In Alston v. Dawe, 20 Cal. Daily Op. Serv. 7561, a Court of Appeal held dismissal of an underlying action on collateral estoppel grounds may qualify as a favorable termination in a subsequent malicious prosecution claim.

To prevail on a malicious prosecution claim, the plaintiff must establish that the underlying judicial proceeding terminated in his favor. In order for the termination of a lawsuit to be considered favorable to the malicious prosecution plaintiff, the termination must reflect the merits of the action and the plaintiff’s innocence of the misconduct alleged in the action. If termination does not relate to the merits, the termination is not favorable for purposes of a malicious prosecution claim. For example, dismissals based on the statute of limitations or pursuant to a settlement do not constitute a favorable termination that could support a malicious prosecution claim.

Alston held whether a termination based on collateral estoppel is “favorable” depends on how collateral estoppel was applied in the underlying case. If collateral estoppel in the underlying case was premised on a determination on the merits in an earlier case, the application of collateral estoppel in the underlying case is a favorable termination.

Alston disagreed with another Court of Appeal decision holding a successful res judicata defense is never a determination on the merits. Although res judicata and collateral estoppel are procedural concepts, their application is not always unrelated to the merits of a claim or issue. A party who successfully establishes a position on the merits would normally invoke that victory as collateral estoppel in subsequent related litigation. The party should not be required to avoid the collateral estoppel defense in the second case merely to establish favorable termination in anticipation of a subsequent malicious prosecution claim.

Attorneys representing plaintiffs should be aware that an underlying case resolved on the basis of collateral estoppel could support the element of favorable termination in a subsequent malicious prosecution claim.

About the Author:

John Sullivan is a partner at Long & Levit, where he handles professional liability cases, attorney fee disputes, partnership disputes, and state bar disciplinary matters. He also serves as the Chair of BASF’s Legal Malpractice Section.