Michael P. SLATER, Plaintiff and Appellant, v. David E. DURCHFORT, an individual, Defendant and Respondent.
In this malicious prosecution case, we conclude a plaintiff adequately alleged malice on the part of a substitute attorney by stating that attorney failed to investigate whether the action had any merit before assuming the prosecution of that action. Accordingly, we reverse a demurrer the trial court sustained in the attorney's favor.
FACTS AND PROCEEDINGS BELOW
Appellant Slater attempted to sell Terence Krell his general partnership interest in a limited partnership. Krell then brought the underlying action against Slater on January 15, 1986, in Los Angeles Superior Court, Krell v. Slater Case No. C583744, later transferred to Los Angeles Municipal Court, Case No. 90K27841. After this action was terminated in appellant's favor he filed the instant malicious prosecution action against Krell's first lawyer, Jerome D. Fireman, and respondent, Durchfort, who had replaced Fireman after the underlying action was filed and prosecuted it to an unsuccessful conclusion.
In the underlying action, there were two allegations by Krell of importance to the subsequently filed malicious prosecution claim. First, Krell alleged appellant had failed to disclose his work status while in a car accident that potentially posed a liability to the partnership. And, second, Krell alleged appellant was trying to solicit the limited partners to interfere with the business of the partnership and to squeeze out Krell as a general partner.
In appellant's malicious prosecution action, he alleged Fireman had personal knowledge of the true facts. Appellant alleged Fireman knew the allegation of nondisclosure of appellant's work status at the time of the automobile accident was false. Fireman knew or should have known appellant did not want the partnership to be sued because of the car accident. Furthermore, Fireman failed to inquire of Krell about the nondisclosure when Fireman knew appellant had disclosed his work status. Appellant also alleged Fireman knew or should have known, because of his already existing relationship with the partnership, that the allegation appellant wanted to disrupt the business of the limited partnership and squeeze out Krell as a partner was untrue.
On or about July 13, 1988, respondent Durchfort substituted in as Krell's counsel in the underlying action against appellant. In his malicious prosecution action, appellant alleges respondent Durchfort, “never inquired of either Fireman or Krell as to the truthfulness and veracity of the allegations contained in the complaint” and aided and assisted the further prosecution of the action without probable cause.
On February 24, 1994, the trial court sustained respondent's demurrer without leave to amend against appellant's third amended complaint for failure to sufficiently plead the malice element of a malicious prosecution claim.
Appellant filed a timely notice of appeal.
Two issues are crucial for the appeal of this demurrer: whether a substituted attorney may be held liable for malicious prosecution and, whether the malice element of malicious prosecution claim is sufficiently pled by alleging a failure to investigate.
I. LIABILITY OF SUBSTITUTE ATTORNEYS.
California courts have recognized an attorney who did not initiate the underlying action may be held liable in a malicious prosecution claim.
In Lujan v. Gordon (1977) 70 Cal.App.3d 260, 138 Cal.Rptr. 654, Jacoves was an attorney who had brought the underlying action against Lujan. After the action was commenced, two other attorneys in Jacoves firm, Gordon and Lipstone, joined in with Jacoves in prosecuting the underlying action. After Lujan won the underlying action he filed a malicious prosecution action naming all three attorneys as co-defendants. The trial court dismissed this malicious prosecution action. On appeal the court held an action may be maintained for malicious prosecution against attorneys who did not commence the action, but were later involved. In order to find Gordon and Lipstone liable, the court found Jacoves was an agent of Gordon and Lipstone, which imputed Gordon and Lipstone with at least constructive knowledge the case was improper.
From later decisions, it is apparent an agency relationship is not the only basis for finding a substitute attorney liable for malicious prosecution. One who knowingly contributes to the continuing prosecution of a previously filed case lacking probable cause likewise can incur liability. The rule is summarized in Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1131, 270 Cal.Rptr. 1, 791 P.2d 587, where the California Supreme Court cites Lujan and Jacques for the proposition a plaintiff can sue anyone “who procures or is actively instrumental in putting the litigation in motion or participates after the institution of the action.” (Id. at p. 1131, fn. 11, 270 Cal.Rptr. 1, 791 P.2d 587, italics added. See also Witkin, Summary of California Law, Torts, § 431, Restatement, 2d, Torts, § 674, Comment c.)
In the case at bar, it is clear respondent Durchfort was instrumental in the lawsuit after the institution of the action because he was Krell's sole attorney after replacing Fireman. Without him the underlying action would never have made it to court.
II. THE ALLEGATION RESPONDENT ATTORNEY FAILED TO INVESTIGATE AT ALL BEFORE PROCEEDING TO TAKE OVER PROSECUTION OF THE CASE IS A SUFFICIENT ALLEGATION OF THE MALICE ELEMENT IN A MALICIOUS PROSECUTION CASE.
The courts have recognized an attorney's failure to investigate is relevant to show the subjective element of malice in a malicious prosecution claim.
The Supreme Court discussed the attorney's duty to investigate as far back as Tool Research & Engineering Corp. v. Henigson (1975) 46 Cal.App.3d 675, 120 Cal.Rptr. 291. At pages 683–684, 120 Cal.Rptr. 291, the Supreme Court held “so long as the attorney does not abuse that duty by prosecuting a claim which a reasonable lawyer would not regard as tenable or by unreasonably neglecting to investigate facts and the law in making his determination to proceed, his client's adversary has no right to assert malicious prosecution against the attorney if the lawyer's efforts prove unsuccessful.” (Italics added.)
In Tool Research, the court further explained “[a]n attorney has probable cause to represent a client in litigation when, after a reasonable investigation and industrious search of legal authority, he has an honest belief that his client's claim is tenable in the form in which it is to be tried.” It is clear the court in Tool Research had recognized a duty for an attorney to investigate the law and facts before bringing an action.
The appellate court in Norton v. Hines (1975) 49 Cal.App.3d 917, 923, 123 Cal.Rptr. 237, cites Tool Research to support the proposition there is a duty, similar to that set forth in the A.B.A. Code of Professional Responsibility, owed to the adverse party to investigate the facts and the law when filing an action. Thus, it held an action could have been brought by the other party for malicious persecution based on a breach of this duty. Similarly, in Stanley v. Superior Court (1982) 130 Cal.App.3d 460, 181 Cal.Rptr. 878, the court uses a duty to investigate as grounds for a malicious prosecution claim.
The reasoning behind recognizing a duty to investigate has been explained in more detail in Schunk v. Zeff & Zeff (1981) 109 Mich.App. 163, 311 N.W.2d 322. In this case the Michigan appellate court explains a malicious prosecution claim traditionally could not be brought for breach of a duty to investigate because there was no privity between the attorney and the adversary's client, and thus no duty to investigate extended to them. The courts eventually decided to reject the privity requirement and base the duty to investigate on foreseeability. An attorney owed a duty to investigate to those they could foreseeably injure by a failure to investigate. Accordingly, the duty to investigate extended to the adversary's client, meaning that a failure to investigate could be the basis for a malicious prosecution claim. (Id.)
The court in Schunk used Tool Research to support this reasoning and recognized a two-part test for probable cause, “ ‘(t)he test is twofold. The attorney must entertain a subjective belief in that the claim merits litigation and that belief must satisfy an objective standard.’ ” (Emphasis in original.) (Id., 311 N.W.2d at p. 332.)
These earlier cases appeared to hold the duty to investigate was part of the “probable cause” element of a malicious prosecution action. However, in Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 254 Cal.Rptr. 336, 765 P.2d 498, the Supreme Court took a different view on how to determine the probable cause element of a malicious prosecution claim. The court in Sheldon held the probable cause determination was a purely legal decision made by the trial court on the objective basis of whether the action was legally tenable or not. On this question, the presence or absence of adequate research, its quality and thoroughness, simply was irrelevant. Well researched or not, the plaintiff's action either did or did not have enough merit to qualify as probable cause. Instead, the Supreme Court held, the extent and quality of an attorney's research bears on the “malice” element, which unlike “probable cause” is subjective and to be decided by the jury rather than the judge.
The Supreme Court overruled Tool Research to the extent it allowed a failure to research to become determinative of whether the action was brought with or without probable cause. The court went on to say “an attorney's duty of care runs primarily to his own client rather than to the client's adversary, and which—on the basis of important policy considerations—have precluded the adversary from maintaining a negligence cause of action against its opponent's attorney”, citing Norton (Id. at p. 883, 254 Cal.Rptr. 336, 765 P.2d 498.) However, the court only held negligence actions are prohibited, and did not preclude malicious prosecution actions from being brought on the basis of a failure to investigate, assuming an objective lack of probable cause.
“[I]f the trial court concludes that, on the basis of the facts known to the defendant, the filing of the prior action was objectively reasonable, the court has necessarily determined that the malicious prosecution plaintiff was not subjected to an unjustified lawsuit. When the court has made such a determination, there is no persuasive reason to allow the plaintiff to go forward with its tort action even if it can show that its adversary's attorney did not perform as thorough an investigation or as complete a legal research job as a reasonable attorney may have conducted.” (Sheldon Appel Co. v. Albert & Oliker, supra, 47 Cal.3d 863, 883, 254 Cal.Rptr. 336, 765 P.2d 498.)
Sheldon Appel did not eliminate the duty to research owed to the adversary's client. All it held was that this duty is not relevant to the probable cause determination. The Supreme Court did not hold this duty is irrelevant to the malice element. Instead our high court held the opposite, expressly stating the failure to adequately investigate was relevant for that purpose. “[A]s with the question of the defendant's subjective belief in the tenability of the claim, if the trial court determines that the prior action was not objectively tenable, the extent of a defendant attorney's investigation and research may be relevant to the further question of whether or not the attorney acted with malice.” (Id., at pp. 863, 883, 254 Cal.Rptr. 336, 765 P.2d 498.)
In the instant case, the trial court did not sustain the demurrer for failure to allege the absence of probable cause, but for failure to adequately allege the malice element of the cause of action. Accordingly, the only question on appeal is whether the malice element has been properly pled. Since Sheldon Appel has held a failure to investigate is not relevant to the probable cause determination, but did not eliminate the duty to investigate, the sole question on review is whether the malice element has been properly pled by alleging a complete failure to investigate. Although there can be other indicia of malice, we conclude an attorney's failure to conduct an investigation of the facts and law reasonable under the circumstances in a case which turns out to lack probable cause may be enough in appropriate circumstances to establish malice.1 Thus, an allegation of such failure is sufficient to support the malice element of a malicious prosecution action when a complaint is challenged by way of demurrer.
There seems to be no reason not to hold a substitute attorney to duty to conduct an investigation which is reasonable under the circumstances when he or she assumes responsibility for carrying the case forward. The primary difference between the first attorney's duty and the duty of a successor attorney is that, depending upon when the new attorney assumes control, a file already may exist containing the results of the first attorney's investigation. The second attorney should be allowed to rely on the contents of that file. If what already has been assembled in the first attorney's file reasonably appears to establish probable cause to proceed further with the lawsuit, the second attorney's duty to investigate is satisfied. Alternatively, if the first attorney's file is skimpy, the second attorney's duty may require that attorney to conduct a further reasonable investigation which, when combined with the existing file, demonstrates probable cause to continue prosecution of the action. If a second attorney has satisfied this minimal duty, malice cannot be imputed from a failure to adequately investigate.
On policy grounds, it seems preferable to require attorneys who assume control of ongoing cases to meet a minimal duty to review the existing file and, if necessary, to conduct a further reasonable investigation of the merits. Otherwise we allow such attorneys to immunize themselves from a malicious prosecution claim by failing to investigate and thus avoiding the discovery they lack probable cause for the cases they have taken over.
What constitutes a reasonable investigation under the circumstances may vary. Short time deadlines, for instance, may affect the thoroughness of the investigation it is possible to conduct. If the client brings his case to the initial attorney only a day or two before the statute of limitations expires, the attorney may have to file after only a cursory review of the facts and law. Similarly, a client may approach an attorney to take over prosecution of an on-going case only the night before a crucial hearing is scheduled. The second attorney may not even have time to complete a review of the first attorney's file before he has to appear in court and thereby further the prosecution of the case. What otherwise would be considered deficient investigations may be “reasonable under the circumstances” and hence unpersuasive on the issue of malice where attorneys lacked the opportunity to do much more than they did.2
We cannot overemphasize too much the failure to adequately investigate becomes relevant, as does the issue of malice itself, only if the trial court determines the plaintiff and his counsel indeed lacked probable cause to pursue the underlying lawsuit. This is the teaching of Sheldon Appel as described above. (See p. 189, ante.) If the court finds probable cause existed, appellant's malicious prosecution action fails even if he can prove appellant continued prosecution of the case without spending even a minute to investigate the facts and law.
Thus, when we speak of a duty to investigate we are describing the risk attorneys run if they fail to fulfill that responsibility in contrast to a duty the violation of which inevitably carries consequences. An attorney may file or continue prosecution of a case without conducting any investigation whatsoever and yet not be liable for malicious prosecution because through luck the case turns out to have enough merit to convince a court there was probable cause to pursue it. But other attorneys who likewise ignore their duty to investigate may not be so fortunate. The trial court will find a lack of probable cause. Thus, the failure to investigate will come back to haunt them as it is used to provide proof they acted in a malicious manner in pursuing a meritless claim without bothering to check the law or the facts.
There is still some doubt whether appellant adequately alleged Durchfort failed to investigate since appellant merely claimed Durchfort failed to inquire of either the first attorney or his client about the truthfulness of the allegations. This left open the possibility Durchfort independently researched the facts and law adequately. Yet, while this allegation of appellant's complaint could have been framed more artfully, we conclude it is minimally sufficient. It can be reasonably construed to allege respondent did not even take the initial first step of an investigation, contacting the first attorney and the client, and by implication, did not do anything else either. Even if this allegation were defective, it would be readily curable through amendment.
The probable cause determination must await a later stage of the proceedings when more information is before the court. Accordingly, for purposes of considering this demurrer we assume the truth of the allegation the underlying action was filed and prosecuted without probable cause. This brings the malice element to the forefront. We conclude an attorney who continues prosecution of a case has a duty to conduct an investigation which is reasonable under the circumstances. We further conclude the failure to fulfill this duty is relevant to prove the malice element against the attorney and indeed in appropriate circumstances may be sufficient to prove this element. In the instant case, appellant alleged facts which suggest respondent attorney continued prosecution of this case without conducting any investigation whatsoever. This, we determine represents a sufficient allegation of malice to survive demurrer.
The judgment is reversed and remanded with directions the trial court vacate its judgment dismissing the complaint, that it overrule the demurrer, and for further proceedings consistent with this opinion. Appellant is awarded his costs on appeal.
1. An attorney who does conduct an adequate investigation and pursues what he has determined is a weak case is not necessarily guilty of malice even though the court later determines the client lacked probable cause to prosecute the action. As the Restatement observes, an attorney in that posture may “still not [be] liable if he acts primarily for the purpose of aiding his client in obtaining a proper adjudication of his claim ․ if his client so insists after he has explained to the client the nature of the chances.” (Rest.2d Torts § 674, com. d, p. 453.) (Italics added.) But an attorney who conducts no investigation at all or only a woefully deficient one before filing or continuing a case cannot claim his well-informed reason for proceeding with such a case. (See, e.g., Williams v. Coombs (1986) 179 Cal.App.3d 626, 224 Cal.Rptr. 865.)
2. At oral argument, respondent's counsel contended Durchfort substituted in at the last moment solely to argue against a motion to dismiss the underlying action. Accordingly, Durchfort lacked the time to adequately investigate the merits of the case itself before making this emergency rescue attempt. Respondent's counsel argues it would discourage attorneys from responding to legitimate emergencies if they were held to have satisfied the malice element of a malicious prosecution action by failing to investigate the case before stepping in. We agree there is a good argument for some analogue of the “good samaritan” defense in true litigation emergencies such as respondent's counsel claims occurred here. However, we simply do not reach the issue here. This case was decided on demurrer. Nothing in appellant's complaint alleges Durchfort's sole role in this case was to respond on a moment's—or a day's—notice to appellant's motion to dismiss the underlying case. Accordingly, none of respondent's version of Durchfort's role is legitimately before our court on this appeal.
JOHNSON, Associate Justice.
LILLIE, P.J., and FRED WOODS, J., concur.