Monday, April 21, 2014

Deep Dicta on the Statute of Limitations on Claims Against Lawyers

Roger Cleveland Golf Co., Inc. v. Krane & Smith, APC, No. B23724 (D2d3 Apr. 14, 2014)

A sporting goods company filed a malicious prosecution case against a competitor and the law firm that represented the competitor in an earlier unsuccessful case stemming from a trademark and licensing dispute. As would be expected, the law firm filed an anti-SLAPP motion, which the trial court granted because plaintiff could establish that its case was not barred by the statute of limitations. After an extensive discussion of the appropriate statute of limitations for a malicious prosecution action against an attorney, the court of appeal affirms, albeit for a different reason.

There’s no question that the first prong of the anti-SLAPP analysis is satisfied because a malicious prosecution claim by its very nature involves suing someone because he or she filed a law suit, which is a quintessential protected activity under Code of Civil Procedure § 425.16(e)(1). The issue, then, comes down to whether plaintiff could show a probability of prevailing, which means showing that it has a legally sufficient claim and coming forward with prima facie evidence of each of the elements.

The law firm’s main argument why plaintiff can’t meet that burden is that plaintiff’s malicious prosecution claim is untimely. Because “favorable termination” of the prior action is an element of a malicious prosecution claim, the statute of limitations on a malicious prosecution claim runs kind of herky-jerky. It starts to run on the entry of a judgment favorably terminating the prior action, when the last element of the tort is complete. But if and when the plaintiff appeals, it stops running because, once an appeal is noticed, the judgment is no longer final—i.e., the malicious prosecution plaintiff no longer has an accrued claim because the favorable termination element is now missing. See Gibbs v. Haight, Dickson, Brown & Bonesteel, 183 Cal. App. 3d 716 (1986). If, however, the favorable termination is affirmed, the clock then resumes running when the remittitur issues and jurisdiction is returned to the superior court. See Rare Coin Galleries, Inc. v. A–Mark Coin Co., Inc., 202 Cal. App. 3d 330 (1988). No one here disputes that if Gibbs/Rare Coin tolling applies, plaintiff’s claim is timely. Setting aside the time the underlying action spent up on appeal, the statute only ran for 167 days, which would be less than any potential statutory period.

The law firm, however, tries to get around that by arguing that Gibbs/Rare Coin tolling doesn’t apply in cases of malicious prosecution against attorneys. It argues that Code of Civil Procedure § 340.6—commonly thought of as the statute of limitations that applies to attorney malpractice—applies, instead of § 335.1, the two year period that applies to malicious prosecution cases against other kinds of defendants. The law firm argues that because § 340.6’s limit is one year from the plaintiff
s discovery of its injury, and because § 340.6 can be tolled exclusively for reasons enumerated in the statute, Gibbs/Rare Coin tolling is inapplicable. Thus, the law firm says that the time ran one year from the entry of judgment in the prior case (i.e., when plaintiff discovered its injury). 

The law firm relies on two recent cases—Vafi v. McCloskey, 193 Cal. App. 4th 874 (2011) and Yee v. Cheung, 220 Cal. App. 4th 184 (2013), previous coverage here. Vafi and Yee reject that the scope of § 340.6 is limited either to actions against attorneys by their clients or to actions sounding in professional malpractice. They stand for the proposition that Code of Civil Procedure § 340.6, applies to all actions brought against an attorney for wrongful acts or omissions that arise in the performance of professional services, except cases of actual fraud. That includes malicious prosecution claims brought by former adversaries. The upshot of applying Vafi and Yee to the facts here would be that: (1) plaintiffs claim accrued on the entry of the underlying judgment; (2) when that judgment was appealed, it was not tolled under Gibbs/Rare Coin; and thus that (3) since the appeal was not resolved within a year of the entry of judgment, § 340.6 ran on plaintiff's case against the law firm at a time in which plaintiff’s claim was not actually unripe because the favorable termination element remained unsatisfed due to the pending appeal.

The court here doesn’t buy it. After reviewing the text and structure of § 340.6, the relevant legislative history, the thirty years of legislative inaction since the court applied § 335.1 to a malicious prosecution action against an attorney in Gibbs, and the public policy implications against affording attorneys a special statute of limitations, the court declines to follow Vafi and Yee. Ultimately it observes that having separate statutes of limitation for client and attorney leads to an “absurd result in which the client can be sued for following the attorney’s advice, long after the client’s attorney ceases to be potentially liable for recommending the course of action.” The court thus holds that the two-year period in § 335.1, subject to Gibbs/Rare Coin tolling, applies to any malicious prosecution claim regardless of whether the defendant went to law school and passed the bar. Plaintiff’s action was timely.

Of course, none of the court’s twelve pages of analysis on the statute of limitations actually matters, because plaintiff did not come forward with prima facie evidence of the defendants’ malice. So even though the claim wasn’t time barred, because plaintiff could not show a probability of prevailing, the anti-SLAPP motion was nonetheless properly granted.


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