Daily Blast August 27, 2014

The California Court of Appeal, Second Appellate District, Division Three (Los Angeles) issued an opinion in Parrish v. Latham and Watkins (Aug. 27, 2014, B244841) ___ Cal.App.4th ___, analyzing whether the plaintiffs/former employees established a probability of prevailing on the probable cause element of their malicious prosecution cause of action in the context of an anti-SLAPP motion. (Slip opn., p. 16.) The Court of Appeal held that the interim adverse judgment rule did not apply and that the plaintiffs/former employees established a probability of prevailing on the merits. (Ibid.)

This case arises from an underlying action brought against the former employees by their former employer for misappropriation of trade secrets. (Slip opn., p. 2.) The employees’ summary judgment motion in the underlying action was denied, but the employees prevailed at trial. (Id. at p. 9.) The court also found that the former employer pursued the action against the former employees in bad faith. (Id. at p. 12.) The employees then filed an action for malicious prosecution against the attorneys who represented the former employer in the underlying action, Latham and Watkins (“Latham”). (Ibid.) Latham moved to strike the complaint under the anti-SLAPP statute arguing the action was untimely under the statute of limitations and the former employees could not establish a probability of prevailing on their malicious prosecution action because they could not establish a lack of probable cause. The trial court granted the anti-SLAPP motion. (Ibid.)

The Court of Appeal reversed. The court analyzed the interim adverse judgment rule, which states that a victory at trial or denial of a defendant’s motion for summary judgment in the underlying action establishes that probable cause existed to bring that action. (Slip opn., p. 19.) The court determined that the rule does not apply when there has been a subsequent ruling in the underlying action that the underlying action was, in fact, brought in bad faith. (Id. at p. 21.) The court explained that in the absence of an exception to the rule, the interim adverse judgment rule would apply and render the denial of summary judgment in the underlying action conclusive evidence that the underlying action was brought with probable cause. However, in this case, the trial court also concluded that the underlying action was brought in objective and subjective bad faith, with no legal or factual basis. This finding defeats the application of the interim adverse judgment rule. (Id. at p. 24.) The court also held the former employees offered sufficient evidence of a probability of prevailing on the element of probable cause of their malicious prosecution action and thus reversed the order granting Latham’s motion to strike the complaint. (Id. at p. 25.)

In addressing the statute of limitations issue, the Court of Appeal agreed with Roger Cleveland Golf Co., Inc. v. Krane & Smith, APC (2014) 225 Cal.App.4th 660, 684, and held that the action was timely because the applicable statute of limitations for malicious prosecution is Code of Civil Procedure section 335.1, irrespective of whether the party is being sued for malicious prosecution is the former adversary or the adversary’s attorney. (Slip opn., p. 16.)