2013 year in review: notable decisions affecting lawyers, Part 1

A steady stream of appellate decisions with significant implications for practicing lawyers in the fields of legal malpractice, malicious prosecution, and related cases against attorneys continued in 2013. In Part 1 of this two-part series, we see how the appellate courts were busy refining principles governing the practice of law, such as by issuing decisions limiting the scope of federal preemption in relation to malpractice claims. Third-party cases against attorneys also garnered attention, as the appellate courts examined the reach of the anti-SLAPP statute, and extended the scope of the malpractice statute of limitations to malicious prosecution actions.

Lack of Federal Court Jurisdiction

In February, the U.S. Supreme Court in Gunn v. Minton, 133 S.Ct. 1059 (2013), determined that even if an underlying case involved issues which themselves were subject to federal preemption, federal jurisdiction would not extend to the malpractice case arising out of those issues. Gunn arose out of an underlying federal patent infringement suit in which a client sued his lawyer after a district court declared his patent invalid. After a Texas state court dismissed the client's case largely on causation grounds, the client appealed, alleging that a state court did not have jurisdiction over his malpractice action since it arose out of a patent dispute, which was clearly subject to the exclusive jurisdiction of the federal courts.

After the Texas Supreme Court reversed an appellate court's affirmance of the dismissal, the U.S. Supreme Court took up the case, and held that because the malpractice case was not a creature of federal law, it was not subject to preemption, even if the underlying case was. Particularly significant to the court was the fact that regardless of how the case-within-the-case resolved, it would not ultimately alter the result of the underlying patent issues, nor would it undermine "the development of a uniform body of [patent] law." In essence, Gunn resolved that the subject matter of an underlying case does not determine jurisdictional issues in relation to the malpractice case, a holding which effectively overturns Landmark Screens v. Morgan Lewis & Bockius, 183 Cal. App. 4th 238 (2010).

Anti-SLAPP Cases

The anti-SLAPP statute, often an effective procedural screening device available to attorneys sued by third parties for malicious prosecution and other torts related to litigation, was considered in Kleveland v. Siegel & Wolensky LLP, 215 Cal. App. 4th 534 (2013), a decision issued in April in which the court ultimately allowed a malicious prosecution case to proceed. In Kleveland, there was no dispute the anti-SLAPP statute applied, but the court held the plaintiff had made out a prima facie case. Indeed, based on the specific facts of the underlying dispute, the court found that the anti-SLAPP motion was frivolous and awarded attorney fees to the plaintiff's counsel. In leading to that determination, the court first notably held that favorable termination occurs in the context of an underlying probate action upon the final adjudication of a petition to remove petition for instructions, distribution and removal of a trustee, even if further estate administration matters remain pending, before further concluding that both a lack of probable cause and malice could be inferred from, among other things, threats made by the attorney suggesting "long and expensive litigation" if his demands were not met. The Kleveland ruling heralded a cluster of cases that would rein in somewhat the potency of the anti-SLAPP statute in response to cases brought by third parties against attorneys.

An example of that followed only a few days later in Mendoza v. Hamzeh, 215 Cal. App. 4th 799 (2013), which implicitly took the Kleveland rationale further, holding that certain threats in a demand letter could take it out of the protections of the anti-SLAPP statute. Mendoza followed the reasoning in Flatley v. Mauro, 39 Cal. 4th 299 (2006), which first held that extortionate speech, being not constitutionally protected, could not satisfy the first prong of the anti-SLAPP statute, which requires a showing that the challenged cause of action arises from protected activity. While the demand letter at issue in Mendoza was deemed less egregious than the demands made in Flatley, the Mendoza court nevertheless determined that a demand letter which threatens to "report criminal conduct to enforcement agencies and to [the plaintiff's] customers and vendors," coupled with a demand for money, constituted extortionate speech not protected by the anti-SLAPP statute.

Malin v. Singer, 217 Cal. App. 4th 1283 (2013), issued in July, softened the absoluteness of Mendoza, drawing the line with respect to extortionate speech, at least in the context of the anti-SLAPP statute, at an express threat to disclose wrongdoing to a prosecuting agency or the public at large. In directly distinguishing Mendoza (as well as Flatley), the Malin court clarified that speech concerning a "public issue" would be protected by the anti-SLAPP statute so long as "did not expressly threaten to disclose alleged wrongdoings to a prosecuting agency or the public at large." That said, the Malin court further determined that causes of action for civil rights violations based on illegal wiretapping and computer hacking did not qualify for protection under the anti-SLAPP statute because neither was based on an act in furtherance of the right of petition or free speech.

The Jay v. Mahaffey, 218 Cal. App. 4th 1522 (2013), opinion, also issued in July, dealt a further minor blow to the anti-SLAPP statute as a procedural tool for defending malicious prosecution claims, not by limiting its application, but, like in Kleveland, underscoring that the evidentiary burden sufficient to establish a probability of prevailing may not be an onerous one. After first reaffirming that a voluntary dismissal is presumed to be a dismissal on the merits for purposes of favorable termination, the Jay court had no difficulty finding that a prima facie showing both of a lack of probable cause and malice had been made when the evidence revealed that the attorney defendants had sued limited partners for liability related to a lease agreement (despite that they were not signatories) for the perceived purpose of pressuring another party to settle a case. Jay is also significant because it held an associate could be liable for malicious prosecution even if she was simply following the directive of her supervising partner. Moreover, the Jay court declared that a defendant cannot introduce any new evidence on reply as to an anti-SLAPP motion, a ruling which appears inconsistent with the burden shifting mechanism of CCP Section 425.16(b)(3).

While the viability of the anti-SLAPP procedure as a device to summarily dispose of malicious prosecution actions may have been constrained somewhat in 2013, the latest word came in October, and went in the opposite direction. In Yee v. Cheung, 220 Cal. App. 4th 184 (2013), the court expressly applied the one-year malpractice statute of limitations set forth in Code of Civil Procedure Section 340.6 (which governs "[a]n action against an attorney for a wrongful act or omission") to a malicious prosecution action, before affirming the granting of an anti-SLAPP motion. The plaintiff argued that a longer limitations period applied, primarily because a malicious prosecution action is generally not an action brought by a former client, but the Yee court concluded that the reach of Section 340.6, as written, seems to extend to any claims against an attorney, other than fraud, whether brought by a client or third party, including those alleging malicious prosecution.

In Part 2 of this series, appearing Jan. 24, we will look at cases limiting the preclusion against assigning malpractice claims, reaffirming the collectability element, or emphasizing the implications of obtaining conflict waivers. See you next week.