Wednesday, April 16, 2014
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Court of Appeal Rules:
Malpractice Limitations Not Applicable to Malicious Prosecution
By KENNETH OFGANG, Staff Writer
The statute of limitations governing legal malpractice actions has no application to a malicious prosecution suit arising from an attorney’s representation of a client, the Court of Appeal for this district ruled yesterday.
Acknowledging that two earlier Court of Appeal rulings suggest otherwise, Div. Three said it disagreed with Los Angeles Superior Court Judge James Kaddo’s conclusion that the claims before him were time-barred. But it affirmed judgment in favor of the law firm Krane & Smith, APC on another ground.
Krane & Smith, attorneys Marc Smith and Ralph C. Loeb, and their client Sportsmark Trading, Ltd. were sued by Roger Cleveland Golf Company, Inc., the prevailing party in litigation that followed the unraveling of the business relationship between Roger Cleveland and Sportsmark.
Sportsmark distributed Roger Cleveland products in several Asian countries between 1998 and 2006 under a series of agreements. But Roger Cleveland notified Sportsmark in September 2006 that it was ending the relationship.
Sportsmark filed suit in 2007, asserting that there had been an oral agreement that it would continue to distribute the products absent good cause for termination, and that it had a right to continue to use Roger Cleveland’s trademarks in the countries where it distributed products.
Permanent Injunction
The case was eventually transferred to Orange Superior Court. Roger Cleveland won a permanent injunction barring Sportsmark from registering or using the Cleveland trademarks anywhere in the world, and all of Sportsmark’s claims for damages and declaratory relief were voluntarily dismissed or dismissed by the court following nonsuit.
Roger Cleveland filed its malicious prosecution action in May 2011, 13 months after the dismissal order was signed and less than four months after it was affirmed on appeal. The complaint alleged that the attorneys should have been aware that Sportsmark’s claims were baseless and that Smith admitted as much to Roger Cleveland’s counsel.
The attorneys filed an anti-SLAPP motion, contending that the action was time-barred under Code of Civil Procedure §340.6, which allows one year in which to file a legal malpractice. They also argued that the plaintiff could not prevail on the issues of lack of probable cause and malice.
Kaddo granted the motion on statute-of-limitations grounds and awarded nearly $50,000 in attorney fees.
No Malice
The Court of Appeal, after requesting and receiving supplemental briefing on the limitations question, held that the applicable statute of limitations was not §340.6(a), but §335.1. It also concluded, however, that the plaintiff could not prevail on the issue of malice, and that the anti-SLAPP motion was thus correctly granted.
Justice Richard Aldrich, writing for the court, explained that the requirement of “actual injury” in a legal malpractice action does not apply to malicious prosecution. Thus, §335.1 gave Roger Cleveland two years from the date it obtained judgment in the underlying action to sue for malicious prosecution, he said.
Aldrich disagreed with Vafi v. McCloskey (2011) 193 Cal.App.4th 874 and Yee v. Cheung (2013) 220 Cal.App.4th 184, which would have applied a one-year statute of limitations, not tolled during the pendency of the appeal in the underlying case.
The justice explained:
“Unlike the Vafi and Yee courts, we read the language in section 340.6 as a professional negligence statute, similar to section 340.5, the statute of limitations applicable to a claim for professional negligence of a health care provider....[T]he legislative history and public policy considerations support this interpretation....Applying section 340.6, subdivision (a) to attorneys without such an accrual rule during the pendency of an appeal leads to absurd results, permitting the losing party in the prior action to file a notice of appeal to run out the statute of limitations, or requiring a malicious prosecution plaintiff to bring a premature action during the pendency of the appeal. We must construe section 340.6, subdivision (a) to avoid such unreasonable results.”
Aldrich went on to say, however, that Roger Cleveland’s case agains the attorneys lacked “minimal merit” on the issue of malice. The comments allegedly made by Smith, he said, “were typical of comments attorneys maek to one another during the course of litigation” and cannot support an inference of malice, he said, nor did the plaintiff’s other evidence on the issue support such an inference.
The case is Roger Cleveland Golf Company, Inc. v. Krane & Smith, APC, B237424.
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