Source: http://californiaslapplaw.com/library-of-cases/zamo-v-stroud-attorney-liable-for-bad-faith-action/
Timestamp: 2019-04-25 20:57:35+00:00

Document:
James T. STROUD et al., Defendants and Respondents.
87 P.3d 80232 Cal.4th 958April 19, 2004.As Modified on Denial of Rehearing June 9, 2004.Jerome Zamos, in pro. per., and for Plaintiffs and Appellants.
James T. Stroud, in pro per., and for Defendants and Respondents.
Milam & Larsen and Paul A. Larsen, Princeton, MN, for Association of California Insurance Companies as Amicus Curiae on behalf of Defendants and Respondents.
The question presented by this case is whether, assuming the other elements of the tort are established, an attorney may be held liable for malicious prosecution [bad faith action] when he commences a lawsuit properly but then continue‘s to prosecute it after learning it is not supported by probable cause. We conclude an attorney may be held liable for continuing to prosecute a lawsuit discovered to lack probable cause.
The instant case for malicious prosecution is based upon a lawsuit (the fraud lawsuit) brought by Patricia Brookes (Brookes) — who is named as a defendant in this case but is not a party to this appeal — against [Jerome Zamos and Odion L. Okojie (collectively Zamos)]. Zamos had represented Brookes in another lawsuit (the foreclosure lawsuit) arising from the foreclosure on her house. Jerome Zamos and [ ] Okojie practiced law together. Jerome Zamos was the attorney who primarily represented Brookes in the foreclosure lawsuit, although Okojie made some appearances in that case.
After a jury trial of the foreclosure lawsuit, when it appeared that the jury was deadlocked, Brookes settled the lawsuit against some of the defendants in that case in exchange for $250,000 paid by those settling defendants as damages for emotional distress. Out of that $250,000, Zamos received $83,333.33 as a contingency fee, and Brookes received $166,666.67. As part of the settlement, Brookes expressly released all claims to her house. The terms of the settlement agreement were stated on the record before the court at two separate hearings. Brookes appeared by telephone at the first hearing, held on October 27, 1995, and appeared personally at the second hearing, held on October 30, 1995.
Almost two years later, in 1997, Brookes sued Zamos for fraud, among other claims, based upon certain alleged representations Zamos made to induce her to settle the foreclosure lawsuit. Brookes alleged that Jerome Zamos told her that (1) he would continue to represent her (to judgment) against the nonsettling defendants in the foreclosure lawsuit, (2) he would substitute into and represent Brookes in a malpractice lawsuit Brookes filed against her former attorneys (the malpractice lawsuit), (3) he would have her house returned to her, and (4) he would withdraw from representing her in the foreclosure lawsuit if Brookes did not accept the settlement. Brookes also alleged, among other things, that Mr. Zamos never intended to keep his first three promises and that Zamos withdrew from representing her against the nonsettling defendants, never substituted into the malpractice lawsuit, and never tried to have her house returned to her.
After Stroud and Brookes refused to dismiss the fraud lawsuit against Zamos despite these transcripts, Zamos moved for summary judgment. In opposition to Zamos’s motion for summary judgment, Stroud submitted a declaration signed by Brookes in which Brookes stated, among other things, that she agreed to settle the foreclosure lawsuit in reliance upon Zamos’s promises to (1) continue representing her against the nonsettling defendants, (2) represent her in the malpractice lawsuit, and (3) have her house returned to her. The trial court questioned whether Brookes could establish that she was damaged as a result of Zamos’s alleged fraud, but the court nonetheless denied Zamos’s motion, although it did so “reluctantly,” finding that Brookes’s declaration raised a triable issue of fact regarding whether Zamos made the alleged promises.
Brookes’s fraud lawsuit proceeded to trial before a judge who had not been the judge in any of the other proceedings in that case. Before the trial began, the trial judge informed the parties that he had read the transcripts of the three hearings discussed above in preparation for ruling on several motions. Based on the judge’s understanding of Brookes’s anticipated testimony, he warned Mr. Stroud several times that he needed to advise Brookes of her Fifth Amendment rights, and that he would notify the district attorney’s office if Brookes’s testimony at trial contradicted those transcripts because such testimony would be perjurious.
Following entry of judgment in the fraud lawsuit, Zamos filed the instant malicious prosecution action against Brookes, Stroud, Taylor, and Peterson. Zamos alleged on information and belief that Taylor encouraged Brookes to file the fraud lawsuit 58*58against Zamos and engaged Stroud to represent Brookes, and that Peterson urged Brookes to file the fraud lawsuit and gave false testimony to assist Brookes in prosecuting the lawsuit. Zamos also alleged that defendants prosecuted the fraud lawsuit to extort an unwarranted settlement by Zamos.
Stroud, Taylor, and Peterson filed a joint anti-SLAPP motion in which they argued that Zamos could not show a reasonable probability of success on the malicious prosecution claim. Stroud asserted that Zamos cannot show that the fraud lawsuit was brought without probable cause because Stroud’s decision to file the action was based upon (1) Brookes’s statements regarding Zamos’s alleged promises; (2) corroboration by Peterson and, to a lesser degree, by Taylor; and (3) the timing of Zamos’s alleged promises, Zamos’s receipt of the contingency fee from the settlement, and Zamos’s motion to be relieved as counsel in the foreclosure lawsuit. Taylor and Peterson asserted that Zamos [could not] hold them liable for malicious prosecution because their sole involvement with the fraud lawsuit was as witnesses, and thus they [were] protected by the litigation privilege.
In opposition to the anti-SLAPP motion, Zamos presented evidence that shortly after the fraud lawsuit was filed Stroud received the transcripts that Zamos contended gave notice to Stroud that the fraud lawsuit had no merit. Zamos also presented evidence that Taylor sought counsel to represent Brookes in the fraud lawsuit and gave assistance to Stroud during Peterson’s deposition. (Taylor graduated from law school, although apparently he is not a licensed attorney.) Zamos contended that this evidence shows that Taylor was actively involved in maliciously prosecuting the fraud lawsuit. Finally, Zamos presented evidence that Peterson was not present or within hearing distance when Jerome Zamos spoke with Brookes about the settlement agreement in the foreclosure lawsuit, and therefore Peterson is liable for malicious prosecution because her assertion that she heard Mr. Zamos make the alleged promises at issue in the fraud lawsuit was demonstrably false.
The trial court granted the anti-SLAPP motion as to all of the moving parties. As to Stroud, the court found that Stroud had probable cause to bring the lawsuit based upon Brookes’s representations that were corroborated by Taylor and Peterson. The court held that Taylor and Peterson were immune from liability under the “common law witness immunity doctrine” set forth in Briscoe v. LaHue (1983) 460 U.S. 325, 103 S.Ct. 1108, 75 L.Ed.2d 96 and Silberg v. Anderson (1990) 50 Cal.3d 205, 214, 266 Cal.Rptr. 638, 786 P.2d 365. The court awarded $3,000 in attorney fees to Taylor and $3,000 in attorney fees to Peterson. Zamos timely appealed from the trial court’s order dismissing the entire action against Stroud, Taylor, and Peterson and awarding attorney fees.
Defendants contend continuing to prosecute a lawsuit discovered to lack probable cause does not constitute the tort of malicious prosecution, and in making this argument they rely heavily on the torts being a disfavored cause of action.
Confining the tort of malicious prosecution to the initiation of a suit without probable cause would be, we conclude, without support in authority or in principle.
The question we address today is a question of first impression in this court, and was first addressed by a California Court of Appeal only two years ago. However, so far as our research reveals, the rule in every other state that has addressed the question is, and in many states has long been, that the tort of malicious prosecutiondoes include continuing to prosecute a lawsuit discovered to lack probable cause.
The Restatement’s position on this question has been adopted or was anticipated by the courts of a substantial number of states: Alabama (Laney v. Glidden Co., Inc.(1940) 239 Ala. 396, 194 So. 849, 851-852); Arizona (Smith v. Lucia (Ct.App.1992) 173 Ariz. 290, 842 P.2d 1303, 1308); Arkansas (McLaughlin v. Cox (1996) 324 Ark. 361, 922 S.W.2d 327, 331-332); Colorado (Slee v. Simpson (1932) 91 Colo. 461, 15 P.2d 1084, 1085); Idaho (Badell v. Beeks (1988) 115 Idaho 101, 765 P.2d 126, 128); Iowa (Wilson v. Hayes (Iowa 1990) 464 N.W.2d 250, 264); Kansas (Nelson v. Miller(1980) 227 Kan. 271, 607 P.2d 438, 447-448); Mississippi (Benjamin v. Hooper Electronic Supply Co., Inc. (Miss.1990) 568 So.2d 1182, 1189, fn. 6); New York (Broughton v. State of New York (1975) 37 N.Y.2d 451, 457, 373 N.Y.S.2d 87, 335 N.E.2d 310); Ohio (Siegel v. O.M. Scott & Sons Co. (Ohio Ct.App.1943) 73 Ohio App. 347, 56 N.E.2d 345, 347); Oregon (Wroten v. Lenske (1992) 114 Or.App. 305, 835 P.2d 931, 933-934); Pennsylvania (Wenger v. Philips (1900) 195 Pa. 214, 45 A. 927); and Washington (Banks v. Nordstrom, Inc. (1990) 57 Wash.App. 251, 787 P.2d 953, 956-957).
Even more significantly, defendants have not brought to our attention, nor has our own research revealed, a single state that has declined to adopt the Restatements view in this regard.
Defendants’ position, that the tort of malicious prosecution does not include continuing a lawsuit discovered to lack probable cause, is no more supported by the decisions of this court than it is by out-of-state authority.
Coleman is distinguishable. In order to establish a cause of action for malicious prosecution, a plaintiff must prove “`the prior action . . . was commenced by or at the direction of the defendant [in the malicious prosecution action].’ [Citation.]” (Coleman, supra, 41 Cal.3d at p. 793, 226 Cal.Rptr. 90, 718 P.2d 77, italics added.) In Coleman,the underlying action was commenced by the plaintiffs in the malicious prosecution action. Therefore, in order to establish their cause of action against the defendant’s insurer for malicious prosecution, the plaintiffs argued that the insurer, in maliciously causing the defendant to file a frivolous appeal, caused the initiation of a separate action. This is the argument the Coleman court rejected.
The operative distinction, then, is between continuing a prosecution and continuing a defense. In Coleman, the defendant in the malicious prosecution action had merely continued its defense of the underlying wrongful death action by causing the filing of the appeal in that action. Here, according to the evidence presented 63*63 in opposition to the anti-SLAPP motion, defendants in the malicious prosecution action continued their prosecution of the underlying fraud action after learning it was baseless.
Defendants contend our holding — that malicious prosecution includes continuing to prosecute a lawsuit discovered to lack probable cause — would be unworkable and therefore contrary to public policy. Defendants assert the holding would be unworkable because it would divert an attorney’s attention away from the zealous representation of his or her client by causing the attorney (1) continually to second-guess the merits of the litigation and (2) to fear retaliation for malicious prosecution if the attorney argues for an extension of the law. We disagree. Only those actions that any reasonable attorney would agree are totally and completely without merit may form the basis for a malicious prosecution suit. (Wilson, supra, 28 Cal.4th at p. 817, 123 Cal.Rptr.2d 19, 50 P.3d 733; Sheldon Appel, supra, 47 Cal.3d at p. 886, 254 Cal.Rptr. 336, 765 P.2d 498.) The same standard will apply to the continuation as to the initiation of a suit. Applying the standard in any given case may be very difficult. However, applying it to the decision to continue to prosecute a case should be no more or less difficult than applying it to the decision to initiate a case.
For the reasons stated, we conclude an attorney may be held liable for malicious prosecution for continuing to 64*64 prosecute a lawsuit discovered to lack probable cause.
As we stated earlier, the parties agree that plaintiffs’ malicious prosecution action arises from acts in furtherance of defendants’ right of petition or free speech. Thus, the issue is whether plaintiffs presented evidence in opposition to defendants’ anti-SLAPP motion that, if believed by the trier of fact, was sufficient to support a judgment in plaintiffs’ favor. Plaintiffs, we conclude, did make the required showing.
Brookes alleged that Jerome Zamos told her he would continue to represent her against the nonsettling defendants in the foreclosure lawsuit. However, at the January 29, 1996 hearing, the judge advised Brookes there was a motion pending to relieve Mr. Zamos in the foreclosure matter. “Is there a problem?” he asked her. “No,” Brookes replied, “other than I can’t understand how Mr. Zamos can be relieved when he’s never been my attorney of record to my knowledge.” After listening to Brookes’s rambling diatribe against Zamos, the judge asked her, “What’s the point?” “The point,” Brookes replied, “is I don’t care if you sign him off or not. He’s never been on.” Brookes was apparently being sarcastic because as the judge pointed out, Mr. Zamos had tried the foreclosure matter and had persisted in obtaining a favorable settlement for her “when lesser lawyers would have just bowed out.” Hearing no objection whatsoever from Brookes regarding Mr. Zamos’s motion to be relieved, the judge, after admonishing Brookes that she “couldn’t have had a better lawyer than Mr. Zamos,” ordered him relieved.
Contrary to Brookes’s claim that she agreed to the settlement in reliance on an assurance from Jerome Zamos that she would still be able to proceed with an action to have her house returned to her, Brookes initially declined the settlement,complaining that he had never discussed it with her. Then, after having been given an opportunity to consult by phone with someone other than Mr. Zamos, someone who was not an attorney, Brookes decided to accept the settlement.
Malicious prosecution, we hold, includes continuing to prosecute a lawsuit discovered to lack probable cause. Accordingly, we disapprove of Swat-Fame, Inc. v. Goldstein, supra, 101 Cal.App.4th 613, 124 Cal.Rptr.2d 556 and Vanzant v. DaimlerChrysler Corp., supra, 96 Cal.App.4th 1283, 118 Cal.Rptr.2d 48, as well asMorrison v. Rudolph, supra, 103 Cal.App.4th 506, 126 Cal.Rptr.2d 747, insofar as they are inconsistent with the views expressed herein.
Plaintiffs did present evidence in opposition to defendants’ anti-SLAPP motion that, if believed by the trier of fact, was sufficient to support a judgment in plaintiffs’ favor. Therefore, we affirm the judgment 66*66 of the Court of Appeal reversing the order of the trial court dismissing plaintiffs malicious prosecution claim against defendants.
WE CONCUR: GEORGE, C.J., KENNARD, BAXTER, WERDEGAR, CHIN and MORENO, JJ.
 As a convenient shorthand, we will refer to this as continuing to prosecute a lawsuit discovered to lack probable cause.
 We adopt the Court of Appeal’s statement of the factual and procedural background. Brackets enclosing material in that part of the opinion (other than citations) denote insertions or additions by this court. Defendants James T. Stroud and Van T. Do petitioned for rehearing, and in their petition objected in certain respects to the Court of Appeal’s statement of the facts. (Cal. Rules of Court, rule 28(c)(2).) The petition was denied. In part II.C., we discuss defendants’ objections and find they do not undermine the factual conclusions or the judgment of the Court of Appeal.
 In Jarrow Formulas, supra, 31 Cal.4th at page 741, 3 Cal.Rptr.3d 636, 74 P.3d 737, we declined to create a categorical exemption from the anti-SLAPP statute for malicious prosecution actions.
 Counsel who receives interrogatory answers appearing to present a complete defense might act reasonably by going forward with the defendant’s deposition in light of the possibility that the defense will, on testimonial examination, prove less than solid. The reasonableness of counsel’s persistence is, of course, a question of law to be decided on a case-by-case basis, and we have no occasion here to formulatemore detailed rules.
As defendants did not petition for review on this issue, we need not decide whether the Court of Appeal correctly decided it.

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