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Merritt-Chapman & Scott Corp. v. Elgin Coal, Inc.

United States District Court · Civil Procedure

Civil ProcedureMalicious ProsecutionAbuse of ProcessFraudSummary Judgmentmalicious prosecutionfavorable terminationsettlement

Facts

In pending chancery litigation between these parties, Elgin Coal filed a cross claim seeking more than $4,000,000, alleging that the parties' contract and sublease omitted agreed terms and that plaintiff wrongfully failed to incorporate agreed changes. That cross claim was later dismissed with prejudice pursuant to a settlement agreement that also provided for cancellation of subleases, payment of funds, mine closings, vacating the leasehold, and payment of court costs by plaintiff. After the cross claim was dismissed, but while the original chancery action remained pending, plaintiff filed this action alleging that the cross claim had been maliciously and wrongfully asserted. The defendants included Elgin Coal, several of its officers and shareholders, its attorney of record in the chancery suit, and the executrix of a deceased officer's estate.

Issue

Whether plaintiff could maintain a malicious prosecution action based on a cross claim that was dismissed pursuant to settlement, and whether the complaint otherwise stated claims for abuse of process, conspiracy, fraud, or private damages for breach of an attorney's oath or false testimony. The court also considered whether a malicious prosecution action may be founded on the filing of a cross claim at all.

Rule

A malicious prosecution claim requires allegations that the defendant instituted a prior action with malice and without probable cause and that the prior action terminated favorably to the plaintiff. A cross claim maliciously and without probable cause filed may support malicious prosecution, but termination by compromise and settlement is not a favorable termination. Abuse of process lies only when issued process is willfully perverted to accomplish a result not commanded by it or lawfully obtainable under it; merely filing and prosecuting an unfounded claim, even with bad motives, states malicious prosecution at most, not abuse of process. Fraud requires deception of the plaintiff and reasonable reliance by the plaintiff. No private civil damages action lies solely for breach of an attorney's oath by filing a false claim, and relevant testimony in judicial proceedings is absolutely privileged from private damages actions.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In a contract suit pending in Nashville, Dana Holcomb filed a cross-claim against Ridgeway Drilling LLC seeking $2 million for alleged side promises. Months later, Dana and Ridgeway signed a written agreement under which the cross-claim was dismissed with prejudice, Ridgeway transferred certain equipment back to Dana, both sides adjusted payment obligations, and Ridgeway paid filing costs.

If Ridgeway later sues Dana for malicious prosecution based on the cross-claim alone, what is the strongest argument against Ridgeway's claim?

Explanation. A malicious prosecution claim requires favorable termination of the prior proceeding. The majority held that a cross-claim may support malicious prosecution, but termination by compromise and settlement is not a favorable termination. Here, the dismissal with prejudice was part of an integrated settlement with mutual concessions, so Ridgeway cannot satisfy favorable termination. (Derived from Merritt-Chapman & Scott Corp. v. Elgin Coal, Inc. (n.d.).)