Friday, November 22, 2013

Kurtz v. Syrus Systems, Inc. (Cal. Ct. App. - Nov. 22, 2013)

This decision is wrong.  Understandable.  But wrong.

It's an anti-SLAPP appeal, but the relevant dispute boils down to a single issue:  Can an employer sue for malicious prosecution based upon an applicant's (allegedly) frivolous prosecution of a claim for unemployment benefits?

The Court of Appeal says "No," a holding based exclusively upon the language of Section 1960 of the Unemployment Insurance Code, which provides that findings of an unemployment proceeding "shall not be used as evidence in any separate or subsequent action or proceeding [] between an individual and his or her present or former employer."  According to the Court of Appeal, this means that the employer can never prove that the unemployment proceeding terminated in its favor, since Section 1960 precludes admission of any evidence about this proceeding, including but not limited to its outcome.  And since the employer can't prove favorable termination, it definitionally can't establish one of the elements of malicious prosecution.

You could indeed read the statute that broadly.  But you'd be wrong to do so.

The point of Section 1960 is to prohibit issue preclusion from findings made by unemployment commissioners.  It's not to bar malicious prosecution claims, which are routinely permissibly filed in response to frivolous administrative proceedings.  Section 1960 is like analogous statutory and common law provisions governing mediation, arbitration, small claims proceedings, and other areas in which we don't want to give preclusive effect.  But just because we don't allow the findings in such areas to be admissible doesn't mean that the result of those proceedings can't establish a favorable termination.  In the same way you can't give evidence about what transpired at a mediation but are nonetheless permitted to enforce a settlement agreement arising therefrom.

I understand the Court of Appeal's contrary textualist approach.  But it's overly formal.  It doesn't accurately reflect the policies and legislative intent behind Section 1960.  And it neglects the adverse policy consequences that necessarily arise from the Court of Appeal's holding.

I concede that there are some cases in which the text is so spanking crystal clear that there's no room to do the right thing.  This isn't one of them.

The Court of Appeal shouldn't have reversed the trial court.  Bad result.  Bad law.