Key Decisions

February 2013 – A Legal Malpractice Action Was Maliciously Prosecuted

(filed under: Key Decisions | February 22, 2013)

A Legal Malpractice Action Was Maliciously Prosecuted

Silas v. Arden
(Cal. Ct. of App., 2d Dist.), filed December 31, 2012 

KEY FACTS

Attorney Martina Silas represented Ross Gunnell in a personal injury action against Metrocolor Laboratories, Inc., which owned a facility to develop and process movie and television film.  Gunnell worked as an unskilled laborer on a cleaning project at the facility.  He was injured by toxic chemicals provided to him by Metrocolor, which did not provide him with warnings or proper protective equipment.  To avoid the bar of the workers’ compensation laws, Silas, on behalf of Gunnell, relied on two exceptions to exclusivity.  One was based on the theory that Metrocolor committed a willful battery by providing the chemicals which touched Gunnell during the cleaning process.  The other was that Metrocolor fraudulently concealed the injury that Gunnell was suffering.

During discovery in the personal injury action, Silas learned that Gunnell had reported skin irritation problems to his doctor at or about the time he was doing the cleaning project and attributed this to the cleaning solution.  Since this negated the fraudulent concealment theory, she dropped it.

Silas, on behalf of Gunnell, proceeded to trial only on the willful battery theory.  A jury awarded substantial compensatory and punitive damages against Metrocolor.  Pursuant to Metrocolor’s motion for judgment notwithstanding the verdict based on the holding of Johns-Manville Products Corp. v. Superior Court, 27 Cal.3d 465 (1980), the trial court ruled that worker’s compensation was Gunnell’s exclusive remedy.  This decision was upheld on appeal.

Gunnell then sued Silas for legal malpractice.  His action was based on two theories.  One was that Silas should not have abandoned the fraudulent concealment theory.  The other was that Silas had misappropriated funds that had come from settlements with other defendants in the Metrocolor action.  In connection with the latter theory, he asserted that Silas forged Gunnell’s name on settlement documents and settlement checks.

After filing the malpractice action, Gunnell engaged attorney James Arden and his law firm, Scott, Arden & Salter, to represent him.  Arden then prosecuted Gunnell’s action.

Silas moved for summary judgment on the ground that abandoning the fraudulent concealment theory did not constitute legal malpractice as the undisputed facts and law, which she had researched before abandoning it, established it was untenable.

The trial court agreed and entered summary judgment in her favor.  The Court of Appeal affirmed.

Silas then filed a malicious prosecution action.

At trial, Silas argued that (1) Arden lacked probable cause for prosecuting the malpractice action because Silas was not negligent in failing to present the jury in the Metrocolor action with a theory not supported by the law; and (2) the facts did not support Gunnell’s misappropriation claim.  Silas also argued that Arden harbored malice based on his lack of research into the law relative to the fraudulent concealment theory and his failure to review the trial testimony in the Metrocolor action.  Silas argued that the evidence supported an inference based on this lack of research that Arden prosecuted the malpractice action to extract a nuisance settlement from Silas.

After closing arguments, Arden filed an amended answer, asserting a statute of limitations defense based upon the recent decision of Vafi v. McCloskey, 193 Cal.App.4th 874 (2011), which held that a one-year statute of limitations applied to a malicious prosecution action against an attorney.

A jury awarded Silas $145,756 in legal fees and costs, $30,000 in noneconomic damages, and $125,000 in punitive damages.  The special verdict form asked the jury whether Arden prosecuted the malpractice action for a purpose other than succeeding on the merits of the claim.  They answered “yes.”

The trial court denied Arden’s motion for judgment notwithstanding the verdict.

HOLDING & REASONING

The Court of Appeal affirmed.

The court first held that Vafi did not apply to Silas’ case against Arden.  At the time Silas commenced her action, the prevailing view, as evidenced by judicial decisions, was that the two-year statute of limitations applied to malicious prosecution actions.  Vafi was decided more than three years after Silas commenced her action, and more than five years after the cause of action accrued with the favorable termination of the malpractice action in her favor.  The court reasoned that even assuming Vafi correctly decided the issue, there was no reason to apply it to Silas’ action, where in the face of the unforeseen change brought by Vafi, Silas’ reliance on a two-year statute was “manifestly reasonable.”

The court then turned to the sufficiency of the evidence that Arden maliciously prosecuted Gunnell’s action against Silas.

To establish a cause of action for malicious prosecution, a plaintiff must prove that the underlying action was (1) terminated in the plaintiff’s favor; (2) prosecuted without probable cause; and (3) initiated with malice.  A claim for malicious prosecution need not be directed to an entire lawsuit.  It may be based on only some of the causes of action alleged in the underlying lawsuit.

The existence or absence of probable cause is a question of law to be determined by the court from the facts established in the case.  This is because “[c]ounsel and their clients have a right to present issues that are arguably correct, even if it is extremely unlikely that they will win.”  Therefore, the court “must properly take into account the evolutionary potential of legal principles” and determine, in light of the facts known to counsel, “whether any reasonable attorney would have thought the claim tenable.”

The malice element of the malicious prosecution tort goes to the defendant’s subjective intent.  It is not limited to actual hostility or ill will towards the plaintiff.  It can exist where the proceedings are initiated for the purpose of forcing a settlement which has no relation to the merits of the claim.  A lack of probable cause is a factor that may be considered in determining if the claim was prosecuted with malice.  Because “parties rarely admit an improper motive, malice is usually proven by circumstantial evidence and inferences drawn from the evidence.”

Since the fraudulent concealment theory that Silas abandoned before the trial of the Metrocolor action was untenable under the law, Arden did not have a basis for believing that she was negligent for having abandoned it.  Moreover, once Silas presented Arden with settlement documents from the Metrocolor action which had Gunnell’s signature notarized, and endorsed checks which admittedly all contained Gunnell’s genuine signature, Arden could have had no factual basis for believing Gunnell’s misappropriation claims were meritorious.

With respect to malice, the court held:  “the evidence established Arden’s failure to investigate the merits of applicability of the fraudulent misrepresentation exception and his failure to withdraw allegations of misappropriation even when confronted with unequivocal evidence the allegations were not supported by the facts.”  If found, this constituted sufficient evidence to support the jury’s verdict.

ANALYSIS

The court’s decision is significant in that it demonstrates what a plaintiff in a malicious prosecution action needs to establish to show lack of probable cause and malice.