Medley Capital Corp. v. Security National Guaranty, Inc.
A147726
| Cal. Ct. App. | Nov 13, 2017Background
- SNG borrowed from Fourth Third LLC; dispute arose over alleged discounted payoff (DPO) and related negotiations in 2013–2014.
- SNG filed a cross-complaint in the underlying foreclosure action alleging fraud against Fourth Third and Medley Capital Corporation (MCC), seeking >$300 million and punitive damages based on a claimed DPO agreement.
- MCC (a separate, publicly traded entity) repeatedly notified SNG’s counsel that MCC had no role in the loan and denied any DPO; key MCC witnesses and contemporaneous emails contradicted SNG’s allegations.
- SNG issued a press release naming MCC and highlighting the fraud claim while Medley affiliates were preparing an IPO, and maintained MCC as a defendant despite multiple warnings to dismiss.
- SNG settled with Fourth Third for $17 million and later voluntarily dismissed the cross-complaint against MCC without prejudice; MCC then sued SNG and Ghandour for malicious prosecution.
- The trial court denied SNG’s anti‑SLAPP motion; on appeal, the court affirmed, finding MCC showed a probability of prevailing on malicious prosecution (favorable termination, lack of probable cause, and malice).
Issues
| Issue | Plaintiff's Argument (MCC) | Defendant's Argument (SNG/Ghandour) | Held |
|---|---|---|---|
| Whether SNG’s voluntary dismissal of the cross-complaint was a "favorable termination" for malicious prosecution | Dismissal (even without prejudice) generally reflects on the merits and here was supported by evidence that SNG lacked merit to continue versus MCC | Dismissal was not a favorable termination because it was not on the merits and may have been for economic reasons; trial court failed to analyze reasons for dismissal | Court held the dismissal was a favorable termination to MCC: absent evidence dismissal was for economic reasons, voluntary dismissal can reflect the merits and supports the element |
| Whether MCC showed lack of probable cause for the cross-complaint | MCC pointed to repeated written notices that MCC was not the servicer/agent, lack of any written DPO agreement, contrary sworn declarations and emails admitting no DPO—so no probable cause existed | SNG argued its allegations were plausible and the anti‑SLAPP burden was not met | Court held MCC met its burden: disputed facts about defendants’ knowledge prevented summary defeat of lack-of-probable-cause; objective lack of evidence supported probability of success |
| Whether MCC showed malice in filing/maintaining the cross-complaint | MCC argued SNG acted with indifference or improper purpose: failed investigation, ignored notices, misleading press release, and contradicted statements and emails supporting malice | SNG asserted legitimate reasons to pursue claim and no improper purpose | Court held there was sufficient evidence of malice (subjective intent/improper purpose) to show probability of prevailing; malice is fact-intensive and supported here |
Key Cases Cited
- Navellier v. Sletten, 29 Cal.4th 82 (California Supreme Court) (anti‑SLAPP two‑step framework and plaintiff must show probability of prevailing)
- Linder v. Thrifty Oil Co., 23 Cal.4th 429 (California Supreme Court) (plaintiff need only show "minimum level of legal sufficiency and triability")
- Bertero v. National General Corp., 13 Cal.3d 43 (California Supreme Court) (elements of malicious prosecution)
- Sheldon Appel Co. v. Albert & Oliker, 47 Cal.3d 863 (California Supreme Court) (probable cause and malice analysis; when factual disputes exist jury must resolve knowledge issues)
- Casa Herrera, Inc. v. Beydoun, 32 Cal.4th 336 (California Supreme Court) (favorable termination inquiry; termination need not be after trial to reflect merits)
- Sierra Club Foundation v. Graham, 72 Cal.App.4th 1135 (Cal. Ct. App.) (when prior proceeding terminates other than on the merits, court examines reasons for termination)
- Lanz v. Goldstone, 243 Cal.App.4th 441 (Cal. Ct. App.) (applies anti‑SLAPP reverse‑summary‑judgment analysis to malicious prosecution claims)
- Drummond v. Desmarais, 176 Cal.App.4th 439 (Cal. Ct. App.) (malicious prosecution malice element and improper purpose examples)