Petitioners, insurer, insured, and attorneys, challenged the decision of the Court of Appeals (California) that denied a writ of mandate to compel the trial court to sustain petitioners' demurrers to the complaint of the real party in interest. The real party in interest's complaint alleged that petitioner insurer violated its duty to attempt settlement under Cal. Civ. Code § 790.03(h)(5) and that petitioners conspired to prevent settlement.

Overview

The real party in interest filed a complaint against petitioners, insurer, insured, and attorneys, alleging that petitioner insurer violated its duty under Cal. Ins. Code § 790.03(h)(5) to attempt settlement and that petitioners conspired to deprive him of the benefits of that section. The trial court denied petitioners' demurrers, and the lower appellate court refused to issue a writ of mandate. The court issued a writ of mandate directing the trial court to vacate its order overruling petitioners' demurrers to the conspiracy allegation and to sustain them. The court held that the duty to refrain from violating § 790.03(h)(5) was imposed only on persons engaged in the business of insurance and there was no allegation that petitioners, insured and attorneys, were engaged in the business of insurance. Further, petitioners were not liable for a conspiracy to violate a duty peculiar to petitioner insurer because a cause of action for conspiracy did not arise if the alleged conspirators were not personally bound by the duty violated and were acting only as the agent of the party who did have the duty. Accordingly, there was no cause of action against petitioners for conspiracy. The parties were counseled by their respective small business lawyer in California.

Outcome

The court issued a peremptory writ of mandate directing the trial court to vacate its order overruling the demurrers of petitioners, insurer, insured, and attorneys, to the real party in interest's cause of action alleging that petitioners conspired to prevent settlement. The trial court was directed to sustain the demurrers. Agents were not liable for conspiracy to cause their principal to violate a duty that was binding on the principal alone.

Procedural Posture

Appellant law firm sought review of an order from the Court of Appeals (California), which affirmed the trial court's finding for respondent company in its malicious prosecution action against appellant.

Overview

Appellant law firm represented client in an action it filed with a lien lis pendens against respondent, which sought a declaration of client's rights under a sales contract between client and respondent. Client's action was terminated in favor of respondent. Client filed an action against respondent for breach of contract and respondent counter-filed an action for malicious prosecution. The trial court severed the actions, and found for client in the breach of contract action. The trial court found for respondent in the malicious prosecution action, and appellant sought review. The appellate court upheld the trial court, and appellant again sought review. The court reversed and held that the key element to proving malicious prosecution was the absence of probable cause in the underlying action, that the trial court erred in allowing the jury to decide probable cause, that the adequacy of research on the underlying action was irrelevant to the probable cause determination, that the trial court erred in allowing respondent's expert to testify as to the legal tenability of the underlying action, and that appellant's lien claim was legally tenable and established probable cause.

Outcome

The court reversed, holding that the absence of probable cause in the underlying action was the key element in proving malicious prosecution, that appellant's lien claim was legally tenable and established probable cause, that the trial court erred in allowing the jury to decide probable cause and admitting respondent's expert testimony as to legal tenability, and that the adequacy of research was irrelevant to the probable cause determination.