecution lawsuits do not immediately follow every defense verdict, because meeting the burden of proof on the elements of malicious prosecution is very difficult.
Malicious prosecution continues to be a disfavored cause of action. Crowley v Katleman (1994) 8 C4th 666, 680; Babb v Superior Court (1971) 3 C3d 841, 847. Although most litigators are generally familiar with the concept of malicious prosecution, recent case law continues to define -- and sometimes limit -- the elements of the tort.
In malicious prosecution cases, the players are often confusing because the plaintiff in the first case becomes the defendant in the second case and vice versa. The first suit is referred to as the underlying case (UC), in which the UC plaintiff unsuccessfully sued the UC defendant, who then brings the suit for malicious prosecution (MP). Thus, the UC plaintiff and the MP defendant are the same, the UC defendant and the MP plaintiff are the same, and the UC plaintiff's attorney and the MP attorney-defendant are the same.
The elements of malicious prosecution arising out of a civil case are as follows: (1) The MP defendant initiated or was actively instrumental in the commencement or maintenance of a civil proceeding against the MP plaintiff, (2) The civil proceeding against the MP plaintiff terminated in the MP plaintiff's favor, (3) The MP defendant acted without probable cause in commencing or maintaining the civil proceeding, (4) The MP defendant acted with malice, and (5) The malicious actions of the MP defendant caused the MP plaintiff to suffer injury, damage, loss, or harm. California Jury Instructions-Civil (BAJI) 7.30 (West Pub., 1995); see also, Judicial Council of California Civil Jury Instructions (CACI) 1501 (West Pub., 2003). The elements of favorable termination, lack of probable cause, and malice are the focal points of most published opinions on malicious prosecution.
To obtain summary adjudication on a cause of action, or summary judgment if only one cause of action is alleged, a defendant need only defeat one element of the claim. CCP §437c(o)(2). Because probable cause is to be determined by the court based on an objective standard rather than a subjective standard, Sheldon Appel Co. v Albert & Oliker (1989) 47 C3d 863, 885, a summary judgment motion on probable cause often is the MP defendant's first line of attack. The probable cause standard is whether any reasonable attorney would have thought the claim tenable, or not frivolous. A claim is frivolous only if any reasonable attorney would agree that it is totally and completely without merit. Sheldon Appel, 47 C3d at 885-886.
Unlike a defendant, a plaintiff cannot seek summary adjudication on an element of a cause of action, because such a motion must be directed to an entire cause of action, an affirmative defense, or an issue of duty. CCP §437c(f), (o)(1). Hence, an MP defendant's summary judgment motion on the issue of probable cause should not risk a countermotion being granted for the MP plaintiff by the trial court on the same issue.
The UC plaintiff's loss of the underlying case does not automatically establish a lack of probable cause, nor does it raise such an inference. Nicholson v Lucas (1994) 21 CA4th 1657, 1670; Klein v Oakland Raiders, Ltd. (1989) 211 CA3d 67, 82 n7. Nevertheless, rulings in the underlying case can establish the existence of probable cause for the MP case. For example, a victory at trial, even if reversed on appeal, will establish probable cause unless it was procured by fraud. Cowles v Carter (1981) 115 CA3d 350, 355-59. Similarly, denial of the UC defendant's motion for summary judgment in an earlier case normally establishes there was probable cause to sue, thus barring a later malicious prosecution suit, unless, for example, the summary judgment motion was denied because of materially false evidence. Roberts v Sentry Life Ins. (1999) 76 CA4th 375, 384; see also, Wilson v. Parker, Covert & Chidester, (2002) 28 C4th 811 (denial of anti-SLAPP motion on merits precludes later MP case).
Although the element of probable cause is an issue of law, it does have both a factual and a legal component. Leonardini v Shell Oil Co. (1989) 216 CA3d 547, 570 (facts were not disputed, case turned on legal question). A lack of probable cause may arise from an insufficiency in the facts or the law. Puryear v Golden Bear Ins. Co. (1998) 66 CA4th 1188, 1195.
When a plaintiff is put on notice that a fundamental element of its case is disputed, to avoid potential liability for malicious prosecution it should not proceed without sufficient evidence to support a favorable judgment on that element, or at least information supporting an inference that the evidence can be obtained. In one recent MP case the underlying case was based on a guarantee. However, the purported guarantor claimed his signature was a forgery and provided a reasonable explanation of who committed the forgery and how that person obtained his personal information. The underlying case was held to be untenable because the UC plaintiff had no objective evidence to establish otherwise. Arcaro v Silva and Silva Enterprises Corp. (1999) 77 CA4th 152, 158-159.
The issue of malice is determined, in part, by evidence that the UC plaintiff wished to vex, annoy, or injure the UC defendant. It does not necessarily require that the UC plaintiff be angry or vindictive or bear any actual hostility or ill will toward the UC defendant. Instead, it means an attitude or state of mind that actuates the commission of an act for some improper or wrongful motive or purpose. BAJI 7.34; see also, CACI 1504. Although hatred or ill will by the UC plaintiff toward the UC defendant is unnecessary, it may be persuasive to prove motive.
Malice cannot be inferred from a lack of probable cause. Downey Venture v LMI Ins. Co. (1998) 66 CA4th 478, 498 and n29; Leonardini, 216 CA3d at 567. It is improper to instruct the jury that it may infer malice from a lack of probable cause, even if the judge in the MP case finds as a matter of law that there was no probable cause for the underlying case. The MP defendant may even be entitled to a specific jury instruction that the jury may not infer malice from a lack of probable cause.
The Downey Venture case is also significant because the dispute over which it arose was whether insurance coverage for a malicious prosecution claim existed under a comprehensive general liability (CGL) policy. The insurance policy in question specifically covered personal injury, which was defined to include "malicious prosecution." Nevertheless, the court held that under Insurance Code section 533, which precludes insurance coverage (or indemnification) for a willful act of the insured, there can be no indemnification for malicious prosecution liability, since it is a tort that constitutes a willful act. 66 CA4th at 506. Significantly, section 533 was held not to defeat the duty to defend. 66 CA4th at 509. Thus, an insurer that issues a CGL policy with this "personal injury" language must provide a defense to a malicious prosecution suit, even though it will not pay a judgment or be obligated to pay a settlement.
The termination of a prior civil proceeding must reflect on the merits of the UC plaintiff's claim to constitute a favorable termination for purposes of a cause of action for malicious prosecution. For example, malicious prosecution does not lie for the termination of an action by a statute of limitations defense, which is technical or procedural. Lackner v La Croix (1979) 25 C3d 747, 750-51. Termination must reflect on the UC defendant's innocence of the alleged wrongful conduct. BAJI 7.32. A favorable termination must apply to the entire UC lawsuit, although lack of probable cause can be found as to a single theory of liability. Crowley, 8 C4th at 686, or a portion of claimed damages, Citi-Wide Preferred Couriers v Golden Eagle Ins. Corp., 2003 Cal. App. LEXIS 1957 (2d Dist., 12/30/03).
Nevertheless, a favorable termination may not give rise to a successful MP claim in certain types of civil proceedings that are not qualifying "prior actions." For example, it may have been a subsidiary piece of ongoing litigation rather than an independent action. Merlet v Rizzo (1998) 64 CA4th 53, 59-60. Another court refused to allow an MP action based on the outcome of an arbitration because the private contractual arbitration was not a "prior action." Sagonowsky v More (1998) 64 CA4th 122, 130, 134. However, a more recent holding clarifies that a private arbitration proceeding does not necessarily preclude an MP action. The critical inquiry is what the parties intended when they entered into the agreement providing for private arbitration. Brennan v Tremco, Inc. (2000) 78 CA4th 391, 395 (holding that triable issue of material fact existed on the issue of intent).
The Advice of Counsel Defense
The MP defendants are aligned in their defense of most elements in a malicious prosecution case, but that alignment can diverge significantly when the MP defendant asserts the "advice of counsel" defense. This defense is an issue that may be ripe for new law, particularly with regard to the timing of raising the defense.
Under the advice of counsel defense, the UC plaintiff must have sought in good faith the advice of an attorney before commencing or maintaining the civil proceeding against the UC defendant. The UC plaintiff also must have made a full, fair, and complete disclosure to the attorney of all the pertinent and material facts of which the UC plaintiff had knowledge tending to prove or disprove the civil allegations and thereafter acted on the advice of the attorney and in the belief of the UC defendant's civil liability for the alleged wrong. BAJI 7.36; see also, CACI 1505.
The most significant effect of the advice of counsel defense is that it necessarily waives the attorney-client privilege with regard to communications between the client and attorney on the advice given and relied on. Transamerica Title Ins. Co. v Superior Court (1987) 188 CA3d 1047, 1054. The advice of counsel defense goes to the element of probable cause and negates an essential allegation of the complaint. State Farm Mutual Auto. Ins. Co. v Superior Court (1991) 228 CA3d 721. Therefore an MP defendant strategically would prefer to raise the advice of counsel defense only after his or her summary judgment motion on the issue of probable cause is brought and denied. If the motion is successful, the advice of counsel defense becomes moot.
As a result of this strategic preference, the timing of raising the defense can create a discovery complication because much discovery typically is conducted before the probable cause summary judgment motion is filed. If the advice of counsel defense is asserted early, discovery will include attorney-client communications on the advice given and relied on. Discovery will not include attorney-client communications before the advice of counsel defense is asserted. When the defendant asserts it after a summary judgment motion on probable cause fails (or is successful but reversed on appeal), a new wave of discovery will be triggered, some of which may be repetitive.
In order to force the MP defendant to waive the attorney-client privilege early, the MP plaintiff may serve an interrogatory asking if the MP client-defendant is relying on the advice of counsel defense. On receiving a response such as "not at this time, but defendant reserves the right to do so," the MP plaintiff may file a motion to compel the MP client-defendant to elect.
The MP plaintiff may lose that motion or elect not to press the issue in the first place. Then, after the summary judgment motion is denied and the MP defendant seeks to raise the defense, the MP plaintiff may argue that the advice of counsel defense is an affirmative defense that had to be raised in the answer or be waived. CCP §431.30; Bertero v Nat'l Gen'l Corp. (1974) 13 C3d 43, 53 (advice of counsel is affirmative defense); Walsh v West Valley Mission Comm. College Dist. (1998) 66 CA4th 1532, 1546 (matters not responsive to essential allegations of the complaint must be raised in the answer). See, Weil & Brown, California Practice Guide, 1 Civil Procedure Before Trial §6:430 (The Rutter Group, 1983 & Supp. 1999).
In contrast to the MP plaintiff's argument, the MP client-defendant will maintain that the defense is raised by a general denial and can be reserved (usually in discovery responses) and asserted at any time before trial. Since an advice of counsel defense negates an element of plaintiff's cause of action, it does not constitute new matter, need not be pleaded as an affirmative defense, and is raised by a general denial. State Farm, 228 CA3d at 725-27; Albertson v Raboff (1960) 185 CA2d 372, 386 (holding that the advice of counsel defense may be raised by a general denial in the answer); 1 Civil Procedure Before Trial §6:438.
As a practical matter, the issue may never reach the California Supreme Court. An MP plaintiff typically welcomes the assertion of the defense, even at a later date, because the concomitant waiver of the attorney-client privilege permits the MP plaintiff to obtain otherwise nondiscoverable communications.
The Unclean Hands Defense
The defense of unclean hands, which precludes equitable remedies for a tainted plaintiff, applies quite broadly to MP cases. The MP plaintiff in a recent case argued that even if the defense of unclean hands applied, the only relevant misconduct was that which had affected the MP defendant's decision to file the underlying case. The court of appeal rejected this argument and permitted broad evidence of any misconduct either in the particular transaction or connected to the subject matter of the litigation that affected the equitable relations between the litigants. Kendall-Jackson Winery Ltd. v Superior Court (2000) 76 CA4th 970, 974.
The unclean hands defense necessarily is fact-intensive, which may render it inappropriate at the summary judgment stage. Nevertheless, this recent opinion may have a dramatic effect on the unclean hands defense during discovery and at trial. Specifically, the MP plaintiff's prior conduct can be put on trial so that the evidence of purported wrongdoing will not be one-sided. However, MP defendants must be cautious. By attacking the MP plaintiff they may bolster the MP plaintiff's evidence of malice by suggesting to the jury that the MP defendant continues to attack the MP plaintiff, in addition to lacking probable cause in the MP defendant's prior unwarranted attack on the MP plaintiff in the underlying case. To be strategically safe, the evidence of unclean hands would need to be sufficiently heinous that a jury would conclude that any animosity that exists between the parties was caused by the MP plaintiff and not by the MP defendant. Unfortunately, there is no formula by which to gauge the sufficiency of that evidence.
Michael C. Denison, a partner in the Los Angeles law firm of Towle, Denison, Smith & Tavera, defends legal malpractice and malicious prosecution cases.
Article updated: January 2004