Albert & Oliker (A&O), a law firm, appeals from a judgment entered against it in a malicious prosecution action.
As we shall explain, we conclude that when, as in this case, there is no dispute as to the facts upon which an attorney acted in filing the prior action, the question whether there was probable cause to institute the prior action is purely a legal question, to be determined by the trial court on the basis of whether, as an objective matter, the prior action was legally tenable or not. If the court determines that the prior action was not objectively tenable — and thus concludes that the action was brought without probable cause — evidence of the extent of an attorney's legal research may be relevant to the further question of whether the prior action was instituted with malice, but if the court finds that the prior action was in fact tenable, probable cause is established — and the malicious prosecution action fails — without regard to the adequacy or inadequacy of the attorney's legal research efforts.
The trial court in this case did not resolve the probable cause issue in this manner, but improperly left the probable cause determination to the jury for resolution under an erroneous standard. We need not return the case to the trial court, however, for we are in as good a position as that court to make the required legal determination, and we conclude, in light of the underlying facts and relevant legal precedents, that the prior action in question here was objectively tenable and thus was not brought without probable cause. Accordingly, we shall reverse the decision of the Court of Appeal with directions to order the entry of judgment in favor of A&O.
In August 1978, three of A&O's clients — M.J. Choppin, J.P. Kinzer, Jr., and Donald Miller (collectively, CKM) — sold a 42-unit apartment building to Sheldon Appel. During the negotiations which preceded the signing of the escrow agreement, Sheldon Appel represented that it would do a "first class" job of converting the building into condominiums and selling the units, and CKM ultimately agreed to sell the building for $2,750,000 cash plus "47% of the excess, if any, of gross sales receipts to [Sheldon Appel] of the condominium units over 3,750,000 dollars." The escrow agreement contained a clause providing that all terms of the sale agreement which were to be performed by Sheldon Appel but which were incapable of performance before the close of escrow would survive the close of escrow and would be binding on Sheldon Appel and its "successors or assigns," but neither the sale agreement nor the escrow agreement contained any provision expressly declaring that the property was to constitute security for Sheldon Appel's obligations.
After learning of Sheldon Appel's bulk sale offer, CKM consulted its attorneys, defendant A&O. On February 23, 1979, A&O filed a complaint on behalf of CKM against Sheldon Appel, seeking a declaration of CKM's rights under the sales contract and the imposition of an equitable lien on the property in question; at the same time, A&O recorded a notice of lis pendens on the property on behalf of CKM.
A little more than a month thereafter, on March 30, 1979, Sheldon Appel filed a motion to expunge the notice of lis pendens, contending that CKM's action did not affect "title to or right of possession of" the real property in question and thus that the lis pendens was not valid (see Code Civ. Proc., § 409.1); in addition to expungement, the motion sought an award of attorneys' fees as a sanction for CKM's alleged misuse of the lis pendens procedure (see Code Civ. Proc., § 409.3). Three weeks later, on April 19, 1979, the trial court granted the motion and expunged the lis pendens; the court declined, however, to impose attorneys' fees on CKM. CKM sought a writ of mandate to vacate the expungement order, but the Court of Appeal denied the writ petition and this court denied a petition for hearing. Eventually, all of the causes of action in CKM's original lawsuit were terminated in Sheldon Appel's favor.
During the period between the recording of the lis pendens and its expungement, Sheldon Appel abandoned its plan to make a bulk sale of the apartment building and began to sell individual condominium units, incurring extra interest costs because of the cloud on the title resulting from the lis pendens. On December 4, 1979, after Sheldon Appel had sold enough condominiums to generate receipts in excess of $3,750,000 but had not paid
On January 3, 1980, Sheldon Appel filed an answer to the breach of contract action and, at the same time, filed a cross-complaint against both CKM and A&O seeking damages for malicious prosecution. In support of its malicious prosecution claim, Sheldon Appel alleged that CKM and A&O had knowingly asserted an untenable lien claim and recorded an impermissible lis pendens to force it to sell individual units.
The trial court severed the malicious prosecution cross-complaint from the breach of contract complaint, and the contract action went to trial first. On April 24, 1984, CKM obtained a judgment of over $720,000 against Sheldon Appel in the breach of contract action.
Sheldon Appel's cross-complaint for malicious prosecution then proceeded to a separate trial. CKM moved in limine for a ruling by the trial court on the question whether the challenged lien claim and lis pendens had been filed and recorded without probable cause, asserting that the uncontradicted facts established that the prior action was instituted with probable cause. The trial court denied the motion and permitted the malicious prosecution action to go to trial.
At trial, the court, over objection, permitted an attorney called by Sheldon Appel to testify as an expert witness on the question of the legal tenability of the prior action. The court also admitted evidence with respect to the adequacy of the legal research that had been performed by A&O prior to the filing of the initial complaint and the recording of the lis pendens. John Zemanek, an attorney employed by A&O who at that point had been a member of the bar for less than a year, had prepared and filed the complaint and had recorded the notice of lis pendens on behalf of CKM. Zemanek initially reported spending slightly over four hours performing all of these tasks, but later testified that he had spent more time than he had reported. Sheldon Appel asserted that Zemanek had spent unreasonably little time researching the legal basis for the lien claim.
In submitting the probable cause issue to the jury, the trial court instructed the jury that "[t]o constitute probable cause for the prosecution of a civil proceeding against [Sheldon Appel]... the evidence must establish that: [A&O], after a reasonable investigation and industrious search of legal authority, had an honest belief that their clients' claims were tenable, and that [A&O] prosecuted claims which a reasonable lawyer would regard as tenable, or did not unreasonably neglect to investigate the facts and law in making their determination to proceed with the prior action." As so instructed,
A&O appealed from the judgment, and a divided Court of Appeal upheld the finding of liability and the compensatory damage award.
We granted review to consider, and to attempt to clarify, a number of issues that have led to disparate rulings in recent Court of Appeal decisions with respect to the application of the probable cause element in malicious prosecution actions.
The common law tort of malicious prosecution originated as a remedy for an individual who had been subjected to a maliciously instituted criminal charge, but in California, as in most common law jurisdictions, the tort was long ago extended to afford a remedy for the malicious prosecution of a civil action. (See Eastin v. Bank of Stockton (1884) 66 Cal. 123, 126-127 [4 P. 1106]; Grant v. Moore (1866) 29 Cal. 644.)
Before taking up the specific questions presented by this case — which relate to the proper application of only the probable cause element of the tort — we think it may be helpful to touch on several policy concerns that have recently been raised with respect to the appropriate application of the malicious prosecution tort generally.
In recent years, however, the large volume of litigation filed in American courts has become a matter of increasing concern, and in some quarters it has been suggested that a reassessment of the traditional "disfavored" status of the malicious prosecution tort, and a relaxation of some of the traditional elements of the tort, may be in order.
The courts of several other states have recently addressed this same question and, in thoughtful opinions, have rejected attempts to broaden the application of the tort, refusing to extend the scope of malicious prosecution liability. (See, e.g., Wong v. Tabor (Ind. App. 1981) 422 N.E.2d 1279, 1285-1290 [declining to expand definition of lack of probable cause]; Friedman v. Dozorc, supra, 312 N.W.2d 585, 595-608 [declining to expand definition of lack of probable cause and declining to abandon special-injury rule].)
After reviewing the competing policy considerations, we agree with those decisions and commentaries which have concluded that the most promising remedy for excessive litigation does not lie in an expansion of malicious prosecution liability. As the Supreme Court of Michigan has recently noted, "In seeking a remedy for the excessive litigiousness of our society, we would do well to cast off the limitations of a perspective which ascribes curative power only to lawsuits." (Friedman v. Dozorc, supra, 312 N.W.2d at p. 600.) While the filing of frivolous lawsuits is certainly improper and cannot in any way be condoned, in our view the better means of addressing the problem of unjustified litigation is through the adoption of measures facilitating the speedy resolution of the initial lawsuit and authorizing the imposition of sanctions for frivolous or delaying conduct within that first action itself, rather than through an expansion of the opportunities for initiating one or more additional rounds of malicious prosecution litigation after the first action has been concluded. In recent years, the Legislature has taken several steps in this direction, enacting legislation to facilitate the early weeding out
A&O's challenge to the trial court's treatment of the probable cause element in this case implicates four interrelated issues: (1) the respective roles of the court and the jury in the determination of this element; (2) whether probable cause is to be tested by an objective or a subjective standard, or some combination of the two; (3) whether the adequacy of a defendant attorney's investigation or legal research is relevant to the probable cause determination; and (4) whether expert testimony is admissible on the issue. As we shall see, past California malicious prosecution decisions have not been consistent in their discussion and treatment of these issues. We take up each of these issues in turn, and then consider whether, on the facts of this case, the trial court should have granted judgment in A&O's favor.
A. Role of Court and Jury in the Probable Cause Determination
As noted above, in a malicious prosecution action, the plaintiff, in addition to establishing that the prior action was terminated in its favor, must prove both (1) that the prior action was brought without probable cause and (2) that the action was initiated with malice. (See, e.g., Bertero v. National General Corp., supra, 13 Cal.3d at p. 50.)
As we explain below, we conclude that under a proper understanding of the probable cause element there were no disputed questions of fact relevant to probable cause to be submitted to the jury in this case, and for that reason it is clear that the trial court erred in submitting the issue to the jury in any form. Furthermore, it is apparent that the form of the probable cause instruction that was utilized in this case — which required the jury to determine, inter alia, whether A&O had "prosecuted claims which a reasonable lawyer would regard as tenable" (see fn. 6, ante) — cannot be squared with the fundamental purposes underlying the rule assigning the probable cause issue for resolution by the court, rather than by the jury. The instruction clearly operated to delegate the probable cause determination to the jury and deprived defendant of the protection afforded by the independent resolution of this element by the court.
Indeed, the impropriety of such an instruction was recognized by this court nearly a century ago in the Ball decision quoted above. As Ball put it, "[it is not] competent for the court to give to the jury a definition of probable cause, and instruct them to find for or against the defendant according as they may determine that the facts are within or without that definition. Such an instruction is only to leave to them in another form the function of determining whether there was probable cause. The court cannot divest itself of its duty to determine this question, however complicated or numerous may be the facts. It must instruct the jury upon this subject in the concrete, and not in the abstract, and must not leave to that body the office of determining the question, but must itself determine it...." (Ball v. Rawles, supra, 93 Cal. at p. 228; see also Williams v. Coombs, supra, 179 Cal.App.3d 626, 635-638.)
Although we conclude that the trial court erred in leaving the probable cause decision to the jury, in fairness to the trial court we must recognize
The trial court and Court of Appeal, relying on a number of Court of Appeal decisions which we discuss below, concluded that under the probable cause standard enunciated in those decisions there were controverted factual questions in this case relevant to the probable cause determination which had to be submitted to the jury. Because we find that the decisions in question set forth an erroneous definition of the probable cause element, we conclude that a reassessment of those decisions is in order.
B. Objective or Subjective Nature of Probable Cause Element
The instruction on probable cause given in this case was derived from much-quoted dictum contained in the Court of Appeal opinion in Tool Research & Engineering Corp. v. Henigson (1975) 46 Cal.App.3d 675 [120 Cal.Rptr. 291]. In that case, the Court of Appeal affirmed summary judgment for the defendant, an attorney, in a malicious prosecution action, concluding that the trial court had correctly found that the plaintiff had failed to establish that the prior action had been instituted without probable cause. The Tool Research court quite properly rejected the plaintiff's contention that probable cause to institute an action exists only if an attorney is "convinced that the trier of fact would accept the evidence in favor of the cause [he represents]" (46 Cal. App.3d at p. 683), making it clear that the appropriate question is simply whether the prior action was legally "tenable." (Ibid.)
In the course of rejecting that contention, however, the Tool Research court included broad dictum which purported to set forth a general definition of the probable cause element for all cases in which an attorney is the subject of a malicious prosecution action. The court stated in this regard: "An attorney has probable cause to represent a client in litigation when, after a reasonable investigation and industrious search of legal authority, he has an honest belief that his client's claim is tenable in the forum in which it
Although this language has been repeated and applied uncritically in numerous subsequent Court of Appeal decisions, we believe that it is flawed in two separate respects: (1) in suggesting that the probable cause element requires an evaluation of an attorney's subjective belief in the tenability of a claim, and (2) in suggesting that the adequacy of the attorney's legal research is relevant to the probable cause element. We turn first to the "subjective belief" issue.
As discussed above, the "probable cause" element in the malicious prosecution tort plays a role quite distinct from the separate "malice" element of the tort.
The Tool Research "subjective belief" dictum (46 Cal. App.3d at p. 683) alters the probable cause element in a fundamental respect. Under that dictum, even if a trial court finds that, on the basis of the facts known to the defendant attorney, the prior lawsuit was objectively reasonable — and thus that the malicious prosecution plaintiff was not subjected to an unjustified lawsuit — the court could not properly terminate the action in favor of the defendant so long as the plaintiff presented any evidence raising a question as to whether the defendant attorney subjectively believed in the tenability
Although past decisions of our own court are not as clear as they might be with respect to the "objective" versus "subjective" nature of the probable cause element (see Franzen v. Shenk (1923) 192 Cal. 572 [221 P. 932]; Albertson v. Raboff (1956) 46 Cal.2d 375, 382 [295 P.2d 405]; Bertero, supra, 13 Cal.3d 43, 55), we find that, properly understood, the decisions do not support the Tool Research court's conclusion that the defendant's subjective belief in the legal tenability of the prior action is a necessary element of probable cause. As we explain, while our decisions do indicate that in some cases the defendant's subjective belief may be relevant to the probable cause issue, in all of the cases the "belief" in question related to the defendant's belief in, or knowledge of, a given state of facts, and not to the defendant's belief in, or evaluation of, the legal merits of the claim.
Franzen v. Shenk, supra, 192 Cal. 572, contains the most extensive discussion of the issue. In Franzen, the plaintiff, Mabel Franzen, instituted a malicious prosecution action against A.M. Shenk, a man with whom she had apparently had an affair, alleging that Shenk had maliciously instituted a prior proceeding seeking to have her declared insane. In defense of his conduct in instituting the prior proceeding, Shenk testified at the malicious prosecution trial that Franzen had made serious threats against his children and his wife, that he had reported those threats to his attorney, a prosecutor and a justice of the peace, and that he had thereafter instituted the sanity proceeding on their advice. Franzen testified, however, that she had never made any threats against Shenk's children or wife. On that state of the record, the trial court had granted a directed verdict in favor of Shenk.
On appeal, the Franzen court reversed the directed verdict in Shenk's favor, finding that because Shenk had testified that Franzen's threats against his family were the only basis for his belief in Franzen's insanity and because Franzen's and Shenk's testimony created a direct conflict on whether such threats had in fact ever been made, the trial court had erred in directing the verdict for Shenk without having the jury determine whether or not the threats had or had not been made. (Franzen v. Shenk, supra, 192 Cal. at p. 582.) In reaching this conclusion, the court explained, inter alia: "`"Although the question of probable cause, as we have seen above, is a question of law, yet the belief of the defendant in a state of facts is itself a fact which it is proper to submit to the jury for its consideration; and whenever the good faith of the defendant, or his knowledge or belief in an
At the same time, however, the Franzen court made clear that it was not suggesting it would be necessary to submit any aspect of the probable cause issue to the jury if the relevant facts on which Shenk had acted were not in dispute. In this regard, Franzen expressly reaffirmed a line of prior decisions which had specifically established that "if there is no dispute concerning the existence of the facts relied upon to show probable cause, the trial court must then determine as a matter of law whether such undisputed facts do or do not warrant an inference of probable cause." (Franzen v. Shenk, supra, 192 Cal. at p. 578, italics added.)
Although in another passage Franzen itself speaks of evidence from which the jury could have inferred that Shenk "did not in fact believe that [Franzen] was insane" (192 Cal. at p. 582), and subsequent opinions in this court have sometimes referred to the defendant's subjective belief "in the validity of the claim asserted" as a component of probable cause (see Bertero, supra, 13 Cal.3d at p. 55; Albertson, supra, 46 Cal.2d at p. 382), in each of the cases what was disputed was not the defendant's subjective belief in the legal tenability of his claim, but rather the state of the defendant's knowledge of the facts on which his claim was based.
When there is a dispute as to the state of the defendant's knowledge and the existence of probable cause turns on resolution of that dispute, Franzen, supra, 192 Cal. 572, and similar cases hold that the jury must resolve the threshold question of the defendant's factual knowledge or belief. Thus, when, as in Franzen, there is evidence that the defendant may have known that the factual allegations on which his action depended were untrue, the jury must determine what facts the defendant knew before the trial court can determine the legal question whether such facts constituted probable cause to institute the challenged proceeding. As Chief Justice Taft's explanation of the probable cause element indicates, however, the jury's factual inquiry into the defendant's belief or knowledge is not properly an inquiry into "whether [the defendant] thought the facts to constitute probable cause" (Director General, supra, 263 U.S. 25, 28 [68 L.Ed. 146, 148]); when the state of the defendant's factual knowledge is resolved or undisputed, it is the court which decides whether such facts constitute probable cause or not.
Lest there be any confusion, however, we strongly emphasize that our conclusion in this regard does not by any means suggest that an attorney who institutes an action which he does not believe is legally tenable is free from the risk of liability for malicious prosecution. If the trial court concludes that the prior action was not objectively tenable, evidence that the defendant attorney did not subjectively believe that the action was tenable would clearly be relevant to the question of malice. Inasmuch as an attorney who does not have a good faith belief in the tenability of an action will
Furthermore, the probable cause element, as so defined, imposes no improper or unjustified hardship on a malicious prosecution plaintiff. If a court finds that the initial lawsuit was in fact objectively tenable, the court has determined that the fundamental interest which the malicious prosecution tort is designed to protect — "the interest in freedom from unjustifiable and unreasonable litigation" (1 Harper et al., The Law of Torts, supra, § 4.2, p. 407, italics added) — has not been infringed by the initial action. Under such circumstances, it is not unfair to bar a plaintiff's suit for damages even if the plaintiff can show that its adversary's law firm did not realize how tenable the prior claim actually was, since the plaintiff could properly have been put to the very same burden of defending an identical claim if its adversary had simply consulted a different, more legally astute, attorney. This is a classic case of "no harm, no foul."
C. Irrelevance of Attorney Research to Probable Cause
As noted above, in addition to suggesting that a plaintiff may establish an absence of probable cause by demonstrating that the defendant attorney did not subjectively believe in the tenability of the prior claim, the Tool Research court further suggested that a plaintiff might prove a lack of probable cause by showing that the attorney had failed to conduct "a reasonable investigation and industrious search of legal authority ..." before instituting the prior action. (Tool Research, supra, 46 Cal. App.3d at p. 683.) Although that statement was only dictum in Tool Research — as no question had been raised as to the adequacy of the defendant's research — at least two subsequent Court of Appeal decisions have relied on the Tool Research language to hold that a malicious prosecution plaintiff may establish a lack of probable cause simply by showing that its former adversary's attorney failed to perform reasonable legal research or factual investigation before filing a claim on his client's behalf. (See Weaver v. Superior Court (1979) 95 Cal.App.3d 166, 188-190 [156 Cal.Rptr. 745]; Williams v. Coombs, supra, 179 Cal.App.3d 626, 640-644.) In the present case, the lower courts apparently relied on these precedents to conclude that because there was a dispute in the evidence as to the extent and adequacy of the legal research conducted by A&O prior to the filing of the earlier action, there was a crucial factual issue to be submitted to the jury on the probable cause element.
As we have explained above, if the trial court concludes that, on the basis of the facts known to the defendant, the filing of the prior action was objectively reasonable, the court has necessarily determined that the malicious prosecution plaintiff was not subjected to an unjustified lawsuit. When the court has made such a determination, there is no persuasive reason to allow the plaintiff to go forward with its tort action even if it can show that its adversary's attorney did not perform as thorough an investigation or as complete a legal research job as a reasonable attorney may have conducted. Permitting recovery on such a basis would provide the plaintiff with a windfall; since the prior action was objectively tenable, the plaintiff could properly have been put to the very same burden of defense if its adversary had simply hired more thorough counsel.
Of course, as with the question of the defendant's subjective belief in the tenability of the claim, if the trial court determines that the prior action was not objectively tenable, the extent of a defendant attorney's investigation and research may be relevant to the further question of whether or not the attorney acted with malice. We conclude, however, that the adequacy of an attorney's research is not relevant to the probable cause determination.
D. Expert Testimony and Probable Cause
The trial court's confusion as to the proper role of the court and the jury in the probable cause determination also led to yet another error in this case. As noted above, the court, over objection, permitted attorneys to be called as expert witnesses to give their opinions as to whether a reasonable attorney would conclude that the claims advanced in the prior action were tenable.
We need not remand the matter to the trial court, however, for we are as in as good a position as that court to resolve the determinative legal question — namely, whether there was probable cause to file the lis pendens and
A number of early cases, discussing the probable cause issue in relation to a claim of a malicious prosecution of a criminal charge, defined probable cause as "a suspicion founded upon circumstances sufficiently strong to warrant a reasonable man in the belief that the charge is true." (See, e.g., Potter v. Seale, supra, 8 Cal. 217, 221.) In the context of an action alleging malicious prosecution of a prior civil suit, however, it has long been recognized that it is not "true charges" but rather legally tenable claims for relief that the law seeks to protect. (See, e.g., Murdock v. Gerth, supra, 65 Cal.App.2d 170, 178-179. See generally Rest.2d Torts, § 675, coms. c, d, e, f and g.)
In addressing the somewhat related question as to the appropriate standard for determining the frivolousness of an appeal in In re Marriage of Flaherty (1982) 31 Cal.3d 637 [183 Cal.Rptr. 508, 646 P.2d 179], we concluded that an appeal could properly be found frivolous only if "any reasonable attorney would agree that the appeal is totally and completely without merit." (P. 650.) In arriving at that standard, we reasoned that "any definition [of frivolousness] must be read so as to avoid a serious chilling effect on the assertion of litigants' rights.... Counsel and their clients have a right to present issues that are arguably correct, even if it is extremely unlikely that they will win...." (Ibid.)
In Williams v. Coombs, supra, 179 Cal.App.3d 626, 638-639, the Court of Appeal suggested that the Flaherty standard was insufficiently stringent as a test for probable cause in the malicious prosecution context, and instead proposed that probable cause be measured "by whether a prudent attorney, after such investigation of the facts and research of the law as the circumstances reasonably warrant, would have considered the action to be tenable on the theory advanced." (179 Cal. App.3d at p. 639.)
Although it is not clear to us that the Williams "prudent attorney" test would, in practice, necessarily lead to results different from the Flaherty "reasonable attorney" standard, to the extent the two formulations do differ we believe that the less stringent Flaherty standard more appropriately reflects the important public policy of avoiding the chilling of novel or debatable legal claims. That policy is no less applicable to the institution of actions at the trial stage than to the pursuit of appeals, and, contrary to the Williams court's suggestion (see 179 Cal. App.3d at p. 638), we do not believe there is any reason to afford litigants and their attorneys less protection from subsequent tort liability than it is to shield them from court-imposed sanctions within the initial action. (See, ante, pp. 873-874; see also
The judgment of the Court of Appeal is reversed, and the case is remanded with directions to order the entry of judgment in favor of A&O on the malicious prosecution claim.
The same is true with respect to a number of decisions which indicate that when the subject of a malicious prosecution action is a prior criminal proceeding the defendant's subjective belief in the "guilt" of the accused is relevant to the probable cause element. (See, e.g., Harkrader v. Moore (1872) 44 Cal. 144, 149-152.) Read in context, the reference in those decisions to the defendant's belief in the accused's "guilt" is to the defendant's belief "`in the truth of the charge made against [the accused] in the prosecution complained of'" (Franzen v. Shenk, supra, 192 Cal. at pp. 578-579 [italics added, citation omitted]), and not to the defendant's subjective evaluation of the legal merits of the prosecution's case.