On November 22, 2013, the California Court of Appeal for the Sixth District, in Kurz v. Syrus Systems, LLC, Case No. H038694, reversed the trial court’s denial of an employee’s anti-SLAPP motion under Code of Civil Procedure section 425.16 which had been filed in response to his former employer’s malicious prosecution claim. The court held that Syrus could not establish a probability of success because no evidence of the outcome of the employee’s unsuccessful underlying administrative claim, including its favorable termination, could be admitted in the action pursuant to Unemployment Insurance Code section 1960.
In 2010, Plaintiff Edward Kurz (Kurz) filed a claim with the Employment Development Department (EDD) for unemployment benefits. Kurz’s former employer, Syrus Systems, LLC (Syrus), objected to Kurz’s claim and appealed the initial EDD decision in Kurz’s favor. The administrative law judge concluded that Kurz was not entitled to benefits as he was deemed to have voluntarily quit his job without good cause. The Unemployment Insurance Appeals Board affirmed the administrative law judge’s decision.
In 2011, Kurz filed a complaint against Syrus for employment discrimination. Syrus filed a cross-complaint against Kurz, which included a cause of action for malicious prosecution. Kurz subsequently filed a special motion to strike Syrus’s cause of action for malicious prosecution arguing that the filing of his discrimination claim constituted constitutionally protected speech pursuant to Code of Civil Procedure section 425.16. Kurz also argued that Syrus could not establish a probability of prevailing on its malicious prosecution claim pursuant to section 1960 of the Unemployment Insurance Code, which provides in pertinent part, that “any findings of fact, conclusions, and final orders of the Unemployment Insurance Appeals Board … shall not be used as evidence in any subsequent proceeding between an individual and his or her present or prior employer.” Syrus contended that section 1960 only applied in wrongful termination actions and did not preclude the admission of an Unemployment Insurance Appeals Board decision in a malicious prosecution action. The trial court denied Kurz’s special motion to strike for malicious prosecution. Kurz appealed.
The Court of Appeal reversed following a two-step analysis. First, the Court had to decide whether Kurz had made a threshold showing that the challenged cause of action was one arising from protected activity; second, it had to determine whether Syrus had demonstrated a probability of prevailing on the claim. The Court found that Kurz had satisfied the first prong of the statute because the malicious prosecution claim involved the litigation of a claim in an official proceeding authorized by law. With respect to the probability of prevailing on the claim, however, the Court determined that Syrus could not meet its burden of demonstrating a probability of prevailing on the cause of action for malicious prosecution because no evidence of the favorable outcome of the underlying EDD claim would be admissible under section 1960. The court’s review of the applicable legislative history established that section 1960 was enacted, in part, to prohibit the findings and decisions of the Unemployment Insurance Appeals Board from being used as evidence in any subsequent proceeding between an individual and his or her present or prior employer. As a result, the appeals court reversed and directed the trial court to grant Kurz’s special motion to strike and to conduct further proceedings to determine costs and reasonable attorney’s fees, including fees on appeal, to be awarded to Kurz.
The practical effect of Kurz is a reminder to employers and their attorneys that malicious prosecution actions brought against unsuccessful employee-claimants which could arguably have the effect of “chilling” the exercise of free speech will be carefully scrutinized in connection with a responsive anti-SLAPP motion where the burden will shift to the employer to justify the suit under Code of Civil Procedure section 425.16. Moreover, the anti-SLAPP statute’s second prong (probability of prevailing) should be thoroughly analyzed before commencing such a suit against an employee based on what the California Supreme Court has regularly described as the “disfavored” status of the tort of malicious prosecution.
This document is intended to provide you with information about employment and labor and professional liability law related developments. The contents of this document are not intended to provide specific legal advice. This communication may be considered advertising in some jurisdictions.