Malicious Prosecution Action Permitted to Proceed Against Plaintiff's Counsel in Dismissed Consumer Class Action

On November 29, 2012, in an unpublished opinion, Innovation Ventures, LLC v. Howard W. Rubinstein et al., the California Court of Appeal affirmed an order by the trial court permitting Innovation Ventures, LLC, the marketer and seller of the drink 5-Hour Energy, to proceed in a malicious prosecution case against plaintiff's counsel who had brought, and subsequently dismissed, a consumer class action alleging false advertising in connection with the drink. The Court, however, reversed the trial court's ruling that a malicious prosecution action could proceed against the named plaintiff.

In the underlying purported class action, after some initial discovery, and in the face of impending discovery requests and a request for a second deposition session of the named plaintiff, plaintiff moved to voluntarily dismiss the case. Innovation brought an action for malicious prosecution, and plaintiff and her attorneys responded with a motion under California's anti-strategic lawsuit against public participation (SLAPP) statute, enacted to prevent lawsuits that target free speech. The California Court of Appeal affirmed the trial court's denial of the motion as to the attorneys (but reversed as to plaintiff), and concluded that Innovation had established a prima facie case for malicious prosecution.

Interestingly, the Court relied heavily on the decision by plaintiff's counsel to continue to prosecute the case even after plaintiff made concessions at deposition and in written discovery responses that she did not suffer any physical or personal injury, that she bought the product "for the case" so she could have a receipt to sue Innovation, and that she voluntarily went back and bought more of the product even after she knew that the effect of the product would not last a full five hours. The Court also pointed to the fact that in pre-suit conversations plaintiff's counsel had contacted defense counsel offering to sell "protection." Plaintiff's counsel argued that despite these discovery concessions, all plaintiff had to show, under the California Supreme Court's decision in Kwikset Corp. v. Superior Court, was that the packaging was likely to deceive a reasonable consumer and actual injury. But the court noted that "Kwikset held [a] consumer who relies on a product label and challenges a misrepresentation contained therein can satisfy the standing requirement . . . by alleging . . . she would not have bought the product but for the misrepresentation." (quotations omitted). And thus plaintiff's admission that she bought the product for the purpose of suing negated her claim, citing Buckland v. Threshold.

While the decision is unpublished, it provides a warning bell to plaintiff's attorneys that may bring or continue to prosecute consumer class actions that have tenuous legal support. Moreover, it emphasizes the importance of obtaining discovery from named plaintiffs in consumer class actions on the issue of the timing and reasons for their product purchases.

© Arnold & Porter Kaye Scholer LLP 2012 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.