Opinion ID: 616835
Heading Depth: 3
Heading Rank: 1

Heading: The Promotion Grant

Text: Assuming, as we must at this stage, that Roberts' sworn allegations are correct, McAfee falsified and withheld evidence to make his culpability seem clearer than it really was. According to Roberts, McAfee or its agents said that he had confessed when he had not, and offered an incomplete picture of the Promotion Grant to exaggerate the degree of suspicion created by his conduct. If Roberts is right, McAfee behaved inexcusably. But, under California law, lying about the facts is not enough to destroy probable cause. In Sheldon Appel, the California Supreme Court held that, so long as the evidence known to the defendant could support an objectively reasonable suspicionregardless of whether the defendant actually possessed such a suspicionthe defendant is not liable for malicious prosecution. Sheldon Appel, 254 Cal.Rptr. 336, 765 P.2d at 506-07. By that same reasoning, a defendant who fabricates evidence still acts with probable cause if the defendant is aware of other evidence which would make it objectively reasonable to suspect the plaintiff's guilt. See Sangster v. Paetkau, 68 Cal. App.4th 151, 80 Cal.Rptr.2d 66, 76-77 (1998) (despite evidence that defendant had leveled false accusations at plaintiff in a fraud complaint, defendant acted with probable cause because she possessed other, unfabricated evidence that plaintiff had defrauded her) (If undisputed facts in the record do establish an objectively reasonable basis for bringing the underlying action, the existence of other, allegedly disputed facts is immaterial); see also McSherry v. City of Long Beach, 584 F.3d 1129, 1142 (9th Cir.2009) (in federal malicious prosecution action against police officers, evidence that officers had fabricated a child rape victim's description of the accused's home did not show a lack of probable cause because other evidence, including the victim's positive identifications of the accused, established an objectively reasonable basis for suspicion). To be sure, McAfee would lack probable cause had it fabricated the entire predicate for its claim. See Sierra Club Found. v. Graham, 72 Cal.App.4th 1135, 85 Cal. Rptr.2d 726, 737 (1999) (A litigant will lack probable cause for his action ... if he relies upon facts which he has no reasonable cause to believe to be true....) (internal quotation marks omitted). But that is because, in such a case, the defendant would know of no facts that could provide reason to suspect the plaintiff of wrongdoing. See id. ([I]f defendant knows that the facts he or she is asserting are not true, then defendant's knowledge of facts which would justify initiating suit is zero, and probable cause is nonexistent.); see also Sheldon Appel, 254 Cal.Rptr. 336, 765 P.2d at 506 ([T]he probable cause element calls on the trial court to make an objective determination of the `reasonableness' of the defendant's conduct, i.e., to determine whether, on the basis of the facts known to the defendant, the institution of the prior action was legally tenable.). Here, by contrast, even if McAfee misrepresented certain aspects of the Promotion Grant to make Roberts look worse, it was also aware of other facts that, on their own, provided objectively reasonable suspicion that Roberts had committed a crime. McAfee knew that, in May 2006, Roberts had told McAfee's CEO and two directors that he and Davis had reduced the strike price on the Promotion Grant months after the grant issued. McAfee also knew that Davis had been convicted of fraud three years after the revision; that McAfee had investigated Davis for issuing and repricing options without authorization; that Roberts had led McAfee's investigation of Davis' conduct; and that Roberts still failed to report the change to the Promotion Grant until about four years after that investigation, when the SEC announced a new investigation into McAfee's options practices in mid-2006. While these facts are far from conclusive of Roberts' culpability, they at least gave McAfee reason to suspect that Davis lacked the authority to revise the grant, that he and Roberts changed the grant just to make it more lucrative, and that the criminality of the act caused Roberts to keep mum about it during the Davis investigation. While Roberts was eventually successful in beating back the criminal and civil enforcement actions against him, the ultimate failure of a lawsuit does not mean there was no probable cause to bring it. See Sheldon Appel, 254 Cal.Rptr. 336, 765 P.2d at 511. Indeed, even the facts as known today do not immediately suggest a compelling explanation for why Roberts thought it appropriate for the Controller to lower by one-third the strike price of options that had already been ratified by the Compensation Committee. The facts upon which Roberts won acquittal may give rise to reasonable doubt, but they do not destroy reasonable suspicion. [5]