Daily Blast August 11, 2017

Yesterday, the California Supreme Court issued an opinion in Parrish v. Latham & Watkins, et al. (August 10, 2017, S228277) __ Cal.5th __, analyzing the interim adverse judgment rule in a malicious prosecution action. The interim adverse judgment rule provides that if an action succeeds after a hearing on the merits, that success establishes the existence of probable cause, even if the result is overturned on appeal or by later ruling of the trial court. The California Supreme Court determined the interim adverse judgment rule applies when a trial court initially denied summary judgment, finding that a lawsuit had sufficient potential merit to proceed to trial, but concluded after trial that the suit had been brought in bad faith because the claim lacked evidentiary support. (Slip opn., pp. 1-2.)

In this trade secrets case, two companies sued their former officers who left to start a new competing company for misappropriation of trade secrets. (Slip opn., p. 2.) The former officers moved for summary judgment, which was denied. (Ibid.) The case proceeded to a bench trial, which ended in a defense verdict. The court also awarded the former officers their costs and attorney’s fees under the California Uniform Trade Secrets Act, which authorizes cost and fee awards to prevailing defendants if a claim of misappropriation was made in bad faith.  (Id. at p. 3.)

The Court of Appeal affirmed the trial court’s award to the former officers and rejected the companies’ argument that the trial court was estopped from finding bad faith because the trial court had denied a motion for summary judgment. The former officers then sued the companies’ attorneys for malicious prosecution. (Slip opn., p. 4.) Defendant attorneys moved to strike under the anti-SLAPP statute. The trial court granted the anti-SLAPP motion, deeming the action untimely under the one-year statute of limitations. Plaintiffs appealed. (Id. at p. 5.) The Court of Appeal affirmed. (Id. at p. 6.)

On review, the Supreme Court held that the interim adverse judgment rule applied despite the trial court’s subsequent post-trial ruling finding bad faith because whether an interim ruling is subsequently reversed by a trial court or appellate court has no bearing on the probable cause inquiry of a malicious prosecution claim. (Id. at p. 11.) The court explained that the summary judgment ruling in favor of the companies established that their position had arguable merit, whether or not after trial the court wished it had ruled against them. (Ibid.) The Supreme Court further noted that the trial court’s finding of bad faith was not based on finding that any reasonable attorney would have agreed that the action was totally and completely without merit and thus, the finding of bad faith did not invalidate the trial court’s earlier conclusion at the summary judgment stage. (Id. at pp. 12-13.) As such, the Supreme Court affirmed. (Id. at p. 21.)

Related Attorneys

Related Practices

• Appellate