Irwin v. Jenkens & Gilchrist

Filed 3/30/06 Irwin v. Jenkens & Gilchrist CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from a judgment of the Superior Court of San Diego County, Joan M. Lewis, Judge. Affirmed.

This malicious prosecution complaint, brought by plaintiffs Dean Stewart Irwin and his new company, RA Medical Systems, Inc. (RA Medical; Respondents), arises out of an underlying lawsuit brought against them by the former employer of Irwin, defendant and appellant PhotoMedex, Inc. (PHMD or Appellant). That underlying action was pursued on behalf of PHMD by the law firm of Jenkens & Gilchrist, LLP and its attorney Michael R. Matthias ("Attorney Appellants"; sometimes denominated collectively with PHMD as "Appellants"). Appellants previously sought damages and an injunction against Irwin, alleging that he took their medical laser technology along with him to his new company. Appellants' complaint included causes of action for trade secret violations and related breach of contract and unfair competition claims. (PhotoMedex, Inc. v. Irwin (Super. Ct. San Diego County, 2003, No. GIN029408 (Underlying Action).)

Eventually, after extensive motion practice and rulings in the trial court, Appellants dismissed that underlying superior court action without prejudice and filed a new action against Respondents in federal court on a related false advertising theory. (PhotoMedex, Inc. v. Irwin (S.D. Cal. 2004, No. 04CV0024 L (JFS)); under 15 U.S.C. § 1125(a), the Lanham Act.) Respondents brought this malicious prosecution complaint based on the dismissed superior court action.

In response, Appellants filed their special motions to strike the malicious prosecution complaint under the anti-SLAPP motion framework. (Code Civ. Proc., § 425.16.)^[1] This appeal arises from the rulings denying these motions, which found that as to both appellants, attorneys and client, Respondents had made a sufficient showing that they would probably prevail on their malicious prosecution claims.

Appellants contend the trial court erred when it determined that Respondents had sufficiently shown a reasonable probability that they could successfully prove all elements of their malicious prosecution cause of action. We find that the record fully supports the ruling denying the motions and affirm.

FACTUAL AND PROCEDURAL BACKGROUND

A

Transactions and Underlying Action

Irwin was a vice president of engineering for PHMD from February 1998 to July 2002, where he helped design an excimer laser system, known as XTRAC, for the treatment of certain skin conditions. After he left his employment with PHMD, Irwin assisted in founding RA Medical, a company formed for the purpose of manufacturing and selling a competing excimer laser technology called Pharos. Less than a year after Irwin left, PHMD personnel saw a brochure produced by RA Medical at a March 2003 trade show, and concluded that this Pharos technology was being developed so quickly that Irwin must be using PHMD technology in it.

Accordingly, in April 2003 PHMD's former counsel sued Irwin and RA Medical for breach of contract, misappropriation of trade secrets, intentional interference with contractual relationships, unfair competition and conversion.^[2] PHMD alleged Irwin had signed confidentiality agreements and breached those agreements by using its confidential and proprietary information in his new company.

Regarding the claims for interference with contractual relationships, misappropriation of trade secrets and unfair competition, PHMD alleged Irwin had used XTRAC technology in the new Pharos design, and had potentially contacted its customers. An executive summary distributed by RA Medical in September 2003 stated that it had sold seven systems to a particular customer of a PHMD distributor, which PHMD believed led to its loss of those sales. In October 2003, PHMD representatives saw another brochure about the Pharos technology and also the apparatus itself at a trade show. According to an expert retained by PHMD, there was no record of FDA approval of the Pharos device as of October 2003, although RA Medical was claiming the same, which was unclear because the device might have still been in the design phase.

B

Key Rulings in Underlying Action

The Attorney Appellants took over representation of PHMD, after attorney Matthias changed law firms and took the case with him, and they pursued discovery in the action. Six months after the underlying complaint was filed, and immediately before the accelerated trial date set for January 2004, Appellants sought to amend the complaint to add allegations of false advertising (e.g., FDA approval claims) and unlawful interference with prospective economic advantage (at least one delayed purchase by a customer of the PHMD distributor). This motion was denied due to the impending trial date. Also in November 2003, Irwin and RA Medical moved for summary judgment, or alternatively, summary adjudication of issues on all five causes of action. (§ 437c.)

After a hearing, the court (Judge Anello) granted summary adjudication in favor of Respondents on the breach of contract, conversion and interference with contractual relationships claims. As to breach of contract, the court found Irwin did not recall signing a PHMD confidentiality agreement and PHMD could not produce a signed copy of one or an equivalent document such as a handbook. Thus, PHMD had failed to raise a triable issue of fact regarding whether Irwin signed a confidentiality agreement for the term of his employment. No triable issues were found as to conversion or interference with contract, as the evidence presented did not support those claims and they were defective as a matter of law (no existing contracts to be interfered with).

However, the court denied summary judgment and summary adjudication as to the claims for misappropriation of trade secrets and unfair competition. The ruling analyzed the parties' respective evidentiary showings at length, concerning the design of the PHMD device and whether it had been kept secret enough. The court concluded that on the showing made, the misappropriation of trade secrets issue could not be disposed of as a matter of law. The unfair competition claim was also found to survive summary adjudication, due to the same triable issues of fact that remained on the trade secret issue.

C

Dismissal/Refiling in Federal Court; Ruling on Fees Application

Days before the January 2004 trial date, PHMD voluntarily dismissed without prejudice its remaining two causes of action. On January 6, 2004, PHMD filed a new action in federal court on a related false advertising theory (Lanham Act.)^[3] PHMD claimed that this was a strategic business decision to maximize damages, due to the denial of its leave to amend and its discovery difficulties, in light of the impending trial date. In early 2004, the parties were continuing to dispute whether the Pharos technology was still in the design phase.

Back in state court, Irwin/RA Medical sought an award of attorney fees on the ground PHMD had filed and maintained the action for misappropriation of trade secrets in bad faith. (Civ. Code, § 3426.4.) In opposition, PHMD's vice president Dennis McGrath stated that as of March 2004, "Let me simply say that we have not abandoned our trade secret claims; we have preserved them for a day when the masquerade that the Pharos laser and its accessories are still in the design phase is in the past and RA Medical has unequivocally committed the device to the marketplace."

The trial court denied the motion for attorney fees under Civil Code section 3426.4, although contractual fees were awarded on other grounds (i.e., Civ. Code, § 1717; approximately $55,000 in fees and costs). The trial court ruling stated as follows, "In the court's view, the evidence presented does not establish this action was objectively specious or subjectively brought in bad faith." This ruling was affirmed on appeal by this court. (PhotoMedex, Inc. v. Irwin (Feb. 23, 2005, D044612) [nonpub. opn.].)

D

Malicious Prosecution Complaint; Anti-SLAPP Motions and Ruling

In November 2004, Respondents filed this malicious prosecution action against both PHMD and the Appellant Attorneys, alleging that the summary adjudication ruling, coupled with the voluntary dismissal without prejudice, amounted to a favorable termination of the underlying action. Respondents also alleged that Appellants, both attorney and client, lacked probable cause to bring that action, and it was brought with malice to interfere with business opportunities and legitimate competition in the industry.

Appellants PHMD and the Attorney Appellants each brought a special motion to strike the malicious prosecution complaint. Both motions acknowledged that the anti-SLAPP motion framework could apply to malicious prosecution complaints, and argued that Respondents would not be able to show a reasonable probability of prevailing on any of the elements of malicious prosecution. Extensive opposition and reply papers were filed, as well as supporting lodged documents.^[4]

Following oral argument, the trial court (Judge Lewis) denied both motions to strike. The court first acknowledged that Respondents had the burden to show there is a probability that they will prevail on their claims of malicious prosecution: i.e., that the underlying action was commenced (or maintained) by or at the defendant's direction; was terminated in plaintiff's favor; was brought without probable cause; and was commenced with malice. (Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 871-872 (Sheldon Appel).) On the first of these elements, the court concluded the underlying action was terminated in plaintiff's favor, as follows:

"The three causes of action dismissed by the granting of summary adjudication was a termination in plaintiff's favor. The question, then, is whether the dismissal of the remaining two causes of action was a termination in Plaintiffs' favor. The Court believes that the fact the two causes of action were dismissed the day before trial is sufficient to satisfy the Plaintiffs' burden on this element. The Court believes the filing of the dismissal the day before trial reflects on the merits of the Defendants' claims or, for purposes of this motion, the lack thereof. The Court finds unpersuasive Defendants' contention that the dismissal was a business decision to permit the claims to be heard in federal court. A comparison of the two complaints demonstrates that the federal action concerns false advertising, a claim not an issue in the underlying state court action."

Next, as to the probable cause element, the court stated that the trial court in the underlying action had granted summary adjudication on the claims of breach of contract, conversion and interference with contractual relationships, and that ruling, together with "the bases for that ruling -- is sufficient to meet the Plaintiffs' burden."

Finally, on the element of malice, the court found that when it considered Irwin's declaration, stating his business, financial and personal interests were harmed by Appellants' conduct in pursuing and then dropping the underlying action immediately before trial, "coupled with the lack of evidence to support some of Defendants' claims in the underlying action," it therefore made a finding that Respondents had satisfied their burden on the motions to strike, regarding malice. The motions were accordingly denied.^[5]

Both PHMD (client) and Appellant Attorneys appeal.

DISCUSSION

We first set out rules of review regarding anti-SLAPP motions, then turn to the parties' respective showings on Respondents' probability of prevailing on each of the elements of the malicious prosecution action. " '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 without probable cause [citations]; and (3) was initiated with malice [citations].' [Citation.]" (Crowley v. Katleman (1994) 8 Cal.4th 666, 676 (Crowley).)

I

ANTI-SLAPP MOTION STANDARDS IN THE

MALICIOUS PROSECUTION CONTEXT

It is not disputed here that the challenged malicious prosecution lawsuit falls within the scope of the anti-SLAPP statutory framework, as arising from protected activity. (§ 425.16, subd. (b)(1); Jarrow Formulas, Inc. v. Lamarche (2003) 31 Cal.4th 728, 741 (Jarrow).) The issues on appeal arise from the second prong of the statute, dealing with whether the plaintiff has "demonstrated a probability of prevailing on the claim." (Navellier v. Sletten (2002) 29 Cal.4th 82, 88 (Navellier).) "Under section 425.16, subdivision (b)(2), the trial court in making these determinations considers 'the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.' " (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67 (Equilon).) "These determinations are legal questions, and we review the record de novo." (Damon v. Ocean Hills Journalism Club (2000) 85 Cal.App.4th 468, 474.)

To demonstrate a reasonable probability of success on their claims, Plaintiffs/ Respondents had to make " 'a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited.' [Citations.]" (Navellier, supra, 29 Cal.4th at p. 89; § 425.16, subd. (b)(1).) The "plaintiff must 'state[ ] and substantiate[ ] a legally sufficient claim.' [Citation.]" (Jarrow, supra, 31 Cal.4th at p. 741.) "Only a cause of action that satisfies both prongs of the anti-SLAPP statute -- i.e., that arises from protected speech or petitioning and lacks even minimal merit -- is a SLAPP, subject to being stricken under the statute." (Navellier, supra, 29 Cal.4th at p. 89.)

To evaluate an underlying action for purposes of analyzing whether all the elements of a malicious prosecution action are probably present, it is important to distinguish between the closely related probable cause element and the favorable termination element, particularly where the results in the underlying case were mixed. In Crowley, supra, 8 Cal.4th at pages 686 and 693 to 695, the Supreme Court clarified that the favorable termination element is judged by whether the underlying ruling that terminated the case tended to show the innocence of the underlying defendant. Accordingly, the entire underlying action must have been terminated in that party's favor, in order to support a later malicious prosecution action. (Id. at p. 686, citing Bertero v. National General Corp. (1974) 13 Cal.3d 43, 55-57 (Bertero).) However, a malicious prosecution action may be maintained even where only part of the underlying action was brought without any probable cause. (Crowley, supra, 8 Cal.4th at pp. 686, 693-695.)

Accordingly, the rules we must apply are that (1) there must exist a favorable termination of the entire action, tending to exonerate the defendants in the underlying case, but (2), "a malicious prosecution suit may be maintained where only one of several claims in the prior action lacked probable cause (Bertero v. National General Corp., supra, 13 Cal.3d at pp. 55-57)." (Jenkins v. Pope (1990) 217 Cal.App.3d 1292, 1300.) In Crowley, supra, 8 Cal.4th at pages 686 and 693 to 695, the court reaffirmed the rules of Bertero, supra, 13 Cal.3d 43, after identifying the competing policies at work and then determining which should preponderate in the circumstances of the case at bar.

Here, too, we have a prior action before us that arguably "charged multiple grounds of liability and there was probable cause for some grounds but not for others," so that again, "the question arises whether the malicious prosecution plaintiff has satisfied the requirement of showing that the prior action was brought without probable cause." (Crowley, supra, 8 Cal.4th 666, 693.) We look to whether a favorable termination as to Respondents (Irwin/RA Medical) in the entire underlying action was achieved. As to probable cause, we examine whether some or all of Appellants' claims in the prior action lacked probable cause. (Bertero, supra, 13 Cal.3d at pp. 55-57; Crowley, supra, 8 Cal.4th at pp. 686, 693-695.)

We accordingly discuss, initially, whether the summary adjudication ruling and the subsequent dismissals without prejudice, as occurred in the underlying case, together constituted a sufficiently favorable termination for Respondents in the underlying action, for purposes of allowing them to pursue their subsequent malicious prosecution case. We then address the element of whether there was any probable cause to sue them, as well as the sufficiency of any showing of malice or improper motive against them.

II

FAVORABLE TERMINATION ON THE MERITS

Whether a dismissal or other order or judgment constitutes a favorable termination is a legal question for the court to decide. (Sierra Club Foundation v. Graham (1999) 72 Cal.App.4th 1135, 1149 (Sierra Club).) On appeal, review is de novo. (Ibid.)

The theory underlying the element of favorable termination is that it "tends to indicate the innocence of the accused . . . ." (Lackner v. Lacroix (1979) 25 Cal.3d 747, 750.) " '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.]' " (Robbins v. Blecher (1997) 52 Cal.App.4th 886, 893 (Robbins).) " 'A termination . . . 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.]" (Ibid.)

It is well established that a voluntary dismissal of the underlying action may constitute a favorable termination, for purposes of evaluating a later malicious prosecution claim, when the dismissal "reflects on the merits of the action." (5 Witkin, Summary of Cal. Law (10th ed. 2005) Torts, § 501, pp. 735-736.) "A voluntary dismissal, even one without prejudice, reflects on the merits. Although not res judicata, it is generally a favorable termination. [Citations.]" (Ibid.)

Examples of underlying orders or judgments that are not favorable enough to support a subsequent malicious prosecution action are voluntary dismissals on technical grounds, such as lack of jurisdiction, laches, the statute of limitations or prematurity. (Eells v. Rosenblum (1995) 36 Cal.App.4th 1848, 1855-1856.) These do not constitute favorable terminations because they do not reflect on the substantive merits of the underlying claim. (Ibid.) "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." (Id. at p. 1855.)

Here, we must decide whether the summary adjudication ruling on the breach of contract, conversion and interference with contractual relationships claims, together with the voluntary dismissals of the remaining claims, provide Respondents with a favorable termination that can support their action for malicious prosecution, for purposes of overcoming these special motions to strike. Special rules apply in evaluating the effect of summary judgment/adjudication rulings in an underlying case. It has been made clear by recent case law that an adverse ruling on a summary judgment motion in a prior case does not always establish a lack of probable cause to sue, as evidentiary matters or other subsequent developments may intervene. (Jarrow, supra, 31 Cal.4th at p. 742.) In that case, the Supreme Court explained the effect of a prior summary judgment ruling by stating that even a claim that appears to be legally tenable when filed may ultimately fail "for reasons having to do with the sufficiency of the evidence actually adduced as the litigation unfolds." (Id. at pp. 742-743.) Accordingly, it cannot be said that a defense summary judgment on an underlying claim always establishes the plaintiffs' lack of probable cause to sue as a matter of law, because the probable cause inquiry deals with whether, at the time the claim was filed, " 'any reasonable attorney would have thought the claim tenable.' [Citation.]" (Id. at p. 742; also see Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 815 [denial of a special motion to strike in an underlying case establishes the existence of probable cause to sue in that underlying case, "where, as in this case, the trial court's denial ruling was predicated on a finding that the action had potential merit."])

Similarly, for the related purpose of evaluating whether a favorable termination was reached in the underlying action, based on a summary adjudication ruling, the above analysis in Jarrow, supra, 31 Cal.4th 728, 742-743, is of assistance here, even though the court was discussing probable cause in that case. Here, the summary adjudications granted in favor of Respondents on three specific claims amount to rulings that tended to show Respondents ultimately prevailed in showing their innocence in a significant portion of the prior action against them. PHMD was never able to produce a copy of any alleged confidentiality agreement, even though it was alleging a breach of its own agreement by Irwin. PHMD was never able to produce any evidence creating triable issues on or adequately supporting its claims of conversion and interference with contractual relationships. Even assuming these PHMD causes of action could have had potential validity when brought, Respondents were able to obtain favorable rulings on them. (Crowley, supra, 8 Cal.4th at pp. 686, 693-695.) The purpose to be served by the favorable termination element of malicious prosecution is initially satisfied by the summary adjudication ruling throwing out half of PHMD's case against Respondents. (Ibid.)

Next, with respect to the PHMD voluntary dismissal of its two remaining claims regarding trade secret/unfair competition, even in light of their subsequent incarnation in the federal court action as false advertising theories, we agree with the trial court that such a dismissal amounts to a favorable termination for Respondents under all the circumstances. In an analogous situation, the court in Minasian v. Sapse (1978) 80 Cal.App.3d 823, 827, held that, "A dismissal for failure to prosecute under section 583, subdivision (a) does reflect on the merits of the action, and that reflection is favorable to the defendant in the action. The reflection arises from the natural assumption that one does not simply abandon a meritorious action once instituted."

It makes no difference that Appellants each now seek to present the facts about these dismissals strictly in the light of an economics-based decision not to go forward with a trade secrets claim of only minimal damages, but instead to pursue the federal court action on an alternate theory (false advertising). The new false advertising claim, dealing with whether FDA approval had been obtained, was significantly different from the misappropriation of trade secrets issues, concerning the design of the PHMD device and whether it had been kept secret. The fact remains that both Appellants, client and attorneys, abandoned their state court claims on the eve of trial, for a different form of action in federal court, which was still pending at the time of this ruling, and the success of which was not assured. "[O]ne does not simply abandon a meritorious action once instituted." (Minasian v. Sapse, supra, 80 Cal.App.3d at p. 827.)

Accordingly, we conclude that Respondents have sufficiently shown the first required element of their malicious prosecution cause of action, that a favorable termination for them was obtained in the underlying action. The rulings and dismissals that were entered in favor of Respondents should be determined as a matter of law to be favorable terminations of the underlying action, because they sufficiently reflect " ' "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.]" (Robbins, supra, 52 Cal.App.4th at p. 893.)

III

PROBABLE CAUSE TO SUE

In this context of anti-SLAPP motion proceedings, the question is whether Respondents made an adequate showing that they have a reasonable probability of prevailing on this particular aspect of their malicious prosecution claim. Respondents may be permitted to maintain their malicious prosecution suit even where only one or more of the five claims in the prior action lacked probable cause. (Bertero, supra, 13 Cal.3d 43, 55-57; Crowley, supra, 8 Cal.4th at pp. 686, 693-695.)

As set forth in Sheldon Appel Co., supra, 47 Cal.3d 863, 881 and Roberts v. Sentry Life Insurance (1999) 76 Cal.App.4th 375, 382 (Roberts), "A plaintiff has probable cause to bring a civil suit if his claim is legally tenable. This question is addressed objectively, without regard to the mental state of plaintiff or his attorney. [Citation.] The court determines as a question of law whether there was probable cause to bring the maliciously prosecuted suit. [Citation.] Probable cause is present unless any reasonable attorney would agree that the action is totally and completely without merit. [Citation.] This permissive standard for bringing suits, and corresponding high threshold for malicious prosecution claims, assures that litigants with potentially valid claims won't be deterred by threat of liability for malicious prosecution. [Citation.]"

The plaintiff in a malicious prosecution action must separately show lack of probable cause, in addition to the favorable termination of the suit. (Roberts, supra, 76 Cal.App.4th 375, 382.) "Suits which all reasonable lawyers agree totally lack merit--that is, those which lack probable cause--are the least meritorious of all meritless suits. Only this subgroup of meritless suits present no probable cause." (Ibid., italics added.) Probable cause "depends on an objective evaluation of legal tenability based on either (1) the facts known to the attorney at the time he or she brought the prior action [citations] or (2) subsequent events in the litigation which demonstrate, as a matter of law, that the prior action was objectively tenable. [Citation.]" (Downey Venture v. LMI Ins. Co. (1998) 66 Cal.App.4th 478, 497-498 (Downey Venture).)

Appellants mainly rely on part of the summary adjudication rulings, which found triable issues of fact existed on their underlying trade secret and unfair competition claims. Although in some cases, a denial of a defendant's summary judgment in the underlying case can establish the plaintiff had probable cause to sue, this is not a conclusive factor. (Roberts, supra, 76 Cal.App.4th at p. 383.) There, the court explained, "there may be situations where denial of summary judgment should not irrefutably establish probable cause. For example, if denial of summary judgment was induced by materially false facts submitted in opposition, equating denial with probable cause might be wrong. Summary judgment might have been granted but for the false evidence." (Id. at p. 384; see Jarrow, supra, 31 Cal.4th at pp. 742-743 [even a claim that originally appears to be legally tenable may ultimately fail for lack of support in the evidence]; Slaney v. Ranger Ins. Co. (2004) 115 Cal.App.4th 306, 319-321 (Slaney) [a summary judgment ruling, together with other evidence, may support an inference of no probable cause to sue].)

Appellants claim the trial court erroneously relied on the grant of the motion for summary adjudication on three of the claims to conclude that appellants lacked probable cause to sue, at least on those causes of action. However, the trial court's order in this case also referred to "the bases" for that underlying ruling, rather than the actual ruling alone. Accordingly, we also look to all the evidence in the record on whether the breach of contract, conversion, and interference with contractual relationships causes of action, which were later found unsuccessful, were nevertheless brought with or without probable cause. (Slaney, supra, 115 Cal.App.4th at pp. 319-321.)

We are mindful that in its reply briefs, PHMD renews evidentiary objections previously made to the lodged documents, but we note that it has made no further motion or request to strike any material in the record. The lodged documents were provided to this Court without further objection and there is no need to address those objections here. (See fn. 4, ante.) In any case, both Appellants' opening briefs discuss the record evidence at length, seeking to show some portions of the underlying action were potentially meritorious. However, as Respondents point out, they were arguably required to defend against unmeritorious claims, even if any valid claims potentially existed, and this supports their current malicious prosecution action. (Crowley, supra, 8 Cal.4th at pp. 693-695.) Respondents focus upon the breach of contract claim in particular, as having been brought without any probable cause. The question is whether all reasonable lawyers would agree that the breach of contract claim and related allegations totally lacked merit.

We have already noted that in the underlying litigation, PHMD could not produce a copy of its own written confidentiality agreement that it was claiming had been breached. Nor could it show there was any equivalent document that would have supported such a cause of action. The only evidence was that PHMD's employee Levatter thought that Irwin signed one, but Irwin did not remember signing such an agreement at the relevant time period, even though it was possible he had signed one in an earlier term of employment; also, the employee manual only imposed confidentiality on employees during the term of employment, and not afterward. The trial court had a valid basis to conclude that this cause of action was not objectively tenable at any relevant time for those reasons.

With regard to the conversion and interference with contract causes of action, the ruling in the underlying case found no triable issues were presented. Regarding conversion, the court noted that (1) the computer disk that was allegedly taken was not taken, and (2) the documents that were allegedly taken were not missing, and (3) there was only speculation that a xenon chloride gas bottle had been taken, since it might instead have been a gas bottle for the barbecue that was being referred to in the e-mail evidence. (See fn. 2, ante.) PHMD witnesses were not sure about the handwriting on the computer disk, and whether Irwin was in town when the disk was found in the parking lot. Similarly, on the interference with contract claim, the court found all requirements of the tort could not be proved, since there was no showing of any existing contractual relationship that was subject to interference by Respondents. Accordingly, that claim only referred to potential losses rather than actual losses, and was defective as a matter of law. This summary of the evidence, which was not disputed at that point, and those legal conclusions also support an objective finding of lack of probable cause to bring these claims, in light of the record as a whole. (Slaney, supra, 115 Cal.App.4th at pp. 319-321.)

Accordingly, we need not further address the probable cause issue with respect to the alleged trade secret violations and unfair competition, since Respondents have met their burden in opposing the special motions to strike with respect to, at least, the breach of contract claim, and also the conversion/interference with contract causes of action. We agree with the trial court that Respondents should be allowed to proceed on the element of lack of probable cause on this malicious prosecution complaint. (§ 425.16, subd. (b).)

IV

MALICE OR IMPROPER MOTIVE TO SUE

The "malice" element of the malicious prosecution cause of action "relates to the subjective intent or purpose with which the defendant acted in initiating the prior action. [Citation.] The motive of the defendant must have been something other than that of bringing a perceived guilty person to justice or the satisfaction in a civil action of some personal or financial purpose. [Citation.] The plaintiff must plead and prove actual ill will or some improper ulterior motive. [Citation.] It may range anywhere from open hostility to indifference. [Citation.]" (Downey Venture, supra, 66 Cal.App.4th 478, 494.)

A lack of probable cause to sue, while indicative, is not of itself enough to establish malice in the bringing of the underlying action. (Downey Venture, supra, 66 Cal.App.4th at p. 498.) Rather, additional evidence must be brought forth to establish the presence of malice, such as " 'proof of either actual hostility or ill will on the part of the defendant or a subjective intent to deliberately misuse the legal system for personal gain or satisfaction at the expense of the wrongfully sued defendant. [Citation.]' " (Id. at pp. 498-499.) An "intentionally wrongful purpose of injuring another person" must be shown. (Ibid.) Malice may be proved "either expressly (by direct evidence probative on the existence of hatred or ill will) or by implication (by indirect evidence from which the jury may draw inferences)." (Bertero, supra, 13 Cal.3d 43, 66.)

Certain characteristics of civil actions have been identified as demonstrating there was an improper purpose for bringing them: "Suits with the hallmark of an improper purpose are those in which: ' ". . . (1) the person initiating them does not believe that his claim may be held valid; (2) the proceedings are begun primarily because of hostility or ill will; (3) the proceedings are initiated solely for the purpose of depriving the person against whom they are initiated of a beneficial use of his property; (4) the proceedings are initiated for the purpose of forcing a settlement which has no relation to the merits of the claim." ' [Citation.]" (Sierra Club, supra, 72 Cal.App.4th 1135, 1157.)

Because the issue of malice arises in the context of the denial of the Appellants' special motions to strike the malicious prosecution complaint, our inquiry must be whether Respondents have "demonstrated a probability of prevailing on the claim." (Navellier, supra, 29 Cal.4th 82, 88.) The trial court ruled for them, by considering "the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based." (§ 425.16, subd. (b)(2); Equilon Enterprises, supra, 29 Cal.4th 53, 67.) As already noted, we need not focus upon the "attorney eyes only" privileged material, as lodged, but instead may appropriately rely upon the entire procedural and factual background for any showing of indirect or circumstantial record evidence of malice. (See fn. 4, ante.)

In Jarrow, the Supreme Court established that the entry of a defense summary judgment on the underlying claim does not definitively establish the malice element of a subsequent malicious prosecution claim. (Jarrow, supra, 31 Cal.4th at p. 743.) Malice may, however, be inferred from a lack of evidentiary support for the action, such as the breach of contract and conversion claims in this case. We agree with the trial judge that a reasonable inference may be drawn here that the actual purpose of the action was to prevent Irwin, a former employee, from pursuing business opportunities or to harm him or his new company.

Also, from the voluntary dismissal of the remaining claims, whether based on the denial of a tardy request for leave to amend and/or a lack of available discovery materials to support them, it is readily possible to infer that the persons initiating these proceedings did not believe that the claims would be held valid. (Sierra Club, supra, 72 Cal.App.4th at p. 1157.) The fact that the action was started over again in another forum, on a different theory, supports an inference that the underlying action had no merit and was brought for an improper purpose. (Ibid.)

Next, regarding the effect of the previous denial of the attorney fees request on the trade secrets claim, we find guidance in Crowley, supra, 8 Cal.4th 666, 688-689. There, the Supreme Court found no legislative intent to substitute a statutory sanctions authorization, such as section 128.5, for a cause of action for malicious prosecution, and noted that those two remedies are not "coextensive." (Ibid.) The reason was that the statutory sanctions provision allowed compensation for litigation costs, but did not include consequential damages, such as would be available in a malicious prosecution action. (Ibid.) By the same token, the statutory provision for attorney fees in a trade secret action should not be viewed as a replacement of an otherwise available cause of action for malicious prosecution. (Civ. Code, § 3426.4.) Thus, the fact that no sanctions for frivolous or bad faith litigation were ordered in the underlying case, with respect to one of several underlying theories, is only one factor regarding a lack of probable cause on the action as a whole. (Crowley, supra, at pp. 686, 688-689; §§ 128.5, 128.7.) Sanctions represent a different, more limited remedy and type of inquiry than does an independent action for malicious prosecution.

In conclusion, the attorney fees ruling in the underlying action pertained only to the trade secret claim, pursuant to Civil Code section 3426.4, and the trial court's finding of a lack of bad faith under that statutory scheme, in the underlying action, did not fully or conclusively address whether the action may have lacked probable cause in other respects. Respondents have made an adequate showing that this action has sufficient characteristics to demonstrate there was probably an improper purpose or purposes for bringing it. There is no persuasive countervailing showing. On de novo review, we reach the same conclusion as did the trial court, that the special motions to strike must be denied and the malicious prosecution action be allowed to proceed.

DISPOSITION

The orders are affirmed. All Appellants are jointly and severally to pay all costs on appeal.

HUFFMAN, Acting P. J.

WE CONCUR:

McINTYRE, J.

AARON, J.

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^[1] All further statutory references are to the Code of Civil Procedure unless noted.

^[2] The breach of contract cause of action was alleged against Irwin only. The conversion claim was based on allegations that after he left PHMD, Irwin took but dropped a computer disk which was found in the company parking lot near his car, and that disk had proprietary information on it that he might have used. Appellants also alleged Irwin took along a company canister of xenon chloride gas used in the laser product; they referred to an e-mail sent by Irwin mentioning a planned barbecue, as evidence to support such a claim (i.e., "The gas bottles in the garage are full.").

^[3] 15 United States Code section 1125(a), the Lanham Act, provides for a civil right of action to remedy trademark violations such as "False designations of origin, false descriptions, and dilution," as follows: "(a) Civil action (1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which-- [¶] (A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or [¶] (B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act." (15 U.S.C.A. § 1125(a).)

^[4] In its reply brief, PHMD objects that some of the lodged material should not be used to determine whether there was a lack of probable cause, because it is labeled "Attorney eyes only," (e.g., deposition testimony of its own employee Jeffrey Levatter and a declaration and deposition excerpts of Irwin). These materials were before the trial court, which issued a statement in its ruling that it had relied only on admissible evidence and declined to make specific evidentiary rulings. We have criticized that approach to evidentiary objections in the past, as inadequate to deal with any significant evidentiary problems presented, in cases such as Sambrano v. City of San Diego (2001) 94 Cal.App.4th 225, 234-238. Without reopening that issue here, we note only that the same lodged documents submitted in connection with the motions to strike were also lodged with this court without objection, except for the arguments now raised on a belated basis in the reply brief. In any case, there is sufficient evidence in the record on all the subject issues without the need to consider these objections as now argued by PHMD.

^[5] The motion to strike was also brought on behalf of defendant Jeffrey Levatter, an employee of PHMD, and was granted by the trial court on the grounds that there was no showing by Respondents that the underlying action was initiated by or maintained at his direction. That determination is not challenged on this appeal. We also need not deal with RA Medical's claims in its respondent's brief that PHMD sued another medical technology company in Florida for trade secret misappropriation, since those allegations are beyond the scope of this appeal.