Litigation attorneys are increasingly by expected to be aggressive, zealous advocates on behalf of their clients. Any perceived failure to represent the client aggressively may result in a legal malpractice claim. On the other hand, overaggressive pursuit of litigation may lead to a malicious prosecution claim. Part of an attorney's duty as a zealous advocate is to push the limits as to applicable legal theories. Nonetheless, doing so again creates risks of being sued for malicious prosecution. This is particularly true where malicious prosecution liability may result where a single theory is pursued without probable cause, even if the remainder of the lawsuit is meritorious and successful. (See Crowley v. Kattleman 8 Cal.4th 666 (1994)).
As such, there is an inherent tension between legal and ethical duties owed by the attorney to the client and the obligation to pursue lawsuits only where probable cause exists to do so. The courts have expressly recognized this very difficult dilemma, where attorneys may be subject to claims of malicious prosecution by opponents because they vigorously represent their client, yet are also subject to claims of legal malpractice if they fail to provide the vigorous representation to which the client is entitled. (Lossing v. Superior Court 207 Cal.App.3d 635, 640 (1989). While the dilemma faced by attorneys is challenging, it is not impossible. This article will address ways to avoid malicious prosecution claims while still zealously representing the client.
Initially, an action must be brought with probable cause. (Copenbarger v. International Ins. Co. 48 Cal.App.4th 961, 966, 54 Cal.Rptr.2d (1996)). The applicable legal standard for probable cause is whether the claim was "objectively tenable," i.e., whether any reasonable attorney would have concluded there was a basis to pursue the lawsuit. (See Hufstedler, Kaus & Ettinger v. Superior Court 42 Cal.App.4th 64 (1996)).
This standard is satisfied "if the issues presented in the underlying action were arguably correct, even if it was extremely unlikely the client would win." (Sheldon Appel v. Albert & Oliker 47 Cal.3d 863, 885 (1989)). Likewise, an attorney must be given substantial leeway to pursue legal theories of liability, even if it means a tenable challenge to existing law. (See Murdock v. Gerth 65 Cal.App.2d 170 (1944); Brinkley v. Appleby 276 Cal.App.2d 244 (1969); Umansky v. Urquhart 84 Cal.App.3d 358 (1978)). The defendant's subjective belief and the degree of investigation or discovery by the defendant are irrelevant to probable cause, although they are relevant to malice. However, a cause of action for malicious prosecution will lie if the malicious prosecution defendant lacked probable cause to pursue a cause of action or theory, even if the rest of the case was entirely meritorious. (See Crowley).
A malicious prosecution plaintiff must also establish that he or she received a "favorable termination on the merits" as to the underlying actions. In order for a termination to be deemed favorable for malicious prosecution purposes, the termination must demonstrate the innocence of the accused. (Webb v. Younans 248 Cal. App.2d 851 (1967)).
A settlement, even if favorable to the underlying defendant, cannot constitute a favorable termination for malicious prosecution purposes. (Cantu v. Resolution Trust Corp. 4 Cal. App.4th 857 (1992)). Even where one party refuses to participate in a settlement, the settlement can still be bar a malicious prosecution action by that party. Specifically, where the terms of the settlement require the dismissal of another party as a necessary condition of settlement, that party is barred from filing a malicious prosecution action because there is no favorable termination on the merits. (See Villa v. Cole 4 Cal.4th 1427 (1992); Haight v. Handweiler 199 Cal.App.3d 85 (1988)).
Where the underlying case is terminated by way of voluntary dismissal, there must be an analysis by the court of the reasons for such dismissal. A dismissal which reflects ambiguously on the merits, or leaves same doubt as to the defendant's guilt or innocence, is not a favorable termination for purposes of malicious prosecution. (See Pender v. Radin 23 Cal.App.4th 1807 (1994); Dalaney v. American Pacific Holding Corp. 42 Cal.App.4th 822 (1996); Villa). The focus is on the opinion of the dismissing party. (See Cantu). Moreover, there is no favorable termination where the circumstances surrounding a dismissal demonstrates that it was for practical and economical reasons not bearing on the substantive merits. (Oprian v. Goldrich, Kest & Associates 220 Cal.3d. 337 (1990)).
Finally, a showing of actual malice is required to establish a cause of action for malicious prosecution. (See Grindle v. Lorbeer 196 Cal.App.3d 1461 (1987); Weaver v. Superior Court 195 Cal.App.3d 166 (1979); Downey Venture v. LMI Insurance Company 66 Cal.App.4th 142 (1998)). While cases have held that in certain limited circumstances, the requisite malice may be inferred from a lack of probable cause (See Weaver v. Superior Court 95 Cal.3d 166, 193, 156 Cal.Rptr. 745 (1979), the trend in the law is not to infer malice merely from a lack of probable cause alone. (See Downey Venture).
One of the more difficult decisions in preparing and filing a complaint or cross-complaint is deciding who should be sued. On the one hand, failing to sue an appropriate defendant is a frequent source of legal malpractice claims. On the other hand, suing a peripheral party who claims to have no involvement or responsibility is one of the more frequent sources of malicious prosecution lawsuits. The analysis regarding peripheral parties is often complicated by the interplay of the statute of limitations and the "doe amendment" statute. (Code Civ. Proc. § 474). In that regard, relying on the doe amendment statute to name a party at a later date is risky, particularly where there is information available at the time the initial pleading is filed concerning the identity of such a person and his or her role in the acts or omissions giving rise to the case. On the other hand, naming a party with the expectation that unnecessary parties can be "weeded out" during the course of litigation has its own inherent risks. Probable cause must exist as to that party, and voluntarily dismissing such a party down the line may constitute a favorable termination for malicious prosecution purposes.
An attorney defending a lawsuit often deals with a client who wants his or her attorney to "take the offensive." There is sometimes pressure to file a cross-complaint to send a message to the plaintiff that there may be a "downside" to pursuing the case. Such cross-complaints may be legitimate, appropriate, and even required by the standard of care. Additionally, if they are related to the complaint, they may be "compulsory" and must be filed as a cross-complaint in the action, or forever be barred. (See Code Civ. Proc. § 426.30; City of Hanford v. Superior Court 208 Cal.3d 580 (1984)). However, it should be recognized that cross-complaints in this circumstance have inherent risks. There is a built-in component of malice because the complaint was filed first. As such, special care should be taken.
A red flag should always go up where the client appears to be primarily motivated by revenge, particularly if there already exists a history of disputes and litigation. Again, these situations have built-in malice. The client may also tend to allow personal feelings to cause him or her to exaggerate or embellish supporting facts, and to exert pressure to pursue questionable claims.
It is not unusual for a client to come to a lawyer on the very eve of the expiration of the statute of limitations. This situation amplifies all of the risks and pitfalls addressed above, simply because it accelerates the evaluation process.
Avoiding these pitfalls requires objectivity and hard work. The attorney must make certain that he or she has a good grasp of the law and facts supporting each theory of recovery. The law and facts being relied on should be well documented. While the nature and extent of research and investigation are irrelevant under the objective standard for probable cause, they are directly relevant to the issue of malice. Additionally, a lawyer who has conducted an investigation and research makes a much better impression on the judge and the jury, should malicious prosecution litigation ensue. While an attorney is entitled to rely to a significant degree upon the factual information provided by the client, factual disputes sometimes arise as to what information the client provided. It is therefore important to carefully document what information is being relied on. Doing so can also assist in properly evaluating the merits of the claim, and can provide protection in the event malicious prosecution litigation results.
In cases where expert witnesses are important to the substantive merits, the attorney should consider early retention of such experts. This is particularly true in professional liability cases, which are among the most active sources of malicious prosecution lawsuits. An early
opinion from an expert concerning the standard of care can provide an important reassurance to the attorney that the claim is tenable. In the event of a subsequent malicious prosecution action, it can provide important support on the elements of probable cause and malice.
Most malicious prosecution litigation arises out of an atmosphere of hostility. Aggressive, zealous representation should not sacrifice civility and professional courtesies. An attorney who becomes personally involved in litigation, and sinks to the level of gratuitous ad hominem attacks, can lose vitally important objectivity in assessing the tenability of a claim. Additionally, where acrimony exists, the malice element is more easily found. Simply stated, undue acrimony can spawn a malicious prosecution lawsuit where it would otherwise not have been considered.
Since settlements bar malicious prosecution claims, great care should be taken in documenting settlements. This may be particularly important where there is a peripheral party. Such parties may refuse to sign a settlement agreement. In this circumstance, the settling defendant ordinarily does not want the litigation to continue against anyone. There may be issues of indemnity which may interfere with the settling defendant's ultimate extrication from the case. Accordingly, such a settling defendant often requests that, as a condition of settlement, all defendants must be dismissed. If this condition is expressly stated in the settlement agreement, a non-settling defendant is barred from pursuing a malicious prosecution case because there is no favorable termination on the substantive merits. (See Villa and Haight).
Where practical, tactical or economic considerations dictate that a defendant or cross-defendant be dismissed, steps can still be taken which will help avoid a malicious prosecution claim. Where obtaining a waiver of costs is not feasible, protection can be obtained by documenting that the dismissal is for tactical, practical and economic considerations not bearing on the substantive merits. This should be done in writing to the dismissed party's counsel prior to the dismissal. It should confirm the attorney's conviction that the claim is meritorious, and then should explain that the dismissal is being given for economic, practical, and/or tactical
considerations not bearing on the substantive merits. Although the law remains relatively sparse in this area, Oprian provides support for the proposition that such a confirmation in writing may negate a favorable termination on the merits.
There are no absolute assurances of avoiding malicious prosecution claims. However, steps can be taken which will both assist in the avoidance of such claims, and likewise assist in the defense of those claims that are filed. The inherent tension between duties owed to the client and the obligation not to pursue claims without probable cause will continue to exist. However, thoughtful consideration of each case can go a long way toward avoiding both legal malpractice and malicious prosecution claims.