One-year SOL on malicious prosecution suits is virtually settled

For many years, it has been the typical practice of the plaintiff in a malicious prosecution case to name as a defendant both the underlying unsuccessful plaintiff and the underlying plaintiff's lawyer. The plaintiff in such a malicious prosecution case must establish lack of probable cause. The lawyer who prosecuted the underlying case will usually rely on evidence received from the client to show probable cause, although may not be able to use attorney-client privileged communications to defend a case without a waiver. The client in the underlying case can prove the existence of probable cause by showing reasonable reliance on advice of counsel, if the original plaintiff acted in good faith and fully disclosed all the relevant facts known to the client to the attorney.

Although insurance companies, for reasons of public policy, cannot be required to indemnify insureds for malicious prosecution, they often have a contractual duty to defend them. Downey Venture v. LMI Ins. Co., 66 Cal. App. 4th 478, 506 (1998). In the rare case, where an anti-SLAPP motion or motion for summary judgment motion is not granted in favor of the lawyer defendant, insurers sometimes settle malicious prosecution cases against their lawyer insureds in order to avoid paying defense fees. Conversely, the underlying plaintiff sometimes does not have an insurer to provide a defense.

When lawyers and their former clients are sued for malicious prosecution, it is necessary to determine applicable statutes of limitations. For the underlying plaintiff, it is two years under Code of Civil Procedure Section 335.1, the general tort statute of limitations for personal injury to an individual "caused by the wrongful act or neglect of another." A lawyer defendant, in contrast, should argue that the one-year statute of limitations for an action against an attorney "for a wrongful act or omission, other than actual fraud, arising in the performance of professional services," established by Code of Civil Procedure Section 340.6, applies.

In Vafi v. McCloskey, 193 Cal. App. 4th 874 (2011), the defendant attorneys filed a special motion to strike under Code of Civil Procedure Section 425.16, the anti-SLAPP statute, contending that the one-year statute of limitations was applicable to them, and barred the action. The trial court agreed and the Court of Appeal affirmed. The court reasoned that the plain language of Section 340.6 was applicable because the prosecution of an action by a lawyer arises in the performance of professional services. In addition, the court noted that the more specific statute of limitations overrides a more general "catch all statute," such as Section 335.1. 193 Cal. App. 4th at 881.

The holding of Vafi was followed in Yee v. Cheung, 220 Cal. App. 4th 184 (2013). The Yee court found nothing wrong with the fact that attorney defendants in a malicious prosecution action would have the benefit of a shorter statute of limitations than non-attorney defendants in the same case. 220 Cal. App. 4th at 197.

A direct split of authority on the issue of the applicable statute of limitations for malicious prosecution actions against lawyers arose when another panel of the Court of Appeal decided Roger Cleveland Golf Company, Inc. v. Krane & Smith, 225 Cal. App. 4th 660 (2014). The Roger Cleveland court expressly refused to follow Vafi and Yee. It reasoned that the plain language of Section 340.6 indicated that the statute applied only to "a claim by a client or a former client against his or her attorney, and not to a claim by a third party, alleging the attorney maliciously prosecuted an action against the plaintiff." 225 Cal. App. 4th at 680. Ultimately, the Roger Cleveland court affirmed the granting of the anti-SLAPP motion on the grounds the plaintiff did not make the required showing of showing of malice (the last element of the tort in addition to favorable termination and lack of probable cause).

In Lee v. Hanley, 61 Cal. 4th 1225, 1239 (2015), which was a 340.6 case, but not a malicious prosecution case, the California Supreme Court disapproved the Roger Cleveland case to the extent that it was "inconsistent with this opinion." About two months later, however, the Supreme Court granted review in Parrish v. Latham & Watkins, 238 Cal. App. 4th 81 (2015), and specified to issues to be briefed and decided. The first issue was whether the interim adverse judgment rule barred the plaintiffs' malicious prosecution action against the defendant law firm. Surprisingly, in light of Lee v. Hanley, the second issue to be addressed was whether the plaintiffs' malicious prosecution action against the law firm was "barred by the one-year statute of limitations in Code of Civil Procedure section 340.6." Notwithstanding the issues the Supreme Court requested, when the case was decided, the Supreme Court found in favor of defendant under the interim adverse judgment rule and did not reach the statute of limitations question. Parrish v. Latham & Watkins, 3 Cal. 5th 767 (2017). See our earlier article, "Justices Punted in Parrish Decision," Daily Journal (Aug, 18, 2017).

However, in a recent decision the Court of Appeal took the ball and ran with it. In Connelly v. Bornstein, 33 Cal. App. 5th 783 (2019), the court revisited the split of authority concerning the applicability of Section 340.6. After a careful examination of the legislative history of Section 340.6, the prior appellate decisions, and public policy issues, the Connelly court held that the one-year statute of limitations applies to malicious prosecution claims against lawyers. The Connelly court noted that, although malpractice is generally thought of as a claim by a client or former client, the language of Section 340.6 is not so limited. In addition, the elements of a professional negligence claim mirror those of a malicious prosecution claim against a lawyer, which involve "an attorney's failure to competently and professionally perform services." 33 Cal. App. 5th at 795.

The Connelly court noted that the legislative history of Section 340.6 showed an intention to reduce the cost of claims against lawyers, including malicious prosecution actions which may be expensive for insurers to defend. The court observed that the advice of counsel defense is available to litigants but not to lawyers, and found that the Legislature could properly choose a shorter statute of limitations for lawyers than for their former clients. Connelly also based its decision on a Supreme Court case that was decided a year after Lee, and construed a statute of limitations for medical malpractice claims. See Flores v. Presbyterian Intercommunity Hospital, 63 Cal. 4th 75 (2016).

The Connelly court noted that the Supreme Court's decision in Lee did not necessarily resolve the split of authority over the statute of limitations, thus leaving the holding of the Roger Cleveland case in place, even though its reasoning may have been undermined. Thus, it is theoretically possible that a trial court could follow the Roger Cleveland decision on the statute of limitations, and refuse to follow Vafi, Lee and Connelly. Such a decision would be ill-advised.

To be sure, under Auto Equity Sales, Inc. v. Superior Court, 57 Cal. 2d 450, 456 (1962), a trial court may choose which appellate decision to follow, where there are appellate decisions in conflict. Nonetheless, it is now apparent that the great weight of authority supports the proposition that the applicable statute of limitations governing claims of malicious prosecution against lawyers is the one-year provision of Civil Code Section 340.6. The Connelly decision is the most recent and most comprehensive analysis of the issue. 