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October 4, 2013

Yee v. Cheung 2013 WL 5496953

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The Fourth District holds Code of Civil Procedure 340.6, the statute of limitations for claims premised on an attorney’s professional services, applies to a malicious prosecution claim.  Further, probable cause is established as a matter of law if a motion for nonsuit is denied in the underlying case. 

A dispute arose between Don Cheung and his organization, Lin Wah, on one hand and Cheong Yu Yee, on the other hand, about funds on deposit for the Asian Culture & Senior Center, Inc.  Lin Wah hired J. Kenneth Jensen, who filed a complaint against Yee.  Sally Tsui Wong-Avery associated in for trial.  At trial, Yee’s motion for nonsuit was denied, but the jury found in favor of Yee. 

More than one year later Yee filed a complaint against Jensen, Wong-Avery, and their clients, for malicious prosecution and other torts.   Jensen demurred based on the statute of limitations applicable to attorney professional services, Code of Civil Procedure § 340.6.  Wong-Avery filed a special motion to strike under California’s anti-Strategic Lawsuit Against Public Participation statute (anti-SLAPP), Code of Civil Procedure § 425.16.  She argued, among other things, Yee could not show a probability of prevailing under the second prong of the anti-SLAPP analysis because the claims were barred by § 340.6, and Yee could not show a lack of probable cause.  Jensen’s and Wong-Avery’s clients also filed an anti-SLAPP motion based in part on the probable cause argument. 

The Court of Appeal observed the general statute of limitations for malicious prosecution is two years under C.C.P. § 335.1.  Although the court did not feel bound by the decision in Vafi v. McCloskey (2011) 193 Cal.App.4th 874 holding § 340.6 applies to malicious prosecution claims against attorneys, it nonetheless agreed with Vafi’s conclusion. 

Questions of statutory interpretation begin with the words of the statute. If the statutory language is clear and unambiguous, the inquiry ends. Words are given their plain and commonsense meaning, and a court should avoid a construction that would produce absurd consequences.  When a general and a particular provision are inconsistent, the latter is paramount to the former. Particular intent prevails over general, inconsistent intent.  Thus, a specific statute of limitations takes precedence over a general one, even though the latter would be broad enough to include the subject covered by the more particular provision.

The Court disagreed with Yee’s argument § 340.6 applied only to disputes between attorney and client, which is contrary to the plain language of the statute.  It also did not agree that the statute’s term “wrongful act or omission” could only refer to attorney malpractice, as that word does not appear in the statute. 

Applying § 340.6 to malicious prosecution actions would not produce an absurd result.  Malicious prosecution is a disfavored tort, a policy that arguably applies with additional force to attorneys who are likely to be involved in more litigation than the average citizen.

A legislative purpose in enacting § 340.6 was to reduce the costs of legal malpractice insurance, which are impacted by malicious prosecution claims.  Thus, the legislature may have valid policy reasons for shortening the statute of limitations for malicious prosecution actions against attorneys.   

Under the second prong of the anti-SLAPP analysis, Avery-Wong demonstrated Yee could not prevail on his claims because they were barred by § 340.06.

Although the clients did not have the protection of § 340.06, the court considered their argument that probable cause was established because the trial court in the underlying case denied Yee’s motion for non-suit. 

A party has probable cause to bring an underlying suit if, objectively viewed, its claims were legally tenable, meaning a reasonable attorney would conclude the underlying action was not totally and completely without merit. This is a legal question for the court to decide based on the factual circumstances established by the evidence and the legal theory pursued.  A litigant will lack probable cause if he relies on facts for which there is no reasonable cause to believe to be true, or if he seeks recovery under a legal theory that is untenable under the known facts.  The court must construe the allegations of the underlying complaint liberally, in a light most favorable to the malicious prosecution defendant.

Some non-final rulings on the merits may establish probable cause, even if the result is subsequently reversed by the trial or appellate court.  Such rulings include denial of a nonsuit motion, and denial of a defense summary judgment motion, as long as these denials were not induced by materially false facts submitted in opposition.  The underlying trial court determined Lin Wah and Cheung had presented sufficient evidence to allow their claims to go to the jury, which means a reasonable attorney could have concluded the action was not totally and completely without merit.  The court rejected Yee’s argument that the nonsuit motion was premised on Cheung’s perjured testimony. 

Comment: This case, along with Vafi, supra, firmly establishes that the one year limitation of C.C.P. § 340.6 applies to malicious prosecution actions against attorneys.  The reasoning of both cases should apply any cause of action pled against an attorney acting in a professional capacity.

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