• Fraud Claim that Was Eventually Dropped By City Could Not Form Basis for Malicious Prosecution Action against the City
  • April 18, 2011 | Author: Jeffrey L. Massey
  • Law Firm: Kronick Moskovitz Tiedemann & Girard A Law Corporation - Sacramento Office
  • In Fabbrini v. City of Dunsmuir, (--- F.3d ----, C.A.9 (Cal.), February 11, 2011), the United States Court of Appeals for the Ninth Circuit considered whether a defendant could state a malicious prosecution claim against a city where the city eventually dropped its fraud claim against the defendant. The court of appeals held the fraud claim could not form the basis for a § 1983 malicious prosecution claim because the city had dropped its fraud claim against the defendant.

    Facts
    The City of Dunsmuir (“City”) brought a lawsuit against David Fabbrini (“Fabbrini”) in state court for failure to sufficiently collateralize a municipal loan. City sought declaratory relief and also asserted a fraud claim against Fabbrini. City later voluntarily dismissed its lawsuit against Fabbrini. Fabbrini filed a lawsuit against City in a federal district court in which he alleged a § 1983 claim for malicious prosecution against City and a defamation claim pursuant to California law.

    City filed a motion to strike the defamation claim. The federal district court granted the motion to dismiss pursuant to California’s anti-SLAPP statute (Strategic Lawsuit Against Public Participation). The court later granted summary judgment in favor of City on Fabbrini’s § 1983 malicious prosecution claim. The trial court also awarded City attorney fees on the basis of its successful anti-SLAPP motion. Fabbrini appealed the trial court’s award of summary judgment on his § 1983 malicious prosecution claim and the award of attorney fees.

    Decision
    The court of appeals held that the district court did not err in granting summary judgment on Fabbrini’s claim of malicious prosecution. When the City Council approved the loan, it “specified a 110% collateral requirement, and Fabbrini admitted that the loan was not fully collateralized.” Therefore, City’s declaratory action against Fabbrini was brought with probable cause.

    The court of appeals also found that because City did not include its fraud claim in its amended petition, the fraud claim could not form the basis for a lawsuit for § 1983 malicious prosecution. “Even if it was the case that the fraud claim might have been deemed lacking in probable cause, a dropped claim cannot form the basis of a malicious prosecution action.”

    The court of appeals held City is entitled to attorney fees because it prevailed on the anti-SLAPP motion. The trial court, however, awarded City “fees for hours incurred on the § 1983 motion to the extent that any of those hours were ‘inextricably intertwined’ with the anti-SLAPP motion.” The court of appeals concluded the lower court erred when it awarded City attorney fees for its defense against Fabbrini’s § 1983 claim, “even if that work was intertwined with the anti-SLAPP portion of the motion.”

    A prevailing defendant in a § 1983 claim may only recover attorney fees if “the action brought is found to be unreasonable, frivolous, meritless or vexatious.” Here, there was no ruling that the § 1983 claim was frivolous. Therefore, the district court erred when it “awarded fees for time spent defending a § 1983 action that it had not found to be frivolous.” The court of appeals vacated the ruling of the district court “insofar as it granted fees for a portion of the § 1983 motion that it deemed to be intertwined with the anti-SLAPP motion.” Unless the lower court finds that the § 1983 claim was frivolous, City may only recover fees “for work that is exclusively attributable to the anti-SLAPP motion.”