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August 25, 2015

Xcentric Ventures, LLC v. Borodkin, 798 F.3d 1201 (2015)

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The Ninth Circuit holds factual probable cause can be established even if some evidence supporting a cause of action is fabricated, and  legal probable cause can be established by even one supportive reported opinion.

Xcentric Ventures was sued for extortion by Lisa Borodkin’s clients based on its business of encouraging online third party negative reviews and other harmful online activities unless targets would pay high fees. When Xcentric prevailed, it sued Borodkin for malicious prosecution.  The case was dismissed when the court found Xcentric could not establish the underlying claims were brought or continued without factual or legal probable cause.

On appeal Xcentric asserted the underlying claims lacked factual probable cause because Borodkin’s clients lied about phone conversations to support their underlying extortion claim. Factual probable cause is absent if an attorney relies on facts there is no reasonable cause to believe to be true. However, if there is sufficient evidence apart from fabricated evidence, probable cause can nonetheless be established.  The underlying claims were supported by independent written statements, separately establishing probable cause. Nor was it improper for Borodkin to continue the lawsuit after learning that her clients lied about the phone calls; the claims were still supported by the independent written statements.

Legal probable cause exists if any reasonable attorney would consider the claim tenable on the known facts, even if the claims are extremely unlikely to win. It is an objective question of law to be decided by the court. The underlying attempted racketeering extortion claim alleged was legally tenable, because a district court had previously held that similar allegations stated an extortion claim against Xcentric.

Comment: Although malicious prosecution is still a viable claim, it is hard to prove. Attorneys may push the envelope in the name of zealous advocacy.

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