Opinion
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County, Super. Ct. No. 06CC11585, Robert J. Moss, Judge.
Stroock & Stroock & Lavan, Michael F. Perlis, Deborah Drooz, Allan S. Cohen, and Avi N. Wagner for Plaintiff and Appellant.
Grant, Genovese & Baratta, David C. Grant and Marcus G. Larson for Defendants and Respondents.
OPINION
O’LEARY, J.
Stroock & Stroock & Lavan LLP (Stroock) appeal from a judgment after the trial court granted Richard and Jeanne Broadway’s (hereinafter collectively referred to as the Broadways unless the context indicates otherwise) special motion to strike Stroock’s malicious prosecution cause of action. Stroock argues the trial court erroneously granted the Broadways’ special motion to strike because the complaint underlying its malicious prosecution cause of action, the Broadways’ legal malpractice complaint, was terminated in Stroock’s favor. We agree and reverse the judgment.
FACTS
Stroock represented the Broadways individually and American Dental Supply, LLC (American), a company in which the Broadways had an ownership interest, in a breach of contract action brought by Sentry Medical Products, Inc. (Sentry), in federal district court in Wisconsin (the Wisconsin action). After a bench trial, the trial court entered judgment for Sentry against American. The court dismissed the claims against the Broadways as individuals. The court “ordered that judgment for . . . Sentry . . . be entered in the amount of $1,736,401 against . . . American . . . together with costs.”
The Broadways filed a legal malpractice against Stroock. In their first cause of action, the Broadways alleged Stroock failed to advise the Broadways they could bring a malicious prosecution action against Sentry, and of the applicable statute of limitations. In their second cause of action, they alleged Stroock failed to advise them that as the prevailing party, they could recover costs against Sentry in the Wisconsin action pursuant to a local federal court rule.
The rule states: “The party in whose favor a judgment for costs is awarded or allowed by law and who claims the party’s costs must, after the judgment has been entered, serve on the attorney for the adverse parties and file with the Clerk of Court the party’s bill of costs.” (U.S. Dist. Ct., Local Civ. Rules, Eastern Dist. Wis., rule 54.1, subd. (a).)
Stroock demurred to the legal malpractice complaint on the grounds both causes of action were barred by the one-year statute of limitations set forth in Code of Civil Procedure section 340.6. With respect to the first cause of action, Stroock also contended the Broadways had suffered no damages because the statute of limitations on their malicious prosecution cause of action had not run, and they could still file the action. As to the second cause of action, Stroock finally contended the Broadways individually had not incurred any costs that would have been awardable, and they failed to allege the amount of any awardable costs would exceed the amount of attorney fees incurred in obtaining such costs.
All further statutory references are to the Code of Civil Procedure, unless otherwise indicated.
Then, and now, there is a split of authority concerning the applicable statute of limitations on a malicious prosecution action in Wisconsin. Wisconsin Statutes Annotated section 893.57 states, “An action to recover damages for libel, slander, assault, battery, invasion of privacy, false imprisonment or other intentional tort to the person shall be commenced within 2 years after the cause of action accrues or be barred.” However, the Wisconsin Court of Appeals has ruled the general six-year tort statute of limitations codified in former Wisconsin Statutes Annotated, section 893.19(5) (now Wisconsin Statutes Annotated, section 893.52), controls malicious prosecution actions. (Segall v. Hurwitz (WiS.Ct.App. 1983) 339 N.W.2d 333, 342 (Segall).)
The Broadways opposed the demurrer, claiming Stroock willfully concealed facts constituting the causes of action which tolled the statute of limitations, and Stroock replied. Before the hearing on Stroock’s demurrer, the trial court posted a tentative ruling, which stated: “Motion 1: Demurrer to [c]omplaint. [¶] Ruling: [¶] Motion 1: The demurrer is sustained WITH leave to amend. The defendants objections are as follows: [¶] 1. The declaration is stricken in its entirety. This would constitute extrinsic evidence that is not permitted. [¶] Objections 2 through 6: No ruling necessary. [¶] The new complaint shall be filed on or before April 28, 2006[,] at 4:00 p.m. [¶] . . . [¶] If there is a contention of ‘willful concealment’ it must be pled in the complaint, not discussed in a declaration in opposition to the motion.”
Apparently, at the hearing on Stroock’s demurrer, Stroock raised an additional ground as to the second cause of action—the Wisconsin action judgment did not award the Broadways costs as required by the local federal court rule. After the hearing on Stroock’s demurrer, the trial court ruled: “The court heard argument of counsel for defendant. Counsel for plaintiff submits to the tentative. The [c]ourt requested from counsel for plaintiff the status regarding a Wisconsin [lawsuit]. The tentative ruling posted on the [I]nternet this date becomes the final ruling as follows: The demurrer is sustained WITH leave to amend. [Stroock’s] objections are as follows:
1. The declaration is stricken in its entirety. This would constitute extrinsic evidence that is not permitted. Objections 2 through 6: No ruling necessary. The new complaint shall be flied on or before April 28, 2006[,] at 4:00 p.m. The [c]ourt requires two issues either in the pleading or in the supplemental declaration: 1) the statute of limitations questions. If in fact it’s even a two year and you filed this before the two years ran, how can you? 2) Question is please show me how they are entitled to costs under Wisconsin law with the order that’s been left by the [c]ourt. If there is a contention of ‘willful concealment’ it must be pled in the complaint, not discussed in a declaration in opposition to the motion.” (Italics added.)
The Broadways did not amend their legal malpractice complaint by the April 28, 2006, deadline, but instead requested dismissal without prejudice one court day later, on May 1, 2006. The court clerk entered the dismissal without prejudice on May 2, 2006.
Approximately two months later, the trial court granted Stroock’s ex parte application to dismiss the Broadways’ action with prejudice and awarded Stroock reasonable costs.
Stroock filed a malicious prosecution action against the Broadways. The Broadways demurred, and later filed a special motion to strike pursuant to section 425.16. Both relied on the Broadways’ request for judicial notice.
Section 425.16 authorizes a special motion to strike a Strategic Lawsuit Against Public Participation (SLAPP) action, and is referred to as the anti-SLAPP statute. (Navellier v. Sletten (2002) 29 Cal.4th 82, 85, fn. 1 (Navellier).)
Stroock filed an ex parte application to shorten the time for hearing the proposed motion to continue and requesting limited discovery. The Broadways opposed the motion, and Stroock replied. The trial court continued the hearing on the Broadways’ demurrer and special motion to strike and denied Stroock’s request for discovery without prejudice, stating that if Stroock established the “favorable termination” element, it could renew its request.
Stroock opposed the demurrer and special motion to strike and requested the trial court take judicial notice. The Broadways filed a joint reply on the demurrer and the special motion to strike.
In ruling on the Broadways’ demurrer and special motion to strike, the trial court, in a minute order, stated: “[The Broadways’] special motion to strike [the] complaint (SLAPP) is granted. The [c]ourt finds that the [Broadways] have made a threshold showing that the challenged cause of action is one arising out of protected activity, furtherance of the [Broadways’] right of petition. The burden then shifts to [Stroock] to demonstrate a probability of prevailing on its claim. The court finds that [Stroock] has not met that burden because it has not established a probability of proving one of the elements of a cause of action for malicious prosecution, favorable termination. The court in the underlying action sustained the demurrer on the basis of the statute of limitations. This is not a favorable termination for the purpose of maintaining a malicious prosecution case. [Citation.] While it is true that in its minute order sustaining the demurrer the court in the underlying matter expressed some concern regarding the issue of damages (how can they be entitled to costs?), this inquiry does not rise to the level of a determination on the merits. ‘Examples of technical or procedural reasons for terminating an action include abandonment of “the proceeding because of the defects in the complaint . . . .”’ [Citation.] The failure of the [Broadways] to amend their complaint in the underlying matter was a technical or procedural reason for termination. [The trial judge] never made any determination on the damage issue. The court finds that the additional discovery previously requested by [Stroock] will not cure this fundamental defect and, therefore, denies that request. [The Broadways] demurrer to [Stroock’s] complaint is moot in light of the court’s ruling above.” (First italics added.) The trial court entered judgment on March 8, 2007.
The trial court did not address the other elements of a malicious prosecution cause of action: probable cause and malice.
The Broadways filed a memorandum of costs. Stroock filed a motion striking or taxing costs. The Broadways opposed the motion and requested the trial court take judicial notice. Stroock replied.
The trial court ruled the fees sought were excessive and invited the Broadways’ counsel to submit billing to support the charges. After the Broadways submitted redacted invoices, Stroock objected, and the Broadways requested the trial court strike the objections.
The trial court awarded the Broadways attorney fees, and statutory costs “regardless of relation to the [special motion to strike].” The court granted in part and denied in part Stroock’s motion to strike or tax costs. The court reduced the amount of attorney fees from $40,141.38 to $30,271.50 and awarded costs in the amount of $850. Notice of entry of an amended judgment was entered on June 19, 2007.
DISCUSSION
I. Special Motion to Strike
A. General Principles
Section 425.16, subdivision (b)(1), states, “A cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States or California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.” Section 425.16, subdivision (a), is to be “construed broadly.”
Consideration of a section 425.16 special motion to strike anticipates a two-step process. “First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. The moving defendant’s burden is to demonstrate that the act or acts of which the plaintiff complains were taken ‘in furtherance of the [defendant]’s right of petition or free speech under the United States or California Constitution in connection with a public issue,’ as defined in the statute. (§ 425.16, subd. (b)(1).) If the court finds such a showing has been made, it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim.” (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) We review a trial court’s ruling on a special motion to strike de novo. (Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005)133 Cal.App.4th 658, 675.)
B. Malicious Prosecution
“‘“To establish a cause of action for the malicious prosecution of a civil proceeding, a plaintiff must plead and prove that the prior action (1) was commenced by or at the direction of the defendant and was pursued to a legal termination in his, plaintiff’s, favor [citations]; (2) was brought [or maintained] without probable cause [citations]; and (3) was initiated [or maintained] with malice [citations].” [Citation.]’ [Citation.]” (Zamos v. Stroud (2004) 32 Cal.4th 958, 965-966, 970.) The only issue here is the favorable termination element, and we will limit our discussion accordingly.
C. Protected Activity
“[T]he statutory phrase ‘cause of action . . . arising from’ means simply that the defendant’s act underlying the plaintiff’s cause of action must itself have been an act in furtherance of the right of petition or free speech. [Citation.] . . . [T]he critical point is whether the plaintiff’s cause of action itself was based on an act in furtherance of the defendant’s right of petition or free speech. [Citations.] ‘A defendant meets this burden by demonstrating that the act underlying the plaintiff’s cause fits one of the categories spelled out in section 425.16, subdivision (e) . . . .’ [Citations.]” (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78; § 425.16, subd. (e) [listing categories in furtherance of a person’s right of petition or free speech].)
Here, the parties do not dispute Stroock’s malicious prosecution action was subject to Broadway’s special motion to strike. (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 741 [malicious prosecution actions susceptible to special motion to strike].) We must now determine whether Stroock satisfied its burden of demonstrating a probability of prevailing on its malicious prosecution action, or specifically the element the trial court ruled on below—favorable termination.
D. Probability of Prevailing
“[T]o avoid dismissal of each claim under section 425.16, plaintiff bore the burden of demonstrating a probability that she would prevail on the particular claim. . . . ‘In order to establish a probability of prevailing on the claim [citation], a plaintiff responding to an anti-SLAPP motion must “‘state[ ] and substantiate[ ] a legally sufficient claim.’” [Citations.] Put another way, the plaintiff “must demonstrate that the complaint is both legally sufficient and supported by a prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited.” [Citations.] In deciding the question of potential merit, the trial court considers the pleadings and evidentiary submissions of both the plaintiff and the defendant [citation]; though the court does not weigh the credibility or comparative probative strength of competing evidence, it should grant the motion if, as a matter of law, the defendant’s evidence supporting the motion defeats the plaintiff’s attempt to establish evidentiary support for the claim. [Citation.]’ [Citation.] [Citations.]” (Taus v. Loftus (2007) 40 Cal.4th 683, 713-714.) A plaintiff “need only establish that his or her claim has ‘minimal merit’ [citation] to avoid being stricken as a SLAPP. [Citations.]” (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 291.)
1. The Trial Court’s Order Sustaining Stroock’s Demurrer with Leave to Amend
Stroock argues the trial court’s order sustaining its demurrer with leave to amend the Broadways’ legal malpractice complaint did not terminate the action. We agree.
“‘It is hornbook law that the plaintiff in a malicious prosecution action must plead and prove that the prior judicial proceeding of which he complains terminated in his favor.’” (Lackner v. LaCroix (1979) 25 Cal.3d 747, 749 (Lackner), italics added.) An order sustaining a demurrer is not a final judgment and is not itself appealable. (Postley v. Harvey (1984) 153 Cal.App.3d 280, 284.) When a trial court sustains a demurrer with leave to amend, the action is not terminated. The prosecuting party has a number of alternatives. The party may seek writ review, amend the complaint within the time allowed, dismiss the complaint without prejudice within the time allowed for amendment and refile the action, or refuse to amend and allow entry of judgment and seek appellate review. (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2007) ¶¶ 7:146-7:150.1, pp. 7-56 to 7-58.)
Here, when the trial court sustained Stroock’s demurrer with leave to amend, the action was not terminated because the court’s order was not a final judgment, and the Broadways had a number of alternatives on how to proceed. That does not end our inquiry however. We must look to the next procedural event, the Broadways’ failure to amend their complaint and subsequent voluntary dismissal, to determine whether those actions constituted a termination in Stroock’s favor.
2. The Broadways’ Failure to Amend Their Complaint and Voluntary Dismissal
Stroock argues the Broadways’ failure to amend their complaint was either a “failure to prosecute” or “outright abandonment,” and their subsequent voluntary dismissal without prejudice was a favorable termination. The Broadways claim this is not a “failure to prosecute” case and their voluntary dismissal was not a favorable termination for Stroock. The Broadways failure to amend their complaint, and subsequent voluntary dismissal, did not terminate the action. However, in section 4, we will explain how the Broadways failure to amend their complaint and voluntary dismissal is dispositive in this appeal.
As we explain above, a plaintiff in a malicious prosecution action must plead and prove the underlying action terminated in his favor. (Lackner, supra, 25 Cal.3d at p. 749.) As we explain above, a plaintiff may amend its complaint within the time allowed by the trial court. Section 581, subdivision (b)(1), authorizes a plaintiff to dismiss an action with or without prejudice upon written request to the court.
Here, neither the Broadways’ failure to file an amended complaint nor their involuntary dismissal terminated their legal malpractice lawsuit. The Broadways’failure to file an amended complaint before the trial court’s deadline did not terminate their legal malpractice complaint because it did not result in a dismissal of the complaint. Pursuant to section 581, subdivision (f), when the Broadways failed to amend their complaint, the trial court still had to dismiss the complaint for the action to terminate. In other words, the failure to file an amended complaint did not dispose of the action because there was something left to do.
The Broadway’s subsequent voluntary dismissal after the court’s deadline for amending their complaint expired similarly did not terminate the action. “[O]nce a general demurrer is sustained with leave to amend and plaintiff does not so amend within the time authorized by the court or otherwise extended by stipulation or appropriate order, he can no longer voluntarily dismiss his action pursuant to section 581 . . . even if the trial court has yet to enter a judgment of dismissal on the sustained demurrer.” (Wells v. Marina City Properties, Inc. (1981) 29 Cal.3d 781, 789.) Therefore, the Broadways’ voluntary dismissal was invalid, and it did not terminate their action. Again, we must look to the next procedural event, the trial court’s grant of Stroock’s ex parte application for dismissal, to determine when the action terminated.
3. The Trial Court’s Grant of Stroock’s Ex Parte Application for Dismissal
Section 581, subdivision (f), in relevant part, authorizes a trial court to dismiss a complaint “after a demurrer to the complaint is sustained without leave to amend and either party moves for dismissal[]” and “after a demurrer to the complaint is sustained with leave to amend, the plaintiff fails to amend it within the time allowed by the court and either party moves for dismissal.”
After the Broadways’ untimely attempt to voluntarily dismiss their complaint, Stroock moved ex parte to dismiss the complaint with prejudice. The trial court granted Stroock’s request. The court’s grant of a motion to dismiss terminates the action. (Desai v. Farmers Ins. Exchange (1996) 47 Cal.App.4th 1110, 1115 [section 581 order operates as final judgment].) However, our conclusion the trial court’s order dismissing the Broadways’ legal malpractice complaint terminated the action does not end our inquiry because that dismissal was not on the merits. (Oeth v. Mason (1967)
247 Cal.App.2d 805, 810 [section 581, former subdivision 3 dismissal does not determine the merits].) We must still determine whether the Broadways’ legal malpractice complaint was terminated in Stroock’s favor.
4. Favorable Termination?
“‘The key is whether the termination reflects on the underlying defendant’s innocence. [Citations.] If the resolution of the underlying litigation “leaves some doubt as to the defendant’s innocence or liability[, it] is not a favorable termination, and bars that party from bringing a malicious prosecution action against the underlying plaintiff.” ([Citation], italics in original.) “‘A termination [by dismissal] is favorable when it reflects “the opinion of someone, either the trial court or the prosecuting party, that the action lacked merit or if pursued would result in a decision in favor of the defendant.”’ [Citation.] [¶] . . . The focus is not on the malicious prosecution plaintiff’s opinion of his innocence, but on the opinion of the dismissing party.” ([Citation], italics in original.) “The test is whether or not the termination tends to indicate the innocence of the defendant or simply involves technical, procedural or other reasons that are not inconsistent with the defendant’s guilt.” [Citations.]
‘A voluntary dismissal may be an implicit concession that the dismissing party cannot maintain the action and may constitute a decision on the merits. [Citations.] “It is not enough, however, merely to show that the proceeding was dismissed.” [Citation.] The reasons for the dismissal of the action must be examined to determine whether the termination reflected on the merits.’ [Citations.] A voluntary dismissal on technical grounds, such as lack of jurisdiction, laches, the statute of limitations or prematurity, does not constitute a favorable termination because it does not reflect on the substantive merits of the underlying claim. [Citations.]” (Robbins v. Blecher (1997) 52 Cal.App.4th 886, 893-894.) “‘In most cases, a voluntary unilateral dismissal is considered a termination in favor of the defendant in the underlying action; the same is true of a dismissal for failure to prosecute. [Citations.]’” (Sycamore Ridge Apartments LLC v. Naumann (2007) 157 Cal.App.4th 1385, 1401 (Sycamore).)
“‘It is the rule that when a plaintiff is given the opportunity to amend his complaint and elects not to do so, strict construction of the complaint is required and it must be presumed that the plaintiff has stated as strong a case as he can.’ [Citations.]” (Reynolds v. Bement (2005) 36 Cal.4th 1075, 1091.) “We are constrained to determine only whether appellants state a cause of action, not whether they might have been able to do so. [Citations.]” (Chicago Title Ins. Co. v. Great Western Financial Corp. (1968) 69 Cal.2d 305, 312.)
Before we examine the favorable termination element, we must first determine the nature of the trial court’s ruling on Stroock’s demurrer to the Broadways’ legal malpractice cause of action. Stroock contends the trial court sustained its demurrer with leave to amend on three grounds, two substantive (damages) and one procedural (statute of limitations). As to the substantive grounds, the court stated the Broadways had to demonstrate how they could sue Stroock for legal malpractice for failing to advise them that they could bring a malicious prosecution action against Sentry if the statute of limitations on that cause of action had not run, and how they were entitled to costs in the Wisconsin action if that court did not award them costs as required by the local federal court rule. With respect to the procedural ground, the court stated the Broadways had to plead facts showing Stroock willfully concealed the wrongful act or omission thereby tolling the statute of limitations.
The Broadways, reading the trial court’s tentative and final orders together, counters the court sustained the demurrer on statute of limitation grounds, and “[t]he fact [the court] included some follow-up questions and/or guidelines—even if inspired by Stroock’s arguments, does not rise to the level of a firm ruling thereon.” On this point, we agree with Stroock.
A trial court may modify a tentative ruling and that ruling supersedes the court’s tentative ruling. (Cal. Rules of Court, rule 3.1590(b).) Based on our review of the trial court’s final order, we conclude it included both substantive and procedural issues the Broadways were required to address in any amended complaint. Whether you call those points, “follow-up questions,” or “guidelines,” we are confident the court identified three issues the Broadways were required to address in any amended complaint. Before we proceed with our analysis, however, we must determine which were substantive and which were procedural grounds.
The Broadways maintain the trial court sustained the demurrer based only on the fact the statute of limitations on their legal malpractice cause of action had run, a procedural ground. The Broadways seem to agree the issue of whether they were entitled to costs in the Wisconsin action if that court did not award them costs as required by the local federal court rule was a substantive concern because it concerns whether they pleaded damages. However, they also claim the issue of whether the statute of limitations on their malicious prosecution action had not run was a procedural ground because the action was premature. (Eells v. Rosenblum (1995) 36 Cal.App.4th 1848, 1856 (Eells) [voluntary dismissal after attorney learned complaint premature was procedural and did not reflect on merits].) Therefore, we must determine whether this last issue was substantive or procedural.
In Eells, supra, 36 Cal.App.4th at pages 1855-1856, respondent dismissed their malicious prosecution complaint because the appeal in a previous case was pending on appeal, which prevented them from going forward. The court explained respondents dismissed their complaint because it was premature, a technical defect. (Id. at p. 1856.) The court opined: “Like dismissals based upon the statute of limitations or jurisdictional defects, the dismissal here was based solely upon procedural grounds. It did not reflect on the substantive merits.” (Ibid.)
Here, the fact the statute of limitations had not run on the Broadways’ malicious prosecution action against Sentry did reflect on the merits. In their first legal malpractice cause of action, the Broadways alleged Stroock failed to advise them that they could bring a malicious prosecution action against Sentry, and of the applicable statute of limitations. As we explain above, the Broadways filed their legal malpractice cause of action against Stroock before the two-year statute of limitations on their malicious prosecution cause of action against Sentry had run. And assuming the statute of limitations on that cause of action is six years as ruled by the Wisconsin appellate court in Segall, supra, 339 N.W.2d at page 342, the Broadways could still file that cause of action against Sentry. If the statute of limitations on that cause of action had not run, the Broadways could not demonstrate they were damaged by any failure to advise by Stroock. This issue did reflect on the merits and was substantive. Therefore, we have one procedural ground, the statute of limitations on the Broadways’ legal malpractice cause of action, and two substantive grounds, damages as to both legal malpractice causes of action, that formed the basis for the trial court’s order sustaining Stroock’s demurrer. We now turn to the issue of favorable termination.
When the Broadways failed to amend their complaint, they admitted they stated as strong a case as they could. And, although their voluntary dismissal was invalid, the circumstances surrounding the dismissal support the conclusion they could not cure those defects, specifically the damages defects.
Although the Broadways claim now, and below in the special motion to strike, that they dismissed their legal malpractice complaint because of the statute of limitations issue and litigation costs, in their opposition to Stroock’s demurrer, the Broadways contended their attorney willfully concealed facts constituting the wrongful act or omission thereby tolling the statute of limitations.
Although the statute of limitations is a procedural ground that cannot be the basis for a favorable termination (Lackner, supra, 25 Cal.3d at pp. 751-753), statute of limitations in civil cases are ordinary defenses that are not jurisdictional and do not deprive the court from hearing and determining the cause. (2 Witkin, Cal. Procedure (4th ed. 1996) Violation of Jurisdictional Time Limit, § 92, p. 628.) If the statute of limitations issue had been the only ground upon which Stroock demurred, we would be forced to conclude there was not a favorable termination for Stroock. However, that is not the case. They also demurred on the grounds the Broadways failed to plead they were damaged as to both causes of action.
As we explain above with respect to their first cause of action, the Broadways failed to plead they were damaged by any alleged failure of Stroock to advise them that they could bring a malicious prosecution action against Sentry, and of the applicable statute of limitations. As to their second cause of action, the Broadways failed to plead they were entitled to costs when the federal district court in the Wisconsin action did not award them costs as required by the federal court rule or that they were entitled to costs as allowed by law. In other words, by failing to amend their complaint, the Broadways admitted they stated as strong a case as they could and did not establish they were damaged in either of the legal malpractice causes of action. (Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 743 [actual injury occurs when client suffers any loss or injury legally cognizable as damages in legal malpractice action based on asserted errors or omissions]; Steketee v. Lintz, Williams & Rothberg (1985) 38 Cal.3d 46, 57-58 [attorney cannot be held liable for failing to file action prior to expiration of statute of limitations if attorney ceased to represent client and was replaced by other counsel before statute ran on client’s action].) Their subsequent voluntary dismissal conceded the same. (Sycamore, supra, 157 Cal.App.4th at p. 1401.) Thus, the record provides abundant support for the proposition, and resolved any doubt, Stroock carried its burden of proof with respect to the favorable termination element of its malicious prosecution cause of action because the Broadways’ legal malpractice complaint was terminated in Stroock’s favor and indicated its innocence. It established this element of its malicious prosecution cause of action had minimal merit.
The Broadways claim Stroock did not raise this issue in its underlying demurrer papers. As we mention above, Stroock apparently raised this issue at the hearing on its demurrer. This is confirmed by the trial court’s order sustaining Stroock’s demurrer in part on this ground.
The Broadways raise a number of additional issues in defense of the trial court’s granting of their special motion to strike. We will address each in turn.
The Broadways contend their legal malpractice complaint was not terminated in Stroock’s favor because it was based solely on the statute of limitations defense, which “‘may be used only as a “shield” and not as a “sword,” i.e., it can only be set up as a defense to a suit . . . and cannot be invoked affirmatively . . . as the foundation of a right.’” (Lackner, supra, 25 Cal.3d 747, 752.) Lackner is inapposite because there, plaintiff in the malicious prosecution action had only one sword, the statute of limitations. But here Stroock had two swords, the statute of limitations, and the damages issue, which reflected on the merits and was substantive.
In a related claim, the Broadways contend that if Stroock had intended to pursue a malicious prosecution action, it had to forego raising the statute of limitations as a defense. This court has previously stated: “While filing a lawsuit knowing the limitations period has run is a petty act which wastes judicial resources, if a litigant wants to pursue a malicious prosecution action under those circumstances, he must eschew the procedural defense, forgo the easy termination, and obtain a favorable judgment on the merits. Otherwise, the policy reasons behind requiring a favorable termination would be thwarted if a litigant could meet the favorable termination requirement simply by alleging defendants knew the action was barred by the statute of limitations.” (Warren v. Wasserman, Comden & Casselman (1990) 220 Cal.App.3d 1297, 1303 (Warren).) Warren too is inapposite because there the statute of limitations was the only defense which plaintiff asserted in the underlying litigation. (Id. at pp. 1299-1300.) Here, as we explain above, Stroock asserted not only the statute of limitations defense, but also the damages issue, which went to the merits of the action.
The Broadways also argue its legal malpractice complaint was not terminated in favor of Stroock because a technical or procedural defect in the complaint does not go to the substance of the complaint. “Examples of technical or procedural reasons for terminating an action include abandonment of ‘the proceeding because of the defects in the complaint.’” (Eells, supra, 36 Cal.App.4th at p. 1855.) Eells is also distinguishable because in that case there was a procedural defect with the complaint, it was premature. (Id. at p. 1856.) Here, as we explain above, the Broadways’ failure to amend their complaint and subsequent voluntary dismissal reflected on the substantive merits of their legal malpractice complaint.
The Broadways claim they voluntarily dismissed their legal malpractice cause of action in part because of litigation costs. In a previous case from this court we stated: “It would be a sad day indeed if a litigant and his or her attorney could not dismiss an action to avoid further fees and costs, simply because they were fearful such a dismissal would result in a malicious prosecution action. It is common knowledge that costs of litigation, such as attorney’s fees, costs of expert witnesses, and other expenses, have become staggering. The law favors the resolution of disputes.” (Oprian v. Goldrich, Kest & Associates (1990) 220 Cal.App.3d 337, 344 (Oprian).)
Here, in the special motion to strike, the Broadways stated, “While [it] did in its [u]nderlying [d]emurrer go on to attack the sufficiency of some of the other allegations in the [legal] [m]alpractice action, it was the statutory limitation that was the lead argument, the basis of [the trial court’s] ultimate rulings, and (along with the daunting litigation costs) was the plain reason [they] ultimately declined to pursue the action.” Oprian too is distinguishable because there defendants dismissed their complaint to avoid further costs and the inconvenience of a second trial. (Id. at p. 344.) Here, the Broadways admitted their dismissal was due in part to the trial court’s rulings on Stroock’s demurrer. Although they incorrectly characterized those rulings as concerning only the statute of limitations, their failure to amend and subsequent voluntary dismissal reflected on the merits of their legal malpractice complaint.
Finally, the Broadways claim Stroock’s contention their legal malpractice complaint was substantively deficient and could not be cured was relevant not to the favorable termination element, but instead to the probable cause element—did they bring and maintain their legal malpractice causes of action with an honest and reasonable belief in the truth of the allegations. While it is true these two elements serve different purposes (Warren, supra, 220 Cal.App.3d at p. 1303), they are closely related (Cowles v. Carter (1981) 115 Cal.App.3d 350, 355). As we explain above, after the trial court sustained Stroock’s demurrer with leave to amend, the Broadways failed to amend their legal malpractice complaint and subsequently tried to voluntary dismiss it. Their actions were an admission they could not state a stronger case, which constituted a decision on the merits.
We remand the matter to the trial court to determine whether it satisfied its burden on the remaining elements of its cause of action.
II. Attorney Fees
Because we have concluded the trial court erroneously granted the Broadways’ special motion to strike, we reverse the court’s award of attorney fees and costs to the Broadways.
DISPOSITION
The judgment is reversed and the matter remanded to the trial court for further proceedings consistent with this opinion. Stroock is awarded its costs on appeal.
WE CONCUR: RYLAARSDAM, ACTING P. J., ARONSON, J.
The district court entered judgment in the Wisconsin action on March 26, 2004. When the Broadways filed their legal malpractice complaint on February 22, 2008, the two-year statute of limitations for a malicious prosecution cause of action against Sentry had not run.