On Monday, the California Supreme Court unanimously ruled that Thomas M. Siebel, founder of Siebel Systems, Inc., could proceed with a malicious prosecution suit against lawyers who prosecuted an employment case against him. Siebel v. Mittlesteadt, 07 C.D.O.S. 8353,  Opinion available at:
In the underlying lawsuit, Debra Christoffers, who had been a sales director at Siebel Systems, Inc., sued her former employer and Mr. Siebel individually. Ms. Christoffers claimed wrongful termination, gender discrimination, failure to pay compensation in the form of commissions and stock options, and fraudulent failure to pay the same. Six of the claims against Mr. Siebel were disposed of by demurrer, summary adjudication, or voluntary dismissal before trial. Only the fraud claims went to trial against Mr. Siebel.
Ms. Christoffers won a jury verdict on the compensation claim against Siebel Systems, Inc. The jury returned a verdict in favor of Mr. Siebel.
Although all parties initially appealed, they later agreed to settle the case. The settlement agreement required Ms. Christoffers to pay Mr. Siebel his court-awarded litigation costs. The agreement further stated Siebel Systems, Inc. and Mr. Siebel would release Ms. Christoffers, but not her attorneys from liability or obligations arising from the case.
Subsequent to the settlement, Mr. Siebel sued Ms. Christoffers’ attorneys, Carol L. Mittlesteadt and E. Rick Buell II, for malicious prosecution. In California, for a plaintiff to succeed in a malicious prosecution action, the underlying lawsuit must have been terminated in plaintiff’s favor. Therefore, the California Supreme Court was asked to consider what constitutes a favorable termination of a lawsuit as a predicate for a subsequent malicious prosecution action.
The Court held that “because Mr. Siebel received a favorable judgment in the underlying proceeding and settled without giving up any portion of the judgment in his favor,” there had been a “favorable termination.” The Court noted that its decision would “discourage litigation by reaffirming the policy in favor of non-frivolous actions.”
This decision should have the salutary benefit of discouraging plaintiffs’ employment counsel from gratuitously naming individuals (especially senior executives) in employment cases without having probable cause to do so. If individuals are improperly named as defendants in an employment case, plaintiffs’ counsel should be reminded of the California Supreme Court’s decision in the Siebel case.
Keesal, Young & Logan Employment Group