Opinion

Alston v. Dawe

Court: California Court of Appeal
Filed: Jul 28, 2020
Status: Published
Cited by: 0 cases
Authority: More cited than 12.2%

The opinion

Filed 7/27/20

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

ELAINE B. ALSTON et al.,

Plaintiffs and Appellants, G057157

v. (Super. Ct. No. 30-2018-00997214)

MICHAEL G. DAWE et al., OPINION

Defendants and Respondents.

Appeal from a judgment of dismissal of the Superior Court of Orange

County, Sheila Fell, Judge. Affirmed in part, reversed in part, and remanded.

Copenbarger & Associates, Paul D. Copenbarger and Elaine B. Alston for

Plaintiffs and Appellants.

Prenovost, Normandin, Bergh & Dawe, Michael G. Dawe and Brian D.

Cronin for Defendants and Respondents.

* * *

A plaintiff suing for malicious prosecution must establish the underlying

action was terminated in her favor. To satisfy this element, if the underlying action was

terminated by means other than trial, the termination must involve a determination on the

merits of the case and specifically the malicious prosecution plaintiff’s innocence of the

alleged misconduct. (Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 341-342

(Casa Herrera).)

The issue presented here is whether a dismissal by the court of the

underlying action on collateral estoppel grounds can qualify as a favorable termination

for purposes of a subsequent malicious prosecution claim. The trial court held it did not.

The court therefore found the plaintiffs could not establish a probability of prevailing on

their malicious prosecution claim, granted the defendants’ special motions to strike the

claim under the anti-SLAPP (strategic lawsuit against public participation) statute, and

dismissed the complaint. In so ruling, the court relied on the only case on point, JSJ

Limited Partnership v. Mehrban (2012) 205 Cal.App.4th 1512, 1527 (JSJ), which held

“the successful invocation of the defense of res judicata in the underlying claim is not a

determination on the merits for purposes of a malicious prosecution action.” (Italics

added.)

As discussed hereafter, we decline to follow the rule articulated in JSJ. A

dismissal on collateral estoppel grounds can occur for a number of reasons, including the

fact that the same issue was already litigated and decided on the merits in an earlier

proceeding. Thus, when ruling on an anti-SLAPP motion attacking a malicious

prosecution claim that arises out of another lawsuit that was dismissed on collateral

estoppel grounds, a trial court should look behind the collateral estoppel ruling in the

prior case to determine what the rationale for that ruling was. If, in that earlier

proceeding, the party’s lack of culpability on the disputed issue was argued, litigated, and

decided on the merits, the dismissal of the subsequent case on collateral estoppel grounds

qualifies as a favorable termination for purposes of a later malicious prosecution claim.

We have seen this convoluted case before. The original dispute focused on

whether an attorney and her law firm could represent a limited liability company (LLC)

in a lease dispute with its tenant, who also happened to be a member and co-owner of the

LLC. The tenant claimed the LLC could not retain counsel or litigate the lease dispute

without his consent because he was a 50 percent co-owner of the LLC. An arbitrator

found the LLC’s retention of counsel and prosecution of the dispute were permissible,

and the trial court confirmed the arbitration award. We affirmed (Case 1). The tenant

then filed an action for declaratory relief against the LLC’s attorneys (Case 2), seeking a

declaration they could not represent the LLC without his consent. The trial court (the

same judge who presided over Case 1) sustained the LLC’s attorneys’ demurrer in Case 2

without leave and granted their anti-SLAPP motion, citing the collateral estoppel effect

of Case 1. The LLC’s attorneys then filed the instant malicious prosecution action

(Case 3) against the tenant and his attorneys, who each filed anti-SLAPP motions.

Relying on JSJ, the trial court (again, the same judge as in Case 1 and Case 2) granted

their anti-SLAPP motions, finding the attorney-plaintiffs could not establish a favorable

termination of Case 2 and thus could not establish a probability of prevailing on their

malicious prosecution claim.

We reverse that portion of the trial court’s order and remand this matter for

further proceedings. Whether the attorneys could represent the LLC was litigated at

length and decided on the merits in Case 1; that is precisely why the attorneys won in

Case 2. The basis for the dismissal on collateral estoppel grounds in Case 2 was not

technical or procedural; it was based on the merits (or lack thereof) of Case 2. The

attorney-plaintiffs therefore established a termination of Case 2 in their favor. On

The complaint also included a fraud claim against the tenant, and the trial

court granted the anti-SLAPP motion as to that claim as well. The attorney-plaintiffs do

not challenge that portion of the order, and we therefore affirm it without further

discussion.

remand, the trial court should complete its prong two anti-SLAPP analysis and consider

whether the attorney-plaintiffs established a probability of prevailing on the other

elements of their malicious prosecution claim.

FACTS

The following facts are taken from the complaint, declarations, and other

evidence submitted on the special motions to strike, along with our prior opinions in the

underlying matters. (See Newport Harbor Offices & Marina, LLC v. McNaughton

(Sept. 5, 2014, G047424, G048095) [nonpub. opn.] (NHOM 1); Newport Harbor Offices

& Marina, LLC v. Kent A. McNaughton and Associates (June 29, 2017, G052704,

G052984) [nonpub. opn.] (NHOM 2).)

1. The Parties’ Dispute Concerning Rent and NHOM’s Ability to Hire

Counsel without McNaughton’s Consent

Paul Copenbarger and Kent McNaughton formed Newport Harbor Offices

& Marina, LLC (NHOM) in 2003 to acquire an office building in Newport Beach.

McNaughton and Copenbarger were equal owners and the sole members of NHOM.

In NHOM’s operating agreement, Copenbarger delegated to McNaughton

“management of the day-to-day operations of the commercial real property owned by the

Company,” and McNaughton delegated to Copenbarger “management and handling of all

legal affairs of the Company.” These delegations were “[s]ubject to revocation” by the

delegating members.

McNaughton later leased several office suites in NHOM’s building for his

separate real estate business. McNaughton signed the rental agreement on behalf of both

himself and NHOM.

In early 2008, after learning McNaughton had unilaterally increased his

monthly NHOM management payments to himself from $10,000 to $15,000,

Copenbarger revoked McNaughton’s delegated authority to manage NHOM’s day-to-day

operations. In response, McNaughton stopped paying rent to NHOM.

2. Case 1: Litigation Over the Lease Dispute and NHOM’s Ability to Hire

Alston as Counsel

NHOM hired attorney Elaine Alston (Ms. Alston) and her firm, Alston,

Alston & Diebold (collectively, Alston), to file unlawful detainer actions against

McNaughton. McNaughton, through his counsel, advised Alston that their purported

engagement agreement with NHOM was ‘“illegal and ineffective.”’ Undeterred, Alston

continued to represent NHOM in the unlawful detainer actions.

McNaughton then initiated an arbitration against Copenbarger in

accordance with the arbitration provision in NHOM’s operating agreement. He sought a

declaration that NHOM could not validly pursue the unlawful detainer actions against

him without his express consent, Copenbarger could not unilaterally authorize the filing,

and Copenbarger had breached his fiduciary duty by causing NHOM to file the unlawful

detainer actions against McNaughton.

In June 2008, while the unlawful detainer actions and arbitration

(collectively, Case 1) were pending, McNaughton formally revoked Copenbarger’s

delegated right to manage NHOM’s legal affairs. He also filed a motion to compel

arbitration of the lease dispute. In granting the motion, the trial court reasoned the

dispute boiled down to a disagreement between Copenbarger and McNaughton and

would be most efficiently resolved in the pending arbitration. It therefore stayed the

unlawful detainer actions pending the outcome of that arbitration.

The arbitrator issued an interim award in 2011. He found largely in

Copenbarger’s favor, concluding “Copenbarger had the authority to initiate, approve and

ratify the legal enforcement actions undertaken by the LLC against McNaughton for

refusal to pay rents for 3 months,” and “Copenbarger had both the duty and responsibility

to initiate and prosecute an action against a delinquent tenant even if that tenant was a

50% member of the LLC.” He further found McNaughton had breached his leases with

NHOM by improperly withholding rent. The arbitrator later issued a final award

incorporating the terms of his interim award without change.

Copenbarger filed a petition to confirm the arbitration award with the trial

court, and McNaughton filed a motion to disqualify Alston. The court denied

McNaughton’s disqualification motion, granted Copenbarger’s petition to confirm the

arbitration award, and confirmed the award in all respects. The court then conducted a

trial on damages, found McNaughton liable to NHOM for $14,283, and entered a

judgment against McNaughton.

3. Our First Opinion in Case 1 (NHOM 1)

McNaughton appealed, asserting NHOM could not pursue litigation against

him without his consent because NHOM is a distinct legal entity of which he owns

50 percent. NHOM cross-appealed, asserting the damages award was too low.

While the cross-appeals were pending, McNaughton filed a motion in this

court to disqualify Alston and dismiss NHOM’s cross-appeal on the grounds that

McNaughton had not consented to Alston representing NHOM. We summarily denied

the motion.

In 2014, we affirmed the judgment against McNaughton, subject to

modifications not relevant here. We concluded “McNaughton’s assertion that the

arbitrator ‘exceeded his jurisdiction’ border[ed] on the specious.” As for Copenbarger’s

ability to pursue litigation on behalf of NHOM against McNaughton without his consent,

we concluded the NHOM operating agreement expressly “delegat[ed] to Copenbarger

exclusive authority to handle NHOM’s ‘legal affairs.’ NHOM’s choice to pursue

litigation—against McNaughton or anyone else—falls squarely within that authority and

thus the arbitrator properly concluded Copenbarger had ‘both the duty and responsibility

to initiate and prosecute an action against a delinquent tenant . . . .’” (NHOM 1, supra,

G047424, G048095.)

We went on: “And of course, the fact [Copenbarger’s] delegated authority

over legal affairs was revocable changes nothing, since McNaughton failed to actually

revoke it until after NHOM had already filed the lease dispute. At that point, the

revocation could accomplish nothing more than to ensure that any future changes in

NHOM’s litigation strategy—such as a decision to dismiss or settle the case—would

likely have required the consent of both Copenbarger and McNaughton.” (NHOM 1,

supra, G047424, G048095.)

We also noted the arbitrator impliedly found “Copenbarger had the

authority to approve the selection of counsel to represent NHOM in that dispute,” and

therefore declined to address McNaughton’s contention that “Alston ‘was never

effectively engaged by NHOM.’” (NHOM 1, supra, G047424, G048095.)

McNaughton petitioned for review by the California Supreme Court, but

his petition was denied.

On remand, NHOM moved for an award of attorney fees against

McNaughton under Civil Code section 1717. In denying the motion, the trial court

determined there was no prevailing party for purposes of section 1717 because the

amount awarded to NHOM was much less than it sought. NHOM appealed that order.

4. Case 2: McNaughton’s Action for Declaratory Relief

While NHOM’s appeal of the postjudgment fees order in Case 1 was

pending, McNaughton filed an action seeking declaratory relief against Alston, the

attorneys who had represented NHOM in Case 1 (Case 2). In his original complaint,

McNaughton vaguely alleged Alston was impermissibly representing NHOM “in various

[unspecified] litigation matters in which NHOM has putatively taken a position adverse

to McNaughton,” and he sought a declaration that Alston “neither [is], nor ever [was]

legally engaged as counsel for NHOM, and do[es] not, as a matter of law, represent

NHOM, despite their persistent contentions to the contrary.”

McNaughton’s first amended complaint was more detailed. He defined the

“various litigation matters” to include Case 1 and NHOM’s pending appeal of the fees

order. He further alleged he never consented to Alston acting as counsel for NHOM in

Case 1; he formally revoked Copenbarger’s delegated right to manage NHOM’s legal

affairs in June 2008, yet Alston continued to represent and bill NHOM, of which he

owned 50 percent, for their work on Case 1.

McNaughton acknowledged he unsuccessfully challenged Alston’s

authority to bring the unlawful detainer actions in Case 1, but insisted his position was

“[c]onsistent with” this court’s 2014 opinion in NHOM 1, in which we observed

McNaughton’s June 2008 revocation of Copenbarger’s delegated right to manage

NHOM’s legal affairs “could . . . ensure that any future changes in NHOM’s litigation

strategy—such as a decision to dismiss or settle the case—would likely have required the

consent of both Copenbarger and McNaughton.” Selectively citing that sentence in our

2014 opinion, McNaughton alleged Alston was improperly seeking attorney fees for

work that postdated his June 2008 revocation of Copenbarger’s delegated right to manage

NHOM’s legal affairs. He thus sought a declaration that Alston “neither [is], nor ever

[was] legally engaged as counsel for NHOM since June 2008, and do[es] not, as a matter

of law, represent NHOM, despite their persistent contentions to the contrary.” (Italics

added.)

Alston filed a demurrer and special motion to strike the first amended

complaint. The trial court (the same judge who presided over Case 1) sustained the

demurrer without leave to amend and granted the motion to strike on collateral estoppel

grounds. In sustaining Alston’s demurrer, the court reasoned, “If the Court of Appeal

wanted to find that [Alston] had no authority for continued representation, it would have

found so in its September 2014 Appellate opinion [in Case 1]; [McNaughton] is

re-litigating this same issue—he is contending the representation is continuing in the

same underlying [case].”

The court also granted Alston’s anti-SLAPP motion, reasoning: “[The]

Court of Appeal ruled that [Alston] had a right to represent NOHM in the underlying

case; [t]he continuation of litigation in the underlying case, is not alleged to be a changed

strategy, but rather a continuation of the already condoned legal representation and

validation of court orders during that litigation; [and McNaughton] has not shown a

probability of prevailing on the merits.”

The trial court entered a judgment for Alston. McNaughton did not appeal.

5. Our Second Opinion in Case 1 (NHOM 2)

Three weeks later, we issued our opinion in NHOM’s appeal from the

postjudgment order denying NHOM’s motion for attorney fees in Case 1. Finding no

abuse of discretion, we affirmed the order. (NHOM 2, supra, G052704, G052984.)

We then explained at length how misleading and ingenuous McNaughton’s

arguments were in NHOM 2 and expressed frustration with McNaughton’s attempts to

relitigate the issue of NHOM’s ability to retain counsel. We noted “the bulk of

Collateral estoppel, sometimes called issue preclusion, “prohibits the

relitigation of issues argued and decided in a previous case, even if the second suit raises

different causes of action. [Citation.] Under issue preclusion, the prior judgment

conclusively resolves an issue actually litigated and determined in the first action.

[Citation.] There is a limit to the reach of issue preclusion, however. In accordance with

due process, it can be asserted only against a party to the first lawsuit, or one in privity

with a party.” (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 824 (DKN).) The

doctrine “applies (1) after final adjudication (2) of an identical issue (3) actually litigated

and necessarily decided in the first suit and (4) asserted against one who was a party in

the first suit or one in privity with that party.” (Id. at p. 825.)

McNaughton’s 47-page brief [was] devoted to rehashing his contention that because he is

a 50 percent owner of NHOM, its counsel could not have been authorized to represent it,

or to pursue any litigation against him, absent his own consent. Although this contention

was squarely rejected by the arbitrator, and the rejection was expressly endorsed by this

court in the prior appeal, McNaughton persists—going so far as to selectively quote from

our prior opinion in an effort to persuade us it supports the opposite conclusion from the

one we reached. He does this while simultaneously excoriating NHOM’s counsel for her

supposedly questionable ethics and integrity, and lamenting the enormous waste of

resources this ‘sorry saga’ has occasioned. [¶] McNaughton’s effort accomplishes

nothing more than to inspire some regret we must affirm the court’s order denying

NHOM its requested fees.” (NHOM 2, supra, G052704, G052984.)

We also criticized McNaughton’s attempts to misconstrue our holding in

NHOM 1: “[In NHOM 1, we] point[ed] out if McNaughton had validly revoked

Copenbarger’s delegated authority over NHOM’s legal affairs following its initiation of

the lease dispute against him, revocation would ‘change[ ] nothing.’ [Citation.] Instead,

we said such a ‘revocation could accomplish nothing more than to ensure that any future

changes in NHOM’s litigation strategy—such as a decision to dismiss or settle the case—

would likely have required the consent of both Copenbarger and McNaughton.’

[Citation.] Our point was even if McNaughton had regained the right to participate in

future decisions concerning NHOM’s pursuit of litigation—an issue we did not

specifically address—that would still not have empowered him to upset the status quo in

an ongoing case. It would only be future changes in litigation strategy, such as a

decision to dismiss or settle such a case, that McNaughton might claim a right to

participate in. In no way did we suggest that by rescinding Copenbarger’s sole authority

over litigation, McNaughton could deny NHOM authority to continue on the course it

had already set, which in this case was to pursue the lease dispute against him.”

(NHOM 2, supra, G052704, G052984, italics added.)

We continued, “Unfortunately, McNaughton was likewise undaunted by

our opinion. Rather than acknowledge what we said, he attempted to suggest it meant the

opposite of what we intended—i.e., once he had rescinded his delegation of litigation

authority over NHOM to Copenbarger, he could thereafter unilaterally ‘disapprove[ ] any

[further] litigation conduct by NHOM under the putative representation of [it’s [sic]

counsel].’ Indeed, McNaughton went so far as to selectively quote language from our

opinion back to us in his current respondent’s brief, claiming we had previously

concluded once he rescinded his prior delegation of authority to Copenbarger, ‘all

subsequent “litigation strategy”’ in NHOM’s case against him would likely have required

his consent. Not that ‘changes in NHOM’s litigation strategy—such as a decision to

dismiss or settle the case,’ might require his consent, which is what we said, but that all

strategy would. [¶] And having misrepresented what we said, McNaughton then asserted

our supposed conclusion ‘qualifies as ‘law of the case’ which retroactively voided all the

work done by NHOM’s counsel in this case since June 2008—thus precluding counsel’s

recovery of any fees for those years of work. This assertion is disingenuous and

specious.” (NHOM 2, supra, G052704, G052984.)

We further noted McNaughton’s attempts to “undermine the authority of

NHOM’s counsel to continue pursuing this litigation against him” were “unreasonably

zealous.” (NHOM 2, supra, G052704, G052984.) In the end, however, “given NHOM’s

limited success in achieving its objectives in the lease dispute,” we affirmed the trial

court’s order denying NHOM’s fees motion, finding no abuse of discretion. (Ibid.)

6. Case 3: Alston’s Malicious Prosecution Action

One year later, Alston filed the instant action against McNaughton and his

attorneys in Case 2, Michael G. Dawe and Prenovost, Normandin, Bergh & Dawe

(collectively, Prenovost), asserting claims for malicious prosecution based on Case 2 and

fraud. Alston’s complaint detailed various evidence of McNaughton’s and Prenovost’s

alleged acts of malice against Alston, including making numerous disparaging remarks

about Ms. Alston over the years, calling her a ‘“rogue’ attorney” in numerous filings and

hearings, expressing pleasure over the fact Alston had not been paid for most of the work

for NHOM, and submitting a complaint about Ms. Alston to the California State Bar.

According to Ms. Alston, McNaughton and Prenovost’s prosecution of Case 2 damaged

her reputation, bankrupted her and her firm, forced them to incur attorney fees in

defending themselves, caused emotional distress and anxiety, created a conflict between

her and her firm, increased their cost of insurance, and caused difficulty in obtaining

financing.

McNaughton and Prenovost each filed anti-SLAPP motions. Among other

arguments, they asserted Alston could not establish a probability of prevailing on their

malicious prosecution claim because the trial court’s ruling in Case 2 was based on

collateral estoppel grounds, thus barring Alston from establishing the element of a

favorable termination of the underlying action. They both relied on JSJ, supra,

205 Cal.App.4th at p. 1527, which held “the successful invocation of the defense of

res judicata in the underlying claim is not a determination on the merits for purposes of a

malicious prosecution action.”

The trial court (again the same judge as in the prior cases) issued a tentative

ruling granting the anti-SLAPP motions. On the malicious prosecution claim, evidently

relying on the JSJ case, the court reasoned: “Alston cannot show favorable termination

of the underlying action [Case 2]; [t]his Court clearly ruled on the basis of the Court of

Appeal’s decision in the prior action [Case 1]—the basis of this ruling [in Case 2] was

The fraud claim named only McNaughton as a defendant and alleged

McNaughton misrepresented in Case 1 that he was a managing member of NHOM and

held a 50 percent ownership interest in NHOM, when in fact he allegedly transferred his

interest in NHOM to a third party.

collateral estoppel.” The court did not address Alston’s probability of succeeding on the

other elements of their malicious prosecution claim.

Following oral argument, the trial court adopted its tentative ruling without

change and granted the anti-SLAPP motions. It then entered a judgment of dismissal in

favor of McNaughton and Prenovost. Alston appealed.

DISCUSSION

1. The Anti-SLAPP Statute

The Legislature enacted the anti-SLAPP statute to address “what are

commonly known as SLAPP suits (strategic lawsuits against public participation)—

litigation of a harassing nature, brought to challenge the exercise of protected free speech

rights.” (Fahlen v. Sutter Central Valley Hospitals (2014) 58 Cal.4th 655, 665, fn. 3.)

The statute authorizes a special motion to strike meritless claims early in the litigation if

the claims “aris[e] from any act of that person in furtherance of the person’s right of

petition or free speech under the United States Constitution or the California Constitution

in connection with a public issue.” (Code Civ. Proc., § 425.16, subd. (b)(1).)

When evaluating a special motion to strike, the trial court must engage in a

two-step process. “First, the court decides whether the defendant has made a threshold

showing that the challenged cause of action is one arising from protected activity. . . . If

the court finds such a showing has been made, it then determines whether the plaintiff has

demonstrated a probability of prevailing on the claim.” (Equilon Enterprises v.

Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) “Only a cause of action that satisfies

The trial court also granted McNaughton’s anti-SLAPP motion as to the

fraud cause of action. In its tentative, the court explained the claim was “based on

statements made in and in connection with the underlying litigation; [t]he statements are

both protected and privileged; [and Alston] cannot show a probability of prevailing on

the merits.”

both prongs of the anti-SLAPP statute—i.e., that arises from protected speech or

petitioning and lacks even minimal merit—is a SLAPP, subject to being stricken under

the statute.” (Navellier v. Sletten (2002) 29 Cal.4th 82, 89.) We review a trial court’s

order denying an anti-SLAPP motion de novo. (Flatley v. Mauro (2006) 39 Cal.4th 299,

325.)

2. Step One: Protected Activity

Step one of the anti-SLAPP analysis requires us to decide whether Alston’s

challenged malicious prosecution claim arose from an act in furtherance of

McNaughton’s and Prenovost’s right of petition or free speech. (Code Civ. Proc.,

§ 425.16, subd. (b)(1); see id., subd. (e) [defining protected activity].) Alston concedes

the filing and prosecution of Case 2 qualifies as protected activity, and rightly so.

“[E]very Court of Appeal that has addressed the question has concluded that malicious

prosecution causes of action fall within the purview of the anti-SLAPP statute.” (Jarrow

Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 735.)

3. Step Two: Probability of Prevailing

We therefore turn to step two of the anti-SLAPP analysis, in which Alston

must demonstrate a probability of prevailing on the malicious prosecution claim. “‘[T]he

plaintiff’s burden of establishing a probability of prevailing is not high: We do not weigh

credibility, nor do we evaluate the weight of the evidence. Instead, we accept as true all

evidence favorable to the plaintiff and assess the defendant’s evidence only to determine

if it defeats the plaintiff’s submission as a matter of law. [Citation.] Only a cause of

action that lacks “even minimal merit” constitutes a SLAPP. [Citation.]’ [Citation.] ‘Put

another way, the plaintiff “must demonstrate that the complaint is both legally sufficient

and supported by a sufficient prima facie showing of facts to sustain a favorable

judgment if the evidence submitted by the plaintiff is credited.”’” (Greene v. Bank of

America (2013) 216 Cal.App.4th 454, 458, fn. omitted.)

The sole cause of action at issue in this appeal is Alston’s malicious

prosecution claim. “To prevail on a malicious prosecution claim, the plaintiff must show

that the prior action (1) was commenced by or at the direction of the defendant and was

pursued to a legal termination favorable to the plaintiff; (2) was brought without

probable cause; and (3) was initiated with malice.” (Soukup v. Law Offices of Herbert

Hafif (2006) 39 Cal.4th 260, 292, italics added.) As noted, the trial court’s ruling hinged

on the first element—a termination of Case 2 in Alston’s favor.

A. The Favorable Termination Element

Our Supreme Court has summarized the favorable termination element as

follows: “‘[i]t is hornbook law that the plaintiff in a malicious prosecution action must

plead and prove that the prior judicial proceeding of which he complains terminated in

his favor.’” (Casa Herrera, supra, 32 Cal.4th at p. 341.) “‘The theory underlying the

requirement of favorable termination is that it tends to indicate the innocence of the

accused’” in the underlying action. (Ibid.)

“To determine ‘whether there was a favorable termination,’ we ‘look at the

judgment as a whole in the prior action . . . .’ [Citation.] ‘It is not essential to

maintenance of an action for malicious prosecution that the prior proceeding was

favorably terminated following trial on the merits.’ [Citation.] Rather, ‘[i]n order for the

termination of a lawsuit to be considered favorable to the malicious prosecution plaintiff,

the termination must reflect the merits of the action and the plaintiff’s innocence of the

misconduct alleged in the lawsuit.’” (Casa Herrera, supra, 32 Cal.4th at pp. 341-342,

italics added.)

“For example, a termination is favorable for malicious prosecution

purposes where the court in the underlying action: (1) granted summary judgment and

issued sanctions because the claim was meritless [citation]; (2) granted summary

judgment because there was insufficient evidence to establish a triable issue of fact

[citation]; or (3) held that the defendant, as a matter of law, violated no duty to the

plaintiff [citation].” (Casa Herrera, supra, 32 Cal.4th at p. 342.) Similarly, “[a]

voluntary dismissal is presumed to be a favorable termination on the merits unless proved

otherwise to a jury because the natural assumption is that one does not simply abandon a

meritorious action.” (Olivares v. Pineda (2019) 40 Cal.App.5th 343, 354 (Olivares).)

On the other hand, ‘“[i]f the termination does not relate to the merits—

reflecting on neither innocence of nor responsibility for the alleged misconduct—the

termination is not favorable in the sense it would support a subsequent action for

malicious prosecution.’ [Citation.] Thus, a ‘technical or procedural [termination] as

distinguished from a substantive termination’ is not favorable for purposes of a malicious

prosecution claim. [Citation.] Examples include dismissals (1) on statute of limitations

grounds [citations]; (2) pursuant to a settlement [citation]; or (3) on the grounds of laches

[citation].” (Casa Herrera, supra, 32 Cal.4th at p. 342; see also Warren v. Wasserman,

Comden & Casselman (1990) 220 Cal.App.3d 1297, 1302 (Warren) [“Termination of a

prior action by a successful statute of limitations defense is not a favorable termination

since it does not reflect on the merits of the prior action”].) Other examples of technical

or procedural terminations that would not support a malicious prosecution claim include

dismissals “(1) for lack of jurisdiction [citation]; (2) for being moot [citation]; (3) for lack

of standing [citation]; (4) for being premature [citation]; and (5) for avoiding litigation

expenses [citation].” (JSJ, supra, 205 Cal.App.4th at p. 1525.) In all these examples, the

terminations are wholly unrelated to the defendant’s innocence or guilt for the alleged

misconduct.

B. A Dismissal on Collateral Estoppel Grounds May Qualify as a

Favorable Termination

We must decide whether a termination of the underlying action on

collateral estoppel grounds qualifies as a favorable termination for purposes of a

subsequent malicious prosecution claim. The California Supreme Court has never

addressed the issue, and the only published appellate opinion on point is JSJ, which held

“the successful invocation of the defense of res judicata in the underlying claim is not a

determination on the merits for purposes of a malicious prosecution action” because res

judicata is a procedural defense. (JSJ, supra, 205 Cal.App.4th at p. 1527.) Although the

trial court was bound to follow JSJ, the case is not binding on us. (See In re Marriage of

Shaban (2001) 88 Cal.App.4th 398, 409 [“intermediate appellate court precedent that

might otherwise be binding on a trial court [citation] is not absolutely binding on a

different panel of the appellate court”].)

Looking at the issue de novo, we conclude a termination of the underlying

action on collateral estoppel grounds may or may not qualify as a favorable termination

on the merits. It depends on what happened in the original case on which the collateral

estoppel defense was based. If that earlier case involved a determination on the merits of

a particular issue, and if the party’s culpability on that issue was argued, litigated, and

decided in that earlier case, then the termination of the second case on collateral estoppel

grounds is reflective of the merits of that case and qualifies as a favorable termination for

purposes of a later malicious prosecution claim.

Collateral estoppel does not always reflect a finding on the merits or a

determination of guilt or innocence, however. An earlier ruling sometimes has a

collateral estoppel effect even though it is purely technical or procedural in nature. For

example, California “accords collateral estoppel effect to default judgments, at least

where the judgment contains an express finding on the allegations.” (Gottlieb v. Kest

(2006) 141 Cal.App.4th 110, 149.) Similarly, “a stipulated judgment may properly be

McNaughton and Prenovost argue Dalany v. American Pacific Holding

Corp. (1996) 42 Cal.App.4th 822, 829 (Dalany) is also directly on point. We disagree.

Dalany held a settlement and stipulated judgment in an underlying action do not

constitute a favorable termination to support a subsequent malicious prosecution claim; it

did not involve a dismissal on res judicata or collateral estoppel grounds.

given collateral estoppel effect, at least when the parties manifest an intent to be

collaterally bound by its terms.” (California State Auto. Assn. Inter-Ins. Bureau v.

Superior Court (1990) 50 Cal.3d 658, 664.) Of course, a default judgment or a stipulated

judgment is not necessarily indicative of a party’s culpability on a given issue.

Thus, in evaluating whether a termination of the underlying action on

collateral estoppel grounds qualifies as a favorable termination to support a malicious

prosecution claim, courts must look behind the collateral estoppel dismissal, evaluate

what happened in the original case that formed the basis for the collateral estoppel ruling,

and determine whether the party’s culpability on that issue was argued, litigated, and

decided on the merits in that earlier case. If it was, the dismissal of the second action on

collateral estoppel grounds qualifies as a favorable termination for purposes of a later

malicious prosecution claim. If, on the other hand, the first judgment was not based on

the actual merits of that case but nevertheless had a collateral estoppel effect (e.g., if the

first case ended via stipulated judgment, default judgment, or for other technical or

procedural reasons), the dismissal of the second action on collateral estoppel grounds

presumably would not qualify as a favorable termination in a later malicious prosecution

claim because the original judgment was not a determination of the merits.

C. Disapproval of JSJ

We recognize the test we articulate above runs contrary to JSJ, which held

“the successful invocation of the defense of res judicata in the underlying claim is not a

determination on the merits for purposes of a malicious prosecution action.” (JSJ, supra,

205 Cal.App.4th at p. 1527, italics added.) We do not find JSJ’s analysis persuasive.

The relevant facts of JSJ were as follows. Alfredo Garcia was a disabled

restaurant patron who sued JSJ, a commercial landlord, for violations of Civil Code

sections 54 and 54.1 based on Garcia’s alleged inability to use the property’s restrooms.

Following a court trial, the trial court entered judgment for JSJ. (JSJ, supra, 205

Cal.App.4th at pp. 1516-1517.) A year later, Garcia filed a second action against JSJ

alleging violations of Civil Code sections 51, 54, and 54.1 based on the configuration of

JSJ’s parking lot. The trial court sustained JSJ’s demurrer with leave to amend on res

judicata grounds, but rather than amending his complaint, Garcia dismissed the action

without prejudice. (Id. at pp. 1517-1518.) JSJ then sued Garcia and his attorney for

malicious prosecution. Garcia’s attorney filed an anti-SLAPP motion; the trial court

denied the motion, and the attorney appealed. (Id. at pp. 1518-1519.)

The appellate court reversed, finding the attorney’s anti-SLAPP motion

should have been granted. The court began by observing the question of “[w]hether a

ruling that a claim barred by the doctrine of res judicata and dismissed based on that

ruling results in a favorable termination for a malicious prosecution action is not an easy

issue. It might seem that the disposal of a claim by the doctrine of preclusion has been

favorably terminated.” (JSJ, supra, 205 Cal.App.4th at p. 1525.) Ultimately, however,

the court concluded res judicata is necessarily a procedural defense, likening res judicata

to a statute of limitations defense, and thus not reflective of a case’s merits. (See id. at

pp. 1525-1527, citing Warren, supra, 220 Cal.App.3d at p. 1303 for notion that a

resolution based on the statute of limitations “does not constitute a favorable termination

because it does not reflect on the merits of the action.”)

The JSJ court reasoned: “Res judicata, as the statute of limitations, is a

defense that does not go to the substantive merits of the claim. Neither is it a

determination of the actual ‘innocence’ of a party.” (JSJ, supra, 205 Cal.App.4th at

p. 1525.) It is “not concerned with the actual merits of a prior adjudication but solely

with the need for finality.” (Id. at pp. 1525-1256.) “[T]he doctrine is an affirmative

defense, which as a matter of procedure, bars the claim—just as the statute of limitations

does—whether the claim is meritorious or not.” (Id. at p. 1526.) Thus, “the successful

invocation of the defense of res judicata in the underlying claim is not a determination on

the merits for purposes of a malicious prosecution action.” (Id. at p. 1527.) If JSJ

wanted to pursue a malicious prosecution action against Garcia, concluded the court, it

should have “‘eschew[ed] the procedural defense, forgo[ne] the easy termination, and

obtain[ed] a favorable judgment on the merits.’” (Ibid. [quoting Warren, supra,

220 Cal.App.3d at p. 1303].)

We disagree with this analysis. True, res judicata and collateral estoppel

are procedural concepts and affirmative defenses. Both are often more concerned with

the need for finality and avoiding relitigation of issues than with the actual merits of the

earlier case. (Rodgers v. Sargent Controls & Aerospace (2006) 136 Cal.App.4th 82, 88

[“preclusion of relitigation of claims pursuant to the principles of res judicata is an

affirmative defense that must be pled or otherwise raised in the trial court to avoid

waiver”]; Dalany, supra, 42 Cal.App.4th at p. 829 [“Res judicata and collateral

estoppel . . . are not concerned with the actual merits of a prior adjudication but solely

with the need for finality”].)

But that is not to say res judicata and collateral estoppel rulings are always

unrelated to the merits of a given claim or issue. Collateral estoppel, by definition,

“prohibits the relitigation of issues argued and decided in a previous case.” (DKN, supra,

61 Cal.4th at p. 824.) In this way, it differs from a statute of limitations defense, which

considers only the timeliness of the plaintiff’s suit and not the defendant’s culpability.

Cases holding that a resolution on statute of limitations grounds is not a favorable

termination (see, e.g., Warren, supra, 220 Cal.App.3d at pp. 1302-1303) are thus

inapposite.

Moreover, if an issue was previously litigated in another case and a party’s

culpability on that issue was decided on the merits, it is illogical to require that party to

“‘eschew’” her collateral estoppel defense in the second case, as JSJ mandates, and to

litigate the issue again to a favorable judgment on the merits, simply so she may later

meet the favorable termination element of her malicious prosecution claim. Such a rule

is inconsistent with one of the main purposes of the doctrines of res judicata and

collateral estoppel: promoting judicial economy and conserving judicial resources. (See

Proctor v. Vishay Intertechnology, Inc. (2013) 213 Cal.App.4th 1258, 1272.)

Further, requiring trial courts to look behind the collateral estoppel ruling

and consider the procedural history of the underlying litigation is consistent with our

Supreme Court’s instruction that we “‘look at the judgment as a whole in the prior

action’” and evaluate whether the termination ‘“reflect[s] the merits of the action and the

plaintiff’s innocence of the misconduct alleged in the lawsuit”’ when considering

whether the favorable termination element was met. (See Casa Herrera, supra,

32 Cal.4th at pp. 341-342; see also Olivares, supra, 40 Cal.App.5th at p. 354 [we should

“examine[] the record [of the underlying case] to see if the disposition reflects the

opinion of the court . . . that the [underlying] action would not succeed”].) We therefore

disapprove of and decline to follow the bright line rule adopted in JSJ.

D. Application

Against that backdrop, we turn to the precise issue presented here: does the

termination of Case 2 on collateral estoppel grounds based on Case 1 qualify as a

favorable termination for purposes of Case 3? Based on the procedural history of the

three cases, we find it does.

The issue of NHOM’s ability to retain Alston and to prosecute the lease

dispute against McNaughton without McNaughton’s consent was extensively litigated

and decided on the merits in Case 1. The arbitrator found Copenbarger properly hired

Alston as counsel for NHOM to initiate and prosecute the unlawful detainer actions

against McNaughton; the trial court confirmed the arbitration award and denied

McNaughton’s motion to disqualify Alston; we denied McNaughton’s motion to

disqualify Alston in the subsequent appeal; and in NHOM 1, we affirmed the judgment

against McNaughton and explicitly endorsed the arbitrator’s findings. The litigation of

Additionally, in NHOM 2 (which we decided after the trial court entered

judgment for Alston in Case 2), we criticized McNaughton for “rehashing his contention

the issue in Case 1 is precisely why Alston won in Case 2. Thus, the dismissal of Case 2

on collateral estoppel grounds was not purely procedural; it reflected the merits (or lack

thereof) of Case 2. We therefore conclude Alston established a termination of Case 2 in

their favor for purposes of the malicious prosecution claim in Case 3.

Consequently, we reverse the dismissal and the portion of the trial court’s

order granting the anti-SLAPP motions on the malicious prosecution claim and remand

this matter for further consideration of the second prong of the anti-SLAPP statute. The

court’s ruling did not address Alston’s probability of succeeding on the other elements of

the malicious prosecution claim or Alston’s evidentiary objections, and we decline to

consider those matters in the first instance. (See Collier v. Harris (2015) 240

Cal.App.4th 41, 58 [noting most appellate courts decline to decide prong two in the first

instance].) “We think it best that the able and experienced trial judge decide the issue”

first. (Ibid.)

DISPOSITION

The portion of the trial court’s order granting McNaughton’s anti-SLAPP

motion as to Alston’s fraud claim is affirmed. The portion of the order granting

McNaughton’s and Prenovost’s anti-SLAPP motions as to Alston’s malicious

prosecution claim is reversed. The matter is remanded for further proceedings consistent

that because he is a 50 percent owner of NHOM, its counsel could not have been

authorized to represent it, or to pursue any litigation against him, absent his own

consent,” when that contention was already “squarely rejected by the arbitrator, and the

rejection was expressly endorsed by this court in the prior appeal.” (NHOM 2, supra,

at G052704, G052984.)

In light of this holding, we do not address Alston’s argument that a party

may sue for malicious prosecution “when a knowingly ill-founded suit brought only to

harass or vex the defendant fails for procedural reasons.” (See Lackner v. LaCroix

(1979) 25 Cal.3d 747, 752, fn. 3 [declining to decide that issue].) As discussed above,

Case 2 did not fail “for procedural reasons”; it failed on the merits.

with this opinion. Alston shall recover their costs on appeal. (Cal. Rules of Court,

rule 8.278(a)(1).)

GOETHALS, J.

WE CONCUR:

O’LEARY, P. J.

MOORE, J.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.