Metropolitan News-Enterprise


Wednesday, August 28, 2002


Page 1


Justices Limit Attorneys’ Liability for Malicious Prosecution


By KENNETH OFGANG, Staff Writer/Appellate Courts


An attorney who brings a lawsuit with probable cause cannot be held liable for malicious prosecution on the basis of facts the lawyer learned during the course of the litigation, this district’s Court of Appeal has ruled.

Div. Seven yesterday ordered publication of its Aug. 5 opinion affirming a judgment in favor of mid-Wilshire attorneys Howard Rosen and Lawrence Posner.

The plaintiff, apparel manufacturer Swat-Fame Inc., claimed that Rosen and Posner maliciously prosecuted a fraud claim on behalf of a former employee.

But Justice Dennis Perluss, writing for the Court of Appeal, said that the overruling of Swat-Fame’s demurrer to that claim established that it was brought with probable cause, regardless of what Rosen and Posner later learned about their client’s assertions.

The appellate panel did, however, reinstate Swat-Fame’s suit against Rosen and Posner’s former client, Leslie J. Goldstein. Perluss said a trial was necessary to determine whether Goldstein withheld material information from her lawyers—which would preclude her assertion of an advice-of-counsel defense—and whether she acted with malice.

Goldstein was a salesperson for Swat-Fame from October 1997 to April 1999. Her termination came a few months after the Target store chain, whose business Goldstein brought with her from her previous employer, stopped placing orders with her.

Pressure to Buy

Goldstein claimed she lost the business because Swat-Fame could not meet Target’s production demands, but the clothing maker’s sales manager insisted that Target’s buyers were under pressure to buy from other divisions of its corporate parent rather than from outside vendors.

In the complaint they filed on Goldstein’s behalf, Posner and Rosen accused Swat-Fame of fraudulently inducing the plaintiff to change jobs, non-payment of wages and bad faith.

The fraud claim was based on alleged representations by the company that it wanted a long-term relationship with Goldstein, “really” wanted to do business with Target and recognized the value of Goldstein’s relationships with the department store chain, and that Swat-Fame was a $100 million company and could handle Target’s requirements.

 After Swat-Fame’s demurrer to the fraud cause of action, based on the company’s assertion that the alleged representations were statements of opinion, was denied, the case proceeded to discovery.

Swat-Fame eventually won a summary adjudication on that issue when a judge ruled that the only actionable statement of fact was the claim that Swat-Fame was a $100 million company and that Goldstein’s admission in deposition, that the statement was true at the time it was made, destroyed her claim.

Goldstein later dismissed the remainder of the suit, following which Swat-Fame sued her and her lawyers for malicious prosecution.

Summary Judgment Granted

Los Angeles Superior Court Judge James Chalfant granted summary judgment to all three defendants. He ruled that the underlying action was brought with probable cause and without malice and that Goldstein was entitled to prevail on her advice-of-counsel defense.

Perluss agreed that there were no triable factual disputes with respect to the conduct of Goldstein’s lawyers. It was undisputed that Goldstein told them that Swat-Fame had lied about the value of the company, and that the lawyers believed her, the justice said.

Swat-Fame argued that the attorneys should be held liable because they did not dismiss the case after Goldstein admitted that Swat-Fame accurately represented the company’s worth.

Perluss, however, rejected the contention that an attorney who continues to press a claim after learning it is without foundation may be held liable even if there was probable cause to bring the suit. That is not the law in California, he said.

The case is Swat-Fame, Inc. v. Goldstein, 02 S.O.S. 4546.


Copyright 2002, Metropolitan News Company