Staffpro, Inc. v. Elite Show Services, Inc.

• Decision Date: 24 February 2006
• Docket Number: No. D045755.,D045755.
• Citation: 136 Cal.App.4th 1392,39 Cal.Rptr.3d 682
• Court: California Court of Appeals Court of Appeals
• Parties: STAFFPRO, INC., et al., Plaintiffs and Appellants, v. ELITE SHOW SERVICES, INC., et al., Defendants and Respondents.

39 Cal.Rptr.3d 682

136 Cal.App.4th 1392

STAFFPRO, INC., et al., Plaintiffs and Appellants, v. ELITE SHOW SERVICES, INC., et al., Defendants and Respondents.

No. D045755.

Court of Appeal, Fourth District, Division 1.

February 24, 2006.

Bacalski, Koska & Ottoson, Christopher J. Workman, San Diego, and Paul C. Johnson, Jr., for Plaintiffs and Appellants.

Gordon & Rees, Jan K. Buddingh, Jr., and Kenneth S. Perri, San Diego, for Defendant and Respondent Elite Show Services, Inc., Gus Kontopuls and John Kontopuls.

Klinedinst PC, Andrew N. Kohn, G. Dale Britton and Gregor A. Hensrude, San Diego, for Defendants and Respondents Rutherford & Rybacki and Matthew R. Rutherford.

IRION, J.

A plaintiff in a malicious prosecution action must demonstrate that the litigation alleged to have been maliciously prosecuted was pursued to a legal termination in the plaintiff's favor. The primary issue in this appeal is whether this "favorable termination" element can be established where a plaintiff prevailed on some, but not all, of the causes of action asserted against it in the complaint in the underlying litigation. We conclude that in such circumstances, a plaintiff cannot establish favorable termination and is consequently precluded from maintaining a subsequent malicious prosecution action.

FACTS

In the instant malicious prosecution action, StaffPro, Inc.¹ contends that it was the victim of a meritless civil action, maliciously prosecuted by Elite Show Services, Inc.² The relevant facts are as follows:

StaffPro and Elite are competitors in the event-staffing industry. In May 2001, Elite filed suit against StaffPro and two other unrelated defendants in superior court.³ Elite's complaint (the Complaint) alleged that StaffPro was engaging in unlawful practices designed to "artificially lower [StaffPro's] cost of labor and to diminish or destroy competition for security guard and traffic control services in San Diego." The Complaint specifically singled out a number of such practices, including using unlicensed personnel to perform security officer functions, utilizing security guard personnel who did not possess valid "guard cards" as required by state law, allowing unlicensed employees to direct traffic at events, and staffing events with group labor paid by lump-sum payments to third party organizations without required withholdings.

The Complaint asserted three causes of action against StaffPro, alleging that StaffPro: (i) engaged in unlawful business practices in violation of Business and Professions Code section 17200; (ii) offered below-cost services in violation of Business and Professions Code section 17043; and (iii) underbid Elite on a number of specifically enumerated contracts, constituting intentional interference with prospective business advantage. Each of Elite's causes of action was based on StaffPro's alleged reliance on the unlawful practices specified above to obtain a competitive advantage. Elite sought injunctive relief, attorney fees and monetary damages.

After filing the Complaint, Elite sought a preliminary injunction to immediately preclude StaffPro from engaging in the allegedly unlawful practices. The trial court granted the injunction in part, finding that Elite "established a reasonable probability of prevailing on the merits of its case" with respect to the group labor allegations. The court's order stated: "Staffpro is obtaining an unfair advantage by not treating [group laborers] as employees and providing workers' compensation and state disability benefits and paying appropriate employment and payroll taxes."

As the litigation progressed, StaffPro filed a motion for summary adjudication as to Elite's second cause of action. The trial court denied the motion, finding that Elite had demonstrated "a triable issue" with respect to the allegations in that cause of action.

Immediately prior to trial, Elite dismissed its third cause of action and withdrew its claim for monetary damages as to its second cause of action, limiting the issues to be resolved at trial to the legality of StaffPro's business practices and Elite's requests for injunctive relief and attorney fees.

Trial commenced on December 17, 2002. At the conclusion of Elite's presentation of evidence, StaffPro moved for judgment under Code of Civil Procedure section 631.8. (See id., subd. (a) ["After a party has completed his presentation of evidence in a trial by the court, the other party ... may move for a judgment"].) The motion was granted as to Elite's second cause of action but denied as to the first; trial proceeded on Elite's first cause of action. At the conclusion of trial, the court granted relief to Elite, ordering StaffPro to take the following remedial measures: (1) "To ensure Workers' Compensation coverage is afforded to `group labor' personnel, either by ensuring that each nonprofit organization certifies such coverage or providing such coverage itself"; and (2) "To utilize only those personnel licensed pursuant to Business [and] Professions Code section 7583.11 for the following activities: 1. Restraints upon or limitation of movement of the general public which, if escalated, requires force and physical restraint; 2. Pat-downs requiring physical intrusion into the personal space of a member of the general public; 3. Car searches requiring physical intrusion into the personal space of a member of the general public." With respect to StaffPro's alleged use of employees without proper "guard cards," the court ruled that there was evidence supporting the allegations, but that "[n]eed for relief concerning these established practices is rendered moot" by regulatory developments that had become effective after trial commenced. The court also recognized that there was evidence that StaffPro unlawfully utilized uncertified persons to control traffic, but relying in part on StaffPro's contention that "it has recently become licensed to certify traffic control employees and is utilizing the license to certify those assigned to traffic control duties," the court declined to order relief. Concerning Elite's allegations of other unlawful practices with respect to events staffed on school property, the court noted that the evidence, "while significant, is insufficient ... to warrant injunction."

In addition to ordering the relief described above, the trial court made a number of findings relevant to the determination of whether Elite's lawsuit was meritorious. The court found that Elite "was informed and believed in good faith that the alleged unfair business practices and unfair competitive practices had a serious negative impact upon plaintiff's business in San Diego County." The court stated that "there is a dearth of published opinion, definitions or case law dealing with" the event staffing industry and a number of "differing ... opinions by members of the industry as to what is legal or illegal, fair or unfair." Consequently, the court found the lawsuit provided a benefit to the public which "stands to benefit from a clarification of the use of licensed and unlicensed personnel who both manage and control them." Finally, the court specified that neither party was a prevailing party and each would bear its own costs and fees.⁴

In April 2004, StaffPro filed the instant lawsuit alleging that Elite's prosecution of the above-described lawsuit, specifically the second and third causes of action of that lawsuit, constituted the tort of malicious prosecution. Elite responded by moving under Code of Civil Procedure section 425.16 (section 425.16) to strike StaffPro's malicious prosecution cause of action. The trial court granted Elite's motion, ruling that StaffPro failed to carry its burden under section 425.16 of establishing a probability that it would prevail. The court subsequently entered judgment in favor of Elite.

DISCUSSION

StaffPro appeals the trial court's ruling that StaffPro failed to establish a probability that it would prevail on two of the elements of its malicious prosecution cause of action, namely, favorable termination and lack of probable case. We conclude that the trial court was correct with respect to the favorable termination element. As this is a sufficient ground for dismissal of StaffPro's action, we need not address the correctness of the trial court's ruling with respect to the probable cause element.

I Applicable Legal Standards

We begin by summarizing the applicable legal standards. Under section 425.16, the trial court was required to strike StaffPro's malicious prosecution cause of action unless StaffPro established "a probability" that it would prevail on that claim. (§ 425.16, subd. (b)(1).)⁵

To make this showing, StaffPro had to demonstrate a probability of prevailing with respect to each of the elements of its malicious prosecution action, namely, that Elite's underlying action was (1) brought (or continued) without probable cause, (2) initiated with malice, and (3) pursued to a legal termination in StaffPro's favor. (See Zamos v. Stroud (2004) 32 Cal.4th 958, 965-966, 12 Cal.Rptr.3d 54, 87 P.3d 802 (Zamos).) If a plaintiff cannot establish any one of these three elements, its malicious prosecution action will fail. (Ibid.; Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 871-872, 254 Cal. Rptr. 336, 765 P.2d 498 (Sheldon Appel).)

We review the trial court's ruling on a section 425.16 motion de novo (Zamos, supra, 32 Cal.4th at p. 965, 12 Cal. Rptr.3d 54, 87 P.3d 802; HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal. App.4th 204, 212, 12 Cal.Rptr.3d 786 ["We review the trial court's rulings on an anti-SLAPP motion de novo, conducting an independent review of the entire record"]); the substantive ground upon which we rule here, the element of favorable termination in a malicious prosecution action, is also a legal question for the court to decide. (Sierra Club Foundation v Graham (1999) 72 Cal.App.4th 1135, 1149, 85 Cal.Rptr.2d 726 (Sierra Club) ["The element...