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February 28, 2001

Ferreira v. Gray, Carey, Ware & Freidenrich, et al. (2001) 87 Cal.App.4th. 409

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The Fourth District has decided that two traditional elements of malicious prosecution actions will be stringently applied.  In one case the court held that a voluntary settlement after a verdict negates the favorable termination element.  In another case, which has been accepted for review by the California Supreme Court, the court ruled that summary judgment or other dispositive motion in the underlying case establishes probable cause as a matter of law.

Frank Ferreira was involved in a tumultuous romantic relationship with Debra Rushing.  He twice sued Rushing and her mother for return of gifts he allegedly gave in contemplation of marriage.  The first action settled but the second action was tried and resulted in verdicts both in favor of and against Ferreira.  After the verdicts, the parties settled.  Ferreira then sued Rushing’s attorneys, Gray, Carey, et al., for malicious prosecution as to claims which were determined in his favor.  The trial court granted Gray, Carey’s motion for summary judgment on the grounds that there was no favorable termination of the underlying action.

The Court of Appeal affirmed, reiterating the general rule that a negotiated settlement negates the favorable termination element of a malicious prosecution action.  The general rule applies to post-verdict settlements as well as settlements before trial.  While a verdict is a favorable determination, a subsequent settlement terminating litigation cannot be construed as favorable.

Ferreira is the first appellate decision to address the effect of a post-verdict settlement on a malicious prosecution action.  The decision clarifies this issue and furthers the public policy of encouraging settlement and discouraging malicious prosecution.

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