Antitrust Law Daily Wrap Up, RICO—Cal. App.: Corporation’s malicious prosecution, abuse of process claims fail against shareholders asserting RICO claims, (Dec 3, 2013)

By Linda O’Brien, J.D., LL.M.

A corporation failed to show a probability of prevailing on its malicious prosecution and abuse of process claims against two shareholders who had unsuccessfully asserted RICO violations against the corporation in a prior lawsuit, the California Court of Appeal for the Second Appellate District has decided (Kazi v. Rosen & Associates, December 2, 2013, Woods, J.). Thus, the trial court’s order to strike the corporation’s complaint was affirmed.

In 2008, Rosen & Associates, attorneys for corporate shareholders Penny McCoy and Chandrasekhar Joshi, filed a complaint against the corporation, Kazi Foods, Inc., asserting RICO claims as well as other state law causes of action. A federal district court entered judgment as a matter of law against the shareholders and in favor of the corporation on the RICO claims in that action. In 2011, Zubair Kazi and Kazi Foods, Inc. (collectively, “Kazi”) filed a suit for malicious prosecution and abuse of process against the two shareholders and their counsel, Rosen. Specifically, Kazi claimed that McCoy, Joshi, and Rosen lacked probable cause to bring the RICO claims and used the litigation to harass, intimidate, and threaten Kazi. The shareholders and their counsel moved to strike the complaint, which was granted by the trial court.

Under California Code of Civil Procedure Section 425.16, a cause of action against a person arising from the person’s right of petition or free speech under the U.S. or California Constitution regarding a public issue is subject to a motion to strike unless the plaintiff establishes that there is a probability of prevailing on the claim, according to the court. Kazi’s malicious prosecution and abuse of process claims were actions based on protected speech or petitioning activity that fell within the “arising from” prong of the statute.

The court next addressed that Kazi must establish a probability of prevailing and demonstrate that the 2008 lawsuit was filed maliciously and without probable cause. In rejecting Kazi’s argument that the successful defense of the suit did not establish that it was brought without probable cause, the court stated that a claim does not lack probable cause if any reasonable attorney would have thought the claim was tenable. At trial, McCoy, Joshi and Rosen presented extensive evidence supporting the objective tenability of the RICO claims. Additionally, Kazi failed to address the facts or legal theory underlying the plaintiffs’ RICO claims. Since probable cause is to be determined by an objective standard and Kazi failed to establish the probability of prevailing on the malicious prosecution and abuse of process claims, the trial court properly granted the motion to strike the complaint.

The case is No. B241539.

Attorneys: Ryan G. Baker (Baker Marquart) for Zubair Kazi. Jonathan B. Cole (Nemecek & Cole) for Rosen & Associates. Robert C. Rosen (Rosen & Associates) for Penny McCoy and Chandrashekhar Joshi.

Companies: Kazi Foods, Inc.; Rosen & Associates

Cases: RICO CaliforniaNews