"How Real is the Threat of Malicious Prosecution?"
(Originally published in the journal of the
Institute for Conflict Management, February 2003.)

 

Mediators routinely hear an attorney make "The Threat." And when it comes, it is often accompanied by a raised voice and index finger, either jamming down staccato-like on the table or wagging around. The attorney's voice drops to effectively communicate readiness to use this ultimate weapon in the arsenal of law and revenge. Should a settlement not be reached in this mediation, the attorney intones, the opposition along with their attorney can expect to be served right after this case with a Malicious Prosecution lawsuit.

Malicious Prosecution targets the opposing parties and/or their legal advisors who did not prevail in a prior legal action.

The Threat is often made deep into the mediation. By this time, the client has progressively relinquished, in a series of steps, more and more dollars or claims in the name of negotiation. The Threat is an attorney's way of proving undying loyalty to the client and aggressiveness for the cause during the difficult stages of compromise. Or, the Threat is made to motivate the opposition, or at least the mediator, to somehow close the deal on the last offer made. That's how mediators often see it. Nothing more.

But, there is something more.

It's not just threats. Malicious prosecution cases are being filed in ever-increasing record numbers. Attorneys and their former clients are being reunited as defendants in lawsuits. The risk of claims against an attorney by third parties (people who the attorney does not represent) is at an all-time high. The biggest peril of litigation facing a lawyer practicing in Los Angeles now is no longer a legal malpractice claim by his or her client - it is a malicious prosecution action by the disgruntled opposing litigant who was named as a party in that client's unsuccessful prior lawsuit.

Some bitterly bemoan the rise in popularity of this once universally disfavored claim as further evidence of the decline in civility among lawyers. Others applaud how these cases succeed in getting frivolous litigants and their greedy trial lawyers to pay the attorneys' fees and costs incurred by the innocent and in especially egregious cases, punitive damages too. Either way, a mediator must understand certain points about malicious prosecution.

The essential elements of a Malicious Prosecution claim are: (1) that the prior action was initiated by or at the defendant's direction and was terminated in plaintiff's favor; (2) was brought without probable cause; and (3) was commenced with malice.

Settlements entered into at mediations typically include a dismissal of claims. Such a dismissal cannot be the basis for a malicious prosecution action. A red flag is raised however where a claim is dismissed outside of a mediation and not in furtherance of a settlement, either by the court or voluntarily by a party. Under certain circumstances such dismissal can be the basis for a Malicious Prosecution action. This is another reason why mediators should encourage parties to conclude with an agreement or memorandum of settlement in writing. It makes absolutely clear that the dismissal was filed pursuant to a settlement.

California attorneys are often caught off guard on a number of matters when sued for malicious prosecution. First, although professional liability insurance can cover defense costs in a malicious prosecution action, it will not indemnify the attorney for damages. This places the sued attorney on the hook personally if a jury finds him liable for his client's prior unsuccessful lawsuit. Second, he or she may not be able to waive the attorney - client privilege even though that may be the only effective way to mount a defense. Third, when a party gets sued in a malicious prosecution action, that party frequently turns around and cross complains against his attorney.

Finally, an attorney defendant may be found liable for Malicious Prosecution on the basis of merely one of many causes of action from a complaint or cross complaint in the underlying action. It just takes one bad apple -- even where all the other causes of action in the bunch are found to be good or, as a court would say, objectively tenable. Many attorneys overplead their clients' cases and do not appreciate the risk.

While Malicious Prosecution claims are hard to prove (e.g., malice or ill will is tough to show) an attorney defendant is particularly motivated to settle to prevent his or her fate from being decided by a jury which may harbor negative stereotypes about trial lawyers.

A relatively new weapon to stave off a frivolous malicious prosecution claim is available. Under California Code of Civil Procedure 425.16, the anti-SLAPP statute, challenge to an action for malicious prosecution may be filed within 60 days after the complaint is served, during which time all discovery is stayed unless "good cause" is shown. And unless the plaintiff establishes "reasonable probability" of success on the merits, the case is dismissed with an award of attorneys fees to the prevailing defendant.

But, a significant number of malicious prosecution cases are not being stricken thorough this special challenge. Case in point: I recently mediated a malicious prosecution of a malicious prosecution case. The dispute that started the entire litigation was ancient history.

So, the next time The Threat of malicious prosecution is made in a mediation, a mediator might guide the participants to give it a second thought.
 

2003 Daniel Ben-Zvi.

 


 

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