PARRISH v. LATHAM & WATKINS (To be called and continued to the June 2017 calendar.)Amicus Curiae Brief of Mesisca Riley & Kreitenberg, LLPCal.June 10, 2016SUPREME COURT COPY SurRENEcoves Supreme Court Case No.: 8228277 Court of Appeal Case No.: B244841 JUN 1 0 2016 In the Supreme Court of the State of California’t2%k 4. McGuire Clerk Deputy William PARRISH andE. Timothy Fitzgibbons, Plaintiffs and Appellants, LATHAM& WATKINS LLP and Daniel Schecter, Defendants and Respondents Review of a Decision by the Court of Appeal Second Appellate District, Division Three Case No. B244841 Application for Leave to File Amicus Curiae Brief and Proposed Brief on Behalf ofMesisca Riley & Kreitenberg LLP in Support of Appellants William Parrish and E. Timothy Fitzgibbons Dennis P. Riley (SBN #134200) RenaE. Kreitenberg (SBN#138913) MESISCA RILEY & KREITENBERG LLP 644 S. Figueroa Street, Suite 200 Los Angeles, California 90017 Telephone: 213.623-2300 Facsimile: 213.623.6600 dpriley@mrklawyers.com Attorneysfor Applicant Mesisca Riley & Kreitenberg LLP Supreme Court Case No.: $228277 Court of Appeal Case No.: B244841 In the Supreme Court of the State of California William PARRISH and E. Timothy Fitzgibbons, Plaintiffs and Appellants, LATHAM& WATKINSLLP and Daniel Schecter, Defendants and | Respondents Review of a Decision by the Court of Appeal Second Appellate District, Division Three Case No. B244841 Application for Leave to File Amicus Curiae Brief and Proposed Brief on Behalf ofMesisca Riley & Kreitenberg LLP in Support of Appellants William Parrish and E. Timothy Fitzgibbons Dennis P. Riley (SBN #134200) Rena E.Kreitenberg (SBN#138913) MESISCA RILEY & KREITENBERG LLP 644 S. Figueroa Street, Suite 200 Los Angeles, California 90017 Telephone: 213.623-2300 Facsimile: 213.623.6600 dpriley@mrklawyers.com Attorneysfor Applicant Mesisca Riley & Kreitenberg LLP TABLE OF CONTENTS Page No. APPLICATION FOR LEAVE TO FILE AMICUS CURIAE BRIEF 20.0.0cc cece cece ee eeneeeen sees eseeeeueuseteeasevevensns suave I AMICUS CURIJAE BRIEF OF MESISCA RILEY & KREITENBERGLLP. 20000... eee ceccccsscsessesescecsscesesscscssssssecescsecsvaasavsevaeersansacsaeens 4 ISSUE PRESENTEDwoos cccceccccesccsesesesseseesseesseescsssssesssesscsssvasvecevaneateaees 4 PROCEDURAL HISTORY..o.cceccccccssssssesscscsscscessescsssscssescecssssecstsneaeeaaes 5. A. The Parrish Opinions..0......cceccesecsssseseeseseeesseesescessecnssaeeaeens 5 B. The VaughnLitigation...cece ccc ccseccccssecgeestsecsecesseeens 7 LEGAL ARGUMENT|... .cccccecccssessssseseneceeceasseescsesseesssessssavacsesscessasensaaeans 10 1. A CLAIM FOR FEES PURSUANTTO CIVIL CODE §3426.4 REQUIRES A FINDING OF OBECTIVE SPECIOUSNESS OR FRIVOLOUSNESS THAT UNDERMINES ANY INFERENCE OF PROBABLE CAUSEooocceececescseesteseessseseseceeesssscseescsecsecsessssrsesesaccasseavansanes 10 Il. THERE IS A NEED FOR THIS COURT TO ADDRESS THE APPLICABILITY OF THE INTERIM ADVERSE JUDGMENT RULE WHERE A DISPOSITIVE MOTIONIS DENIED AT THE CONCLUSION OF A BENCH TRIAL, IT CANNOT BE DETERMINED ON WHAT GROUNDS THE MOTION WAS DENIED AND THE TRIER OF FACT ULTIMATELY ENTERS JUDGMENT IN FAVOR OF THE MOVING PARTYcvssecssssssssssstssssseesnese 14 CONCLUSION ve vsssssssssssssssesesevessssstssissssstseeeeceeseeessesteeeeeseeeeeeee 22 CERTIFICATE OF WORD COUNTcveceesecccscssceceeeeeeeeeeeeeeeeeeeeeeeesoseec 24 TABLE OF AUTHORITIES Page No. Federal Cases | Stilwell Development, Inc. v. Chen (C.D. Cal. Apr. 25, 1989, No. CV86 4487 GHK), 1989 WL 418783, 1989 U.S. Dist. Lexis 5971 ooo eessesecsssseesseseesssscseecseeessessesesaesssseseecaevscsesaesesesarseseessusessess 11 State Cases Cheong Yu Yee v. Cheung (2013) 220 CalApp.4th 184, 200-01 oo. ecceccescesssesessssessessssssesesessestseseseeseeseeees 19 Cowles v. Carter (2d Dist. 1981) 115 Cal. App. 3d 350, 359cececcecsssessessesessssesessssesessscseveesses 19 Cypress Semiconductor Corp. v. Maxim Integrated Products, Inc. (2015) 236 Cal. App. 4th 243, 267 .....ecesescsssssesscssesessssesesseesessessesesesenees 12, 13, 14 FLIR Sys., Inc. v. Parrish (2009) 174 Cal.App.4th 1270.cscccccssssccsssssssssssessssssssesssssssesenssiasteassesen 12, 13 Gemini Aluminum Corp. v. California Custom Shapes, Inc. | (2002) 95 Cal. App. 4th 1249, 1261 w.vceecsescceceseeneeseesseseseeseeessseeteseaeaeees 11, 12 Hufstedler, Kaus & Ettinger v. Superior Court | | (1996) 42 Cal.App.4th 55, 67... ccccssssecssssscsssscssssssssssesseeseeessestsesssessseseesesesaeenes 16 Hutton v Hafif (2007) 150 Cal. App. 4th 527, 547 vcccceccccsssssssssessscsesssessesesees ecssessssavesssssesssssesesees 18 In re Marriage ofReese & Guy | (1999) 73 Cal.App.4th 1214, 1220-1221 occseecesseeceeeeeteteesetsesesseseeseesseenees 11 Sheldon Appel Company v. Albert & Oliker (1989) 47 Cal.3d B63, BTLieeeeeseecscceseceecsenscsseesecsecsneeseeseaeeeaseeeseseeserseseessens 10, 18 i TABLE OF AUTHORITIES(continued) Page No. Slaney v. Ranger Ins. Co. (2004) 115 Cal.App.4th 306........ccccssseesessesessesesesseeseneaeeeeeeecseeseeneessesteseesesesess 7, 10 Smith v. Selma Community Hospital (2010) 188 Cal.App.4th 1, 32...cecsccsssesssesescsscsescsesecseeecsessessssscsscecsssseassesananes 11 Summers v. City ofCathedral City (1990) 225 Cal.App.3d 1047, 1072......cccccscsssescescssssessssessesscssssssssscecessessseseveceeeas 12 Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811 occcccscssssessssscsessescsesseecsesessesessesees 10, 16, 18, 19, 20, 21 Statutes Civil Code §3426.4 osccssscsssssssssssssssssssesescssssssssssssssarseseseesessessessseiunansnnese 10, 11, 12 Code of Civil Procedure §128.5 ....c.cccccsccsscscssssssssscsscssccsecesesssssssescssessceaesarenaucenees 1] Code of Civil Procedure §425.16 (D)(3) ...cccccccssccsscsscsssssscssscessssssecsecssessscesessserens 18 ili TO THE HONORABLECHIEF JUSTICE OF CALIFORNIA: Pursuant to Rule 8.520(f) of the California Rules of Court, Mesisca ‘Riley & Kreitenberg LLP hereby submits this application for leave to file the accompanying proposed brief in support of Appellants William PARRISH and E. Timothy Fitzgibbons, and respectfully urge this court to overrule the Court of Appeal’s decision in Parrish v. Latham & Watkins LLP (2015) 238 Cal.App.4th 81 (opn. superseded by order granting review) and hold that a finding by thetrier of fact that a claim is objectively specious or frivolous undermines any inference of probable cause from the denial of a motion for summary judgment and excepts such denial from the interim adverse judgment rule. It is also respectfully requested that the California Supreme Court take this opportunity to clarify the application of the interim adversejudgmentrule in bench trials where a motion is deniedat the close of evidence without any stated reason or opinion and the only act remaining bythetrier of fact is to render a judgment andhold that such a denial is either a technical one or insufficient from which to infer probable cause. Mesisca Riley & Kreitenberg LLP (“MRK”) is a private civil litigation firm that has handled malicious prosecution cases including one currently pending entitled Jack Vaughn,et. al. v. Barbara Darwish, et al. Los Angeles Superior Court Case Number BC521721(the “VaughnLitigation”) that is currently on appeal involving a similar issue raised in the Parrish matter. The Vaughn Litigation involves a series of unsuccessful unlawful detainers brought by a landlord and its agents against six tenants. In the Vaughn Litigation a substantially similar issue exists as that currently before this Court: whetherthe denial of a motion for judgment by a trial court at the close of the evidence in a benchtrial satisfies the interim adverse judgmentrule and supports an inference of probable cause where the trial court makesno findings on the record, issues no written order, ultimately finds in favor of the moving defendanton all groundsraised in the motion for judgmentanda trial court and court of appeal in a subsequent malicious prosecution action expressly find lack ofprobable cause for the underlying litigation. In the Vaughn Litigation, currently on appeal,the trial court granted a motion for judgment on the pleadings as to two ofthe six plaintiffs on the groundsthat the interim adverse judgmentrule barred the action. The trial court’s ruling was made after the sametrial court denied two motions underthe anti-SLAPPstatute (Code of Civil Procedure §425.16) which denials were appealed and affirmed. In fact, the Court of Appeal expressly foundthat: “[w]e find that the evidence presented by respondents on the anti-SLAPP motion,if credited, leads to the conclusionthatthe underlying unlawful detainer actions were initiated and prosecuted without probable cause” and “Lal reasonable attorney would not have considered the actions [of the malicious prosecution defendants] valid under these circumstances.” Vaughn v. Darwish, No. B253694, 2015 WL 3397033, (Cal. Ct. App. May 27, 2015), reh’g denied (June 16, 2015), review denied (Sept. 9, 2015). Ascounsel of record in the Vaughn Litigation and the pending appeal in that litigation, MRK hasaninterest in the issue currently before this Court. But MRK alsoasserts that there is a compelling need to address the application and scope ofthe interim adverse judgmentrule generally, given the confusion that exists as to when and under what circumstances an inference of probable cause mayarise. In the Parrish matter, the issue is framed as whether a subsequent ruling by the sametrial court of objective bad faith underminesthe denial of a prior motion for summary judgment. In the Vaughn Litigation theissueis whetheran oral denial of a motion for judgment without any stated reason, findings or written order after all evidence has been presented and closing arguments made, should be considered an interim adverse ruling from which an inference of probable cause may be made where subsequent rulings including that ofthe Court of Appealfind no probable cause.! MRK hasneverbefore submitted an application to file as amicus curiae. No party or other person contributed to the preparation or financing of this amicus curiae brief. MRK hasa substantial interest in the resolution of the ! Counsel for defendants Barbara Darwish, David Darwish, Gingko RoseLtd. and Logerm LLC in the Vaughn Litigation is Roy Weatherup of Lewis Brisbois Bisgaard & Smith LLP whohasfiled an amicus curiae briefin this matter on behalf of Lawyers Mutual. issues pending review concerning the ability oflitigants to pursue malicious prosecution claims against attorneys who pursue meritlesslitigation for a malicious purpose butare able to avoid suchliability even where trial court ultimately determines that the litigation pursued was in bad faith or without any legal and factual tenability. Because the interim adverse judgment rule permits an inference that a trial court has made an affirmative determination that probable cause for a claim exists, the rule mustbe clarified where trial court eventually determinesas a matter of fact that the claim was devoid of factual and legal tenability. This is especially necessary in the case of a bench trial where, there is no needfor a trial court to make a substantive finding on an oral motion for judgment becausethe trial court is the ultimate fact finder and necessarily will make such an adjudication. Given the fact the amount oflitigation filed and pursuedin the State of California has exponentially increased the filing and pursuit of frivolous cases, there is a need to ensure that a maliciously filed and pursued action can be redressed and that attorneys taking on suchlitigation cannot avoid responsibility for such decisions based ontechnicalities or unsupported inferences ofprobable cause. Accordingly, MRK respectfully requests leave to file the accompanyingbrief. ISSUE PRESENTED Does an inference arise that a claim is supported by probable cause under the interim adverse judgmentrule after denial of motion for summary judgment wherea trial court later makes a subsequentfinding of “objective speciousness”ofthe claim or that a reasonable attorney would not believe the claim had merit? PROCEDURAL HISTORY A. The Parrish Opinions Plaintiffs William Parrish and Timothy Fitzgibbons(collectively, Plaintiffs) are former officers and shareholders of Indigo Systems Corporation. FLIR Systems,Inc. (“FLIR”) acquired Indigo in 2004.” After Plaintiffs’ employmentcontracts with Indigo expired in 2006, Plaintiffs began their own business. FLIRsuedthe Plaintiffs for, among other things, misappropriation of FLIR’s trade secrets. Superseded Opinion at 88. Plaintiffs, as defendants in the misappropriation case, brought a motion for summary judgment. Thetrial court denied the motion. Superseded Opinion at 89-90. A benchtrial was then conducted at which thetrial court found that FLIR had broughtthe trade secrets action in “bad faith,” notwithstanding the prior denial of Plaintiffs’ motion for summary judgment. Superseded Opinion at 90-92. Thetrial court entered judgmentin favor of Plaintiffs and awarded sanctions against FLIR pursuant to Civil Code, § 3426.4. The judgment 2 Parrish v. Latham & Watkins, 238 Cal. App. 4th 81 reh’g denied (July 21, 2015), review granted and opinion superseded, 357 P.3d 769 (Cal. 2015 hereinafter “Superseded Opinion”at 87. including the sanctions award was affirmed on appeal. Superseded Opinionat 92; see also FLIR Systems, Inc. v. Parrish (2009) 174 Cal.App.4th 1270, 1286. Thereafter, Plaintiffs brought this malicious prosecution action. Superseded Opinion at 92. The attorney defendants filed a special motion to strike pursuant to Code of Civil Procedure Section 425.16. The attorneys argued the claim was time barred and the denial of the motion for summary judgmentprecluded Plaintiffs from bringing the action underthe “interim adverse judgmentrule.” Superseded Opinion at 93, The trial court granted the anti-SLAPP motionsolely on the statute of limitation ground. The trial court did not address whether the interim adverse judgmentrule conclusively established that the attorney had probable cause to bring the trade secret claim. The Court of Appeal issuedtwo published opinionsrelated to this matter: Parrish v. Latham & Watkins, LLP (2014) 229 Cal.App.4th 264 (opn. vacated by order granting rehearing, 244841, Sept. 25, 2014 (Parrish T) and Parrish v. Latham & Watkins, LLP (2015) 238 Cal. App. 4th 81 (opn. superseded by order granting review, $228277, Oct. 14, 2015 (Parrish II). In Parrish I the court of appeal found that the interim adverse judgment rule did not apply because subsequentrulings by the sametrial judge established the action had beenfiled in bad faith from the get-go. The court of appeal identified the issue thusly: “whether the interim adverse judgmentrule applies when there has been a subsequentruling in the underlying action that the underlying action was,in fact, brought in bad faith”. Parrish I at 279. The court of appeal went on to narrow the inquiry to determine whether subsequent rulings by a trial court may “expressly undermine the probable cause inference which would otherwise arise from the interim summary judgment denial.” Jd. at 279-280. Relying on the analysis in Slaney v. Ranger Ins. Co. (2004) 115 Cal.App.4th 306, the court of appeal in Parrish I reversed thetrial court’s order granting the anti-SLAPP motion. Parrish I, supra, at 279-282. The court in Parrish I recognized the exception established in Slaney that “the fact that the jury ultimately found that the denial of the claim was done with malice, and awarded punitive damages, was sufficient to undermine the effect of the prior summary judgmentdenial”. Jd. at 281. The attorneys filed a petition for rehearing which wasinitially denied on September 19, 2014. But on thecourt’s own motion, rehearing was granted on September25, 2014. On June 26, 2015, the Court of Appeal issued a second decision, Parrish II that affirmed the order granting the anti-SLAPP motion in part on the ground that the “interim adverse judgmentrule”established probable cause to bring the action. B. The VaughnLitigation The VaughnLitigation asserts a claim for malicious prosecution against a landlord, its agents and its legal counselin the filing and pursuit of multiple unlawful detainer actions against six tenants (hereinafter the “Tenant Defendants”). Twoofthe six Tenant Defendants’ claims, Carlos Rodriguez and Wayne Hart, weretried before the Honorable Amy Hogueastest cases. Both Rodriguez and Hart prevailed at a benchtrial. Afterplaintiff landlord finished presentation of its evidence, counsel for Rodriguez and Hart madean oral motion for directed verdictthat the trial court treated as a motion for judgment. Thetrial court, however, deferred a ruling on the motion. Rodriguez and Hart then presented their evidence in defense of the unlawful detainer, both plaintiff and defendants rested and closing arguments were made. Thetrial court then, it the last statement made onthe record before taking the matter under submission “denied”the motion for judgment saying she would just “keep going with it”. No written ruling or order denying the motion was madebythetrial court explaining the denial other thanthetrial court’s statement on the record that she would just “keep going withit.” The trial court ultimately found in favor of Rodriguez and Hart on every ground raised in the oral motion for judgment and entered judgmentin their favor. In the Vaughn Litigation, the malicious prosecution defendants filed a motion for judgment on the pleadingsasserting that the interim adverse judgmentrule precludedthe action becausethe trial court “denied” the motion for judgmentin the unlawful detainertrial. The motion for judgment on the pleadings was broughtafter two anti-SLAPP motions had been denied, appealed and affirmed on appeal by the Court of Appeal in Vaughn v. Darwish, No. B253694, 2015 WL 3397033, (Cal. Ct. App. May 27, 2015), reh'g denied (June 16, 2015), review denied (Sept. 9, 2015). The court of appealin its opinion expressly found on the issue of probable causethat: “[w]e find that the evidence presented by respondents on the anti-SLAPP motion,if credited, leads to the conclusion that the underlying unlawful detainer actions were initiated and prosecuted without probable cause” and “[a] reasonable attorney would not have consideredthe actions [of the malicious prosecution defendants] valid under thesecircumstances.” Id. at 6. Notwithstanding the foregoing, the trial court granted the motion for judgment on the pleadings finding the interim adverse judgmentrule barred the malicious prosecution action as to Rodriguez and Hart and dismissedtheir claims. Rodriguez and Hart made a motion for newtrial that was denied as well. In the motion for new trial, Rodriguez and Hart referenced the rulings in Parrish I and Parrish I and the fact a substantially similar issue was being considered by the California Supreme Court. Rodriguez and Hart timely filed an appeal of the order granting the motion for judgmenton the pleadings, the dismissal and the denial of the motion for new trial. The case is now on appeal, Hartet. al. v. Darwish, et. al. Court ofAppeal Case No. B270513. The record on appealis scheduled to be filed on May 24, 2016. LEGAL ARGUMENT 1. A CLAIM FOR FEES PURSUANTTO CIVIL CODE§3426.4 REQUIRESA FINDING OF OBECTIVE SPECIOUSNESS OR FRIVOLOUSNESS THAT UNDERMINES ANY INFERENCE OF PROBABLE CAUSE Asis evident in the two opinions in Parrish I and Parrish II, there is some confusion as to how the interim adverse judgmentrule should be applied and the scopeofits application. A malicious prosecution plaintiff must establish: 1) that the underlying action against him terminated in his favor; 2) that it was brought without probable cause; and 3) that it wasinitiated and prosecuted with malice. Sheldon Appel Company v. Albert & Oliker (1989) 47 Cal.3d 863, 871. Based on the Supreme Court’s opinion in Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, the court in Parrish I declined to apply the exception to the interim adverse judgmentrule recognized in Slaney, supra that a trial court’s subsequent determination that a claim lacked probable causeis sufficient to defeat application of the interim adverse judgment rule. The court of appeal in Parrish I foundthat “[cJontrary to the Slaney court’s conclusion, the fact that the trial court or jury later rejects a plaintiff's claim and, after weighing the competent evidence, finds the claim was brought with malice, does not negate other evidence which, standing alone, establishes the existence 10 of probable cause.” Parrish II at 101. But bringing a claim “with malice”is really not the issue. The issue is whetherthe rejection ofa plaintiff’s claim by a trier of fact made onthe basis the claim was brought in “objective” bad faith — or “objective speciousness” should standing alone, undermine any “inference” of probable causeresulting from a prior denial of a motion for summary judgment. The “bad faith” element in Civil Code §3426.4 was not defined by the legislature. Thus, the rule regarding “objective speciousness”as a basis for determining “bad faith” under section 3426.4 wasinitially created by the federal court in Stilwell Development, Inc. v. Chen (C.D. Cal. Apr. 25, 1989, No. CV86 4487 GHK), 1989 WL 418783, 1989 U.S. Dist. Lexis 5971 and then adopted by the Fourth District Court of Appeal in Gemini Aluminum Corp. v. California Custom Shapes, Ine. (2002) 95 Cal. App. 4th 1249, 1261. The Gemini court acknowledged that under Stilwell “the claim must have been without substancein reality, if not frivolous”. Courts have defined “frivolous” under Codeof Civil Procedure section 128.5 as a claim where “[a]ny reasonable attorney would agree it is totally and completely without merit. [Citation.]” In re Marriage ofReese & Guy (1999) 73 Cal.App.4th 1214, 1220-1221. It has long been held that the “any reasonable attorney”standard is an objective inquiry made as a matter of law. See, e.g., Smith v. Selma Community Hospital (2010) 188 Cal.App.4th 1, 32. Thus, the standard to determine “objective speciousness”is similarly | determined as a matter of law and doesnot require the weighing of evidence. 11 In addition to the foregoing objective inquiries made as a matter oflaw, however, Civil Code §3426.4 also requires an improper purpose,or in other words, “subjective bad faith on the part of the attorney or party to be sanctioned. [Citation.]” Gemini Aluminum Corp., supra at 1262. The inquiry concerning subjective bad faith ‘involves a factual inquiry into the plaintiff's subjective state of mind[citations]: Did he or she believe the action was valid? Whatwashis or herintent or purpose in pursuing it?’ ”. Summers v. City of Cathedral City (1990) 225 Cal.App.3d 1047, 1072. Once the court finds that a claim is objectively specious andthat the plaintiff made it for an improper purpose,“there is no further requirementthat the court also find a lack of ‘subjective belief in the merits ofits case.’ ” Cypress Semiconductor Corp v. Maxim Integrated Products, Inc. (2015) 236 Cal. App. 4th 243, 267. Thus, a finding of objective speciousness of the claim renders any subjective beliefas to the merits of the claim irrelevant. A finding that a claim is frivolous, on the other hand, is an actual determination that a reasonable attorney would not believe the claim had merit and thus, any subjective belief in the merits of the claim is ineffectual. The Cypress case adopted the definition of “objective speciousness” set forth in FLIR Sys. Inc.v. 3 The Cypress court relied in part on Employer FLIR Sys., Inc. v. Parrish (2009) 174 Cal.App.4th 1270, in which the court of appeal affirmed the judgment against FLIR on the misappropriation of trade secrets action and award of attorney fees. 12 Parrish, supra that there is a “complete lack of evidence to support the claim”.* Cypress, supra, at 261. But the court in Parrish I] refused to acknowledge or analyze the impact of such objective findings bythetrial court in its holding that there are only two recognized exceptions to the interim adverse judgmentrule: (1) where a summary judgment motion was decided on procedural or technical grounds and (2) a summary judgment motion was decided as a result of fraud or perjury. The court found neither exception applied. Parrish I, supra, 238 Cal.App.4th at 97-102. The problem with Parrish II’s narrow viewis that neither exception would address the factual situation at issue in this case, when a trier of fact ultimately determines the claim is objectively specious(i.e. without any tenability atall legal or factual) or frivolous(i.e. no reasonable attorney would have brought the claim). Moreover, the Parrish court did not acknowledge that such a determinationis not the result of “weighing” competing evidence and deciding that evidence presented was simply not enough to prove by a preponderancethatthe plaintiff should prevail. Rather,it 4 The Cypress court dismissed as illogical the rule’s reference the action could “superficially appear to have merit” and found such language “superfluous” because “there is no logical reason to require that the action ‘superficially appear[ ] to have merit.’ ” Jd. Thus, there is no inherent conclusion made by a trier of fact that a claim has superficial merit whena trier of fact finds a claim is “objectively specious”. 13 is “the absence of evidence”altogetherthat controls. Cypress, supra 236 Cal. App. 4th at 260. In effect, a determination of objective speciousness is a statement by the trier of fact that no evidence or law supports the claim. A determination that a claim is frivolous is a statement that no reasonable attorney could believe the claim had merit. Such determinations completely destroy the factual and legal basis for a denial of a prior motion for summary judgmentand certainly completely undermine any “inference”that might be made from such a denial that the claim was supported by probable cause whenit was filed so as to avoid a subsequent malicious prosecution claim. IL. THEREIS A NEED FORTHIS COURT TO ADDRESS THE APPLICABILITY OF THE INTERIM ADVERSE JUDGMENT RULE WHERE A DISPOSITIVE MOTION IS DENIED AT THE CONCLUSION OF A BENCH TRIAL, IT CANNOT BE DETERMINED ON WHAT GROUNDS THE MOTION WAS DENIED AND THE TRIER OF FACT ULTIMATELY ENTERS JUDGMENTIN FAVOR OF THE MOVING PARTY The exceptionsto the interim adverse judgment rule as stated in Wilson, supra are reiterated by the court in Parrish I. But they both are inapplicable whenthere is a denial of a dispositive motion, other than a motion for summary judgment, such as a motion for judgmentin a benchtrial. This is 14 especially true where the denial is made bythetrial court solely becauseit is poised to makea final adjudication on the merits of the claim. Thus,at the time of the denial the only act left to be doneis entry of a judgment. Such a determination may have moreto do with judicial economy and court resources, than any ruling on the merits of such a motion from whichit could be inferred the trier of fact concluded the claims were supported by probable cause. This is especially problematic when there is no written ruling or exposition on the record by trial court concerning any ruling on the motion. Whenthere are no grounds for any such denial articulated there is no basis to infer that the trial court has made a determination that there is sufficient support for any particular claim to survive the motion or that the claim is supported by probable cause. Unlike in a motion for summary judgment/adjudication, where evidence is presented and a written order with an explanation of the findings madeis required, it cannot be ascertained whether an adjudication on the merits or one based on non-technical or non-procedural grounds has been made where a motion for judgment at the end ofa benchtrial is denied without any findings or written ruling. Therationale that has been identified by courts as the basis for the inference madein the interim adverse judgmentrule does not necessarily exist where an oral motion for judgmentin a benchtrialis brought and the trial court ultimately enters judgmentin favor of the moving defendant. In applying the interim adverse judgmentruleto the denial of a pretrial summary judgment 15 motion,as is the case in this litigation, courts have focused the inquiry on whether “no reasonable attorney would have thought” the claim had merit. Hufstedler, Kaus & Ettinger v. Superior Court (1996) 42 Cal.App.4th 55, 67. Courts have concluded that whena trial court findstriable issues of material fact in the underlying case, probable cause may beinferred so that a malicious prosecution action should not proceed. Jd. at 67-69. The Court ofAppeal in Parrish II relied on the notion that the subsequentrulingsofthe trial court that the litigation was filed in objective bad faith (that goes to the inception of thelitigation) to support an award of sanctions did not negate other evidence presented in opposing the summary judgment motion filed by Plaintiffs. The court in Parrish I in effect foundthat the evidence presented in opposition to the motion for summary judgment “standing alone” would establish probable cause. Parrish II at 101. Quoting Wilson, supra the court in Parrish II pointed out: “A litigant or attorney who possesses competentevidenceto substantiate a legally cognizable claim for relief does not act tortiously by bringing the claim, even ifalso aware of evidence that will weigh against the claim.Plaintiffs and their attorneys are not required, on penalty oftort liability, to attempt to predict howa trier offact will weigh the competing evidence, or to abandon their claim if they think it likely the evidence will ultimately weigh against them.” [emphasis added by the Parrish court] Such an analysisis difficult if not impossible to apply in the case of an oral motion in a benchtrial where there is no evidence presented in 16 a formal motion and no ruling or findings are madebythetrial court from which an inference of probable cause can be made-- especially where the denial is an election by thetrial court to simply rule on the merits of the case instead of ruling on a motion for judgment and ultimately finds in favor of the moving defendant on each and every groundraised in the oral motion.for judgment. While the inference of probable cause worksfairly in the context of summary judgment where the moving party must present a dispute offact to prevail, the sameis not true where a motion for judgment during the course of a benchtrial is made wherethetrial court defers a ruling on the motion until after all the evidence is presented, denies the motion without any findings of fact or law and the only additional act in the litigation is the issuance of a judgmentthatis in favor of the moving defendant. Moreover, as is the case in the Vaughn Litigation, any determination of lack of probable cause in a pre- trial setting in a subsequent malicious prosecution action such as a denial of an anti-SLAPP motion or a court of appeal affirming such a denial is simply more support for the notion the claim lacked probable cause and no inference otherwise can be supported. Courts have focused on circumscribing malicious prosecution claims “so that litigants with potentially valid claims will not be deterred from bringing their claims to court by the prospect of a subsequent malicious prosecution claim” Sheldon Appel Co. v. Albert & Oliker supra 47 Cal.3dat 17 872. But there is the opposite concern that a broad application of the interim adverse judgmentrule will serve to eliminate valid claims for malicious prosecution withoutjustification. Becausean essential element of malicious prosecution is the determination bythe trier of fact whether the underlying action lacked probable cause, an attorney defendant in a malicious prosecution action can use a ruling by a trial court that is notarticulated or distilled into a written order as a bar to the action even thoughthere is no basis from which it may be inferred from sucha ruling that the trial court concluded probable cause exists. The problem really stems from language in the Wilson case. Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811. In Wilson, the Supreme Court, addressing the effect of the denial of an anti-SLAPP motion on probable cause, made a statement that lumped together motions for summary judgment and motions fornonsuit:° Denial of a defense summary judgment motion on groundsthat triable issue exists, or ofa nonsuit, while falling short of a determination of the merits, > The Supreme Court in Wilson held that the merits-based denial of a special motion to strike establishes there is probable causeto file a malicious prosecution lawsuit just as does an order denying a summary judgment motion. However, the October 2005 amendmentto the anti-SLAPPstatute (Code of Civil Procedure §425.16 (b)(3)) legislatively abrogated that part of the Wilson opinion. Hutton v. Hafif(2007) 150 Cal. App. 4th 527, 547. 18 establishes that the plaintiff has substantiated, or can substantiate, the elements of his or her cause of action with evidencethat, if believed, would justify a favorable verdict.” Wilson, supra, 28 Cal.4th at 824 [emphasis added]. But the Wilson court went on to explain that it may be inferred that a judgefindsat least “some merit in the claim”from trial court’s “conclusion that issues ofmaterial fact remain for trial”. Id. at 819. In the context ofa motion for non-suit, however, the implications are not as clear. For example in CheongYu Yee v. Cheung (2013) 220 Cal.App.4th 184, 200-01, the Fourth District acknowledgedthat the denial of a nonsuit motion together with a subsequentplaintiff's jury verdict was sufficient to establish probable cause. In the Yee case the judge denied amotion for nonsuit “at the close ofthe plaintiffs’ case” and then permitted the case to go to the jury that in turn, ruled in favor ofthe plaintiff. Under such circumstances, the appellate court held it may beinferred that the trial court made a decision that the claims were sufficiently tenable to go to the jury. See also, Cowles v. Carter (2d Dist. 1981) 115 Cal. App. 3d 350, 359 [“If the trial judge denies a motion for non-suit and permits a question of fact to go to the jury, he has, of necessity, decided that there is sufficient evidence to permit the jury to determine that issue. If the jury then makes a determination contrary to the defendant in the initial action, we feel that the dual action of the court and the jury is a sufficient determination of 19 probable cause to prevent the defendant from instituting malicious prosecution proceedings even though such verdict be overthrownbythetrial judge or on appeal”.] But such inferences cannot be made where a motion for judgmentin a benchtrial is made after plaintiff's case in chief, the ruling is deferred until after all the evidence has been presented by both sides and closing arguments given and the motionis then orally denial without explanation concurrently with taking the matter under submission for issuance bythe trial court of a judgment. Even more compelling, what happensif that sametrial judge after taking the matter under submission finds in favor of the defendant who moved for judgmenton all groundsraised in the motion for judgment? The purposeofthe interim adverse judgmentrule is to give “effect”to the “conclusion that issues of material fact remain fortrial” becauseit “serves the policy expressed in Sheldon Appel to discourage dubious malicious prosecution suits.’ ” Wilson, supra 28 Cal.4th at 819. This policy, however, is not served wherethere is no basis to determinethata trial court has, in fact, reached any conclusion that “material facts remain fortrial” in the case of a pro forma denial of a motion for judgmentin a benchtrial where the judgment ultimately is in favor of the moving defendant. This is especially true where in the subsequent malicious prosecution action,as is the case in the Vaughn Litigation, the trial court expressly found a lack of probable cause to deny defendants’ anti-SLAPP motions and the court of appeal affirmed the denial 20 similarly finding no reasonable attorney would have considered the unlawful detainer claims asserted valid. Vaughn v. Darwish, No. B253694, 2015 WL 3397033, (Cal. Ct. App. May 27, 2015), reh'g denied (June 16, 2015), review denied (Sept. 9, 2015). There is simply no basis to infer from such circumstancesthat the trial court reached any conclusion, muchless a conclusion that probable cause exists. To the contrary, valid, meritorious claims will be barred without just cause thereby providing a loophole forlitigants and their attorneys. It will also have a chilling effect on the bringing of such oral dispositive mid-trial motions, the purpose of whichareto facilitate adjudications expeditiously. In evaluating the application of the interim adverse judgmentrule the issue should not be whether a litigant and his or her attorney should be required, “on penalty oftort liability, to attempt to predict how trierof fact will weigh competing evidence”. Wilson, supra 28 Cal.4th at 822. Rather, it should be whetherthe interim ruling standing alone provides a clear and unambiguousbasis to infer that a court has, in fact, determined that the claim has some merit. Where there is no written order and no oral statement on the record bythe trial court as to why a dispositive motion for non-suit, motion for judgmentor other pre-trial motion is denied, the inference cannot be made and any such ruling should notserve as a basis to impose the interim adverse judgmentrule to bar a valid and meritorious malicious prosecution action 21 especially where the moving party ultimately prevails in the underlying litigation. CONCLUSION Theinterim adverse judgmentrule asit currently exists is problematic. The issue is not whether a “bad faith” exception to the rule based on subjective “bad faith” of a claim should be imposed as argued by some of the amicus curiae. Rather, the issue is whether a determination of “objective speciousness” or “frivolousness” of a claim that necessarily requires a finding the claim was never supported by any law or fact and no reasonable attorney would believe the claim had merit, should be sufficient to override the inference of probable cause from the denial of a dispositive motion. In addition, the application of the only recognized “exceptions” to the rule do not apply to many factual scenarios whereitis simply unjustified to infer trier of fact has madea determinationa claim is supported by probable cause. While such an inference could be reasonable wherea trier of fact finds a triable issue of fact exists in denying a motion for summary judgment,there is no similar inference to be made where a motion made during a benchtrialis denied at the close of evidence andthereis no stated ruling or explanation for the denial. Wherefore, it is requested that this honorable court overrule the opinion in ParrishII and hold: (1) A finding bythetrial court of “objective speciousness” and/or frivolousness of a claim for misappropriation oftrade secrets as a 22 | basis for the award of attorney fees under Civil Code §3426.4 undermines any inference of probable cause from the denial of motion for summary judgment underthe interim adverse judgment rule; and (2) There is no inference of probable cause under the interim adverse judgmentrule to be made from the denial of a motion made during a benchtrial after all the evidence has been presented andthe only act left for the trier of fact is to enter a judgment. The Supreme Court has an opportunity to circumscribe the application of the doctrine so that valid and meritorious malicious prosecution claims can be adjudicated notwithstandingprior interim rulings for which nostated reason or written order exists from which to infer a conclusion bythetrial court that probable cause for the claims asserted exists. Dated: May 26, 2016 DE S P. RILEY RENA E. KREITE RG - Attorneys for Applicant MESISCA RILEY & ITE RG LLP 23 CERTIFICATE OF WORD COUNT [Cal. Rules of Court, Rule 8.520(c)] Counsel of Record herebycertifies that pursuant to Rule 8.520(c) ofthe California Rules of Court, this application and proposedbriefis produced using 13-point Romantypeincluding footnotes and contains approximately 5,727 words including footnotes. Counsel relies on the word countofthe computer program used to preparethis brief. Dated: May 26, 2016 RENA E. KREITENBERG Attorneys for Applisant MESISCARILEY & BERG LLP 24 PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF LOS ANGELES I, SHIREE MAGEE, am employedin the aforesaid County, State of California; I am over the age of 18 years and not a party to the within action; my business address is 644 S. Figueroa Street, Suite 200, Los Angeles, California 90017. On May31, 2016, I served MESISCA RILEY & KREITENBERG LLP’S APPLICATION FOR LEAVE TO FILE AMICUS CURIAE BRIEF AND PROPOSED BRIEF IN SUPPORT OF APPELLANTS WILLIAM PARRISH AND E. TIMOTHYFITZGIBBONSonthe interested parties in this action by placing a true and correct copythereof, enclosed in a sealed envelope, addressed as follows: (See Attached Service List) X___ (BY MAIL) X___ As follows: I am “readily familiar” with the firm’s practice of collection and processing correspondence for mailing. Under that practice it would be deposited with the U.S. Postal Service on that same day with postage thereon fully prepaid at Los Angeles, California in the ordinary course of business. X_ (STATE) declare under penalty of perjury under the lawsofthe State of California that the foregoing is true and correct. Executed on May 31, 2016,at Los Angeles, California. SHIREE MAGEE 25 SERVICE LIST Brian J. Panish PANISH, SHEA & BOYLE LLP 11111 Santa Monica Boulevard, Suite 700 Los Angeles, CA 90025 [Counselfor Plaintiffand Appellant William Parrish] Michael John Avenatti EAGAN AVENATTI LLP 520 Newport Center Drive, Suite 1400 Newport Beach, CA 92660 [Counselfor Plaintiffand Appellant William Parrish] Stuart B. Esner ESNER, CHANG & BOYER 234 East Colorado Boulevard, Suite 750 Pasadena, CA 91101 [Counselfor Plaintiffand Appellant William Parrish] J. Michael Hennigan Michael Swartz MCKOOL SMITH HENNIGAN,P.C. 300 South Grand Avenue, Suite 2900 Los Angeles, CA 90071 [Counselfor Defendant and Respondent Latham & Watkins, LLP| J. Michael Hennigan Michael Swartz MCKOOL SMITH HENNIGAN,PC 300 South Grand Avenue, Suite 2900 Los Angeles, CA 90071 [Counselfor Defendant and Respondent Daniel Schecter} Roy G. Weatherup LEWIS BRISBOIS BISGAARD & SMITH, LLP 633 West Fifth Street, Suite 4000 Los Angeles, CA 90071 [Counselfor Amicus curiae Lawyers Mutual Insurance Company] 26 Harry W. R. Chamberlain,II BUCHALTER NEMER,P.C. 1000 Wilshire Boulevard, Suite 1500 Los Angeles, CA 90017 [Counselfor Amicus curiae The Association ofSouthern California Defense Counsel; Attorney’s Liability Assurance Society, Inc.; Baker & McKenzie; Bryan Cave LLP; DLA Piper LLP; Fish & Richardson P.C.,; Gibson Dunn & Crutcher LLP; Greenberg Traurig, LLP; Irell & Manella LLP; McGuireWoods LLP; Morrison & Foerster LLP; O'Melveny & Myers LLP; Paul.Hastings LLP; Reed Smith LLP; Squire Patton Boggs LLP] Honorable James R. Dunn c/o Clerk, Superior Court of California 111 North Hill Street Los Angeles, CA 90012 27
