The Second District holds that a case lacks probable cause if the attorney knows that the facts render an otherwise viable legal theory inapplicable, or continues to pursue a claim despite definitive evidence undermining it. Further, case law holding the one year statute of limitations for claims against attorneys in their professional capacity applies to malicious prosecution claims does not apply retroactively to bar a case pending prior to that decision.
Attorney Martina Silas sued attorney James Ellis Arden for malicious prosecution. Arden assumed representation of Ross Gunnell, Silas’ former client, in a legal malpractice action Gunnell had filed in pro per against Silas. The case underlying the legal malpractice claim was a personal injury action, based on Gunnell’s exposure to toxins in the workplace. The jury awarded substantial compensatory and punitive damages, finding an exception to worker’s compensation exclusivity applied where the employer fails to disclose the toxicity of chemicals. The trial court then ruled the exception, which pertained to willful assault by the employer, did not apply and it vacated the judgment.
The legal malpractice action alleged Silas failed to argue a different worker’s compensation exclusion applied, relating to the employer’s fraudulent concealment of a worker’s injuries. Arden also alleged Silas misappropriated settlement funds received from other parties.
More than a year after judgment was entered for Silas after she prevailed on summary judgment, she sued Arden for malicious prosecution. Silas relied on the then prevailing view that the applicable statute of limitations for a malicious prosecution action against an attorney was two years.
The jury awarded Silas compensatory and punitive damages in the malicious prosecution action. Shortly before the verdict, the court granted Arden leave to file an amended answer asserting that Silas’ action was barred by the one year statute of limitations for claims against attorneys, Code of Civil Procedure §340.6. Arden’s motion was based on a recently issued decision, Vafi v. McCloskey (2011) 193 Cal.App.4th 874, holding that the one year legal malpractice statute of limitations applied to malicious prosecution suits against attorneys for acts in their professional capacity.
Arden raised the one year statute defense in a motion for judgment notwithstanding the verdict. The trial court denied the motion, ruling Vafi should not be applied retroactively because of the widely relied-upon assumption in the legal community that a two year statute of limitations applied. The court also found Arden waived the defense by failing to raise it during the litigation. The Court of Appeal observed that, as to pending cases, new statutes typically apply prospectively, but judicial decisions apply retroactively. An exception exists when a judicial decision changes a settled rule on which the parties relied. The application of the one year statute of limitations was a change to a settled rule, especially since the parties litigated the malicious prosecution case for three years on the assumption that a two year statute of limitations applied. The Court did not rule on whether Vafi correctly analyzed the applicability of C.C.P § 340.6.
The Court concluded Silas presented sufficient evidence of lack of probable cause and malice to sustain the jury’s verdict. Probable cause is determined as a matter of law. The legal malpractice action lacked probable cause, because, despite Arden’s allegation to the contrary, Silas could not have raised an issue of the employer’s fraudulent concealment in the underlying case. Discovery in the underlying case revealed Gunnell had sought medical care for skin irritation arising from exposure to the employer’s cleaning solution. In the legal malpractice case, Arden learned that Gunnell had actually discussed the injury with his supervisor. Because Gunnell was aware of his condition, the concealment argument was inapplicable pursuant to governing law.
Further, there was evidence that Arden continued to pursue the settlement fund misappropriation claim after he was presented with settlement checks bearing Gunnell’s signature. Despite this evidence, Arden filed an amended complaint including the misappropriation claim.
The court correctly stated that malice pertains to the defendant’s subjective intent. While lack of probable cause is a factor to be considered as to the malice requirement, malice must be established by other, additional evidence, demonstrating proof of actual hostility, ill will, or an intent to deliberately misuse the legal system. Despite the correct articulation of the standard, the Court failed to analyze whether Arden’s actions displayed actual hostility, ill will, or a subjective intent to misuse the judicial system. The Court concluded that Arden’s failure to investigate the merits of the workers compensation exclusion and withdraw the misappropriation allegations after being confronted with contrary evidence was sufficient to prove his malice.
Comment: The Court’s treatment of the probable cause and malice elements of a malicious prosecution claim is troubling. The Court has conflated the two elements and taken the lack of probable cause, by itself, to satisfy the malice element of the tort. The ruling on the statute of limitations is also unfortunate but will likely have limited impact given the Vafi decision’s one year statute of limitations holding, certainly applicable to cases filed after that opinion became final in 2011.