Chalpin v Snyder (10/21/2008)

October 30, 2008

Arizona Court of Appeals Division One Summary Judgment and Dismissal Against Attorney on Malicious Prosecution and Aiding and Abetting Complaint Reversed.

Hi-Health Supermarket (the “Company”) and its President and CEO (“Chalpin”), had liability insurance on the company’s vehicles through Reliance Insurance Company.  In 1996, the Company added Chalpin’s daughter Debra and her car to the Company’s policy.  A few years later, Debra was at-fault in an accident where the driver of the other car was left in a vegetative state.  Debra tendered the claim to Reliance, which initially confirmed that the claim was covered. 

At a mediation following its assurance to Debra and Chalpin that the claim was covered, Reliance refused to settle for the $5 million demanded by the injured woman’s family.  Instead, Reliance hired Snyder, a California lawyer, to investigate “with an eye toward disavowing coverage” for the accident.  Snyder wrote a coverage opinion stating that Reliance could not disavow coverage.  He also, however, recommended that Reliance file a suit against Debra and Chalpin, raising defenses to coverage, to pressure them into a settlement.  Reliance then filed the suit urged by Snyder and named Chalpin and his daughter personally.  Chalpin, the Company, and Debra counterclaimed for declaratory relief confirming coverage.  Reliance lost and the jury awarded nearly $500,000 in attorneys’ fees against it.

Chalpin, having won the first suit, then sued Snyder, the lawyer (Reliance had declared bankruptcy), for abuse of process, malicious prosecution, and aiding and abetting.  The superior court dismissed the aiding and abetting claim for failure to state a claim.  The superior court granted Snyder summary judgment on Chalpin’s remaining claims; Chalpin appealed.

The Arizona appeals court first confirmed that, among five elements in the tort of malicious prosecution, the requirement that the defendant lacked probable cause to institute the underlying action is to be judged objectively.  The Court further explained that the trial court’s ruling on Rule 50 motions in the case brought by Snyder is not dispositive of whether Snyder had probable cause to bring the initial suit.  The superior court, in this case, erred in holding otherwise.

The court went on to discuss, though, whether the record of the underlying litigation otherwise supported the superior court’s ruling here that probable cause existed.  Rejecting Snyder’s argument that probable cause was lacking only if “there was no chance for success,” the Court of Appeals held that probable cause is lacking unless the initiator believes he has a “good chance” of success.  See Bradshaw v. State Farm Mut. Auto Ins. Co., 157 Ariz. 411, 416-17 (1988).

Turning to the aiding and abetting claim, the Court of Appeals, citing the Restatement, rejected the superior court’s conclusion that Arizona law limits actions against lawyers to only two causes of action – abuse of process and malicious prosecution.  The Court of Appeals also rejected Snyder’s claim that the Constitution and the Noerr-Pennington doctrine barred an aiding and abetting claim against him.

The Court of Appeals reversed the grant of summary judgment and the grant of the motion to dismiss and remanded the case to superior court.  Judge Irvine wrote the opinion in which Judges Thompson and Winthrop concurred.