APPEAL from a judgment of the Superior Court for Los Angeles County, Warren L. Ettinger, Judge. Reversed. (Los Angeles County Super. Ct. No. BC285388).
The opinion of the court was delivered by: Willhite, Acting P. J.
CERTIFIED FOR PUBLICATION
The Franklin Mint Company and its principals, Stewart and Lynda Resnick, (collectively, Franklin Mint) appeal from a judgment dismissing their malicious prosecution action against the law firm Manatt Phelps & Phillips LLP and attorney Mark S. Lee (collectively, Manatt). Manatt represented the executors of the estate of Diana, Princess of Wales and the trustees of The Diana, Princess of Wales Memorial Fund (collectively, the Fund) in a lawsuit filed against Franklin Mint alleging claims related to Franklin Mint‟s use of Princess Diana‟s name and image in connection with merchandise Franklin Mint advertised and sold. Franklin Mint‟s malicious prosecution claim is based upon two of the claims that were alleged in that underlying lawsuit, for false advertising and trademark dilution under the Lanham Act (15 U.S.C. § 1125(a), (c)). After a 17-day jury trial, the trial court granted Manatt‟s motion for nonsuit or directed verdict, finding that Manatt had probable cause to prosecute those claims.*fn1 We reverse.
We conclude that, based on the record before us, no reasonable attorney could find tenable the false advertising claim as it was alleged and litigated in the underlying action. Therefore, we hold there was no probable cause to prosecute that claim.
We also hold there was no probable cause to prosecute the trademark dilution claim because no reasonable attorney could conclude that the claim could satisfy two fundamental, long-standing principles of trademark law. First, to be protectable as a trademark,*fn2 a word, phrase, name, or symbol must be used in commerce to identify goods or services and their source. Although Manatt contends that Princess Diana used her name in connection with her appearances at charitable events, that use does not demonstrate trademark use. Second, a trademark that is descriptive -- such as a personal name -- must acquire secondary meaning to be protectable in a trademark dilution action. In other words, the primary meaning of the mark (i.e., the descriptive meaning) must in the minds of the public be subordinate to its meaning as the source of goods or services. Because "Diana, Princess of Wales" has such an extraordinarily strong primary meaning as descriptive of Princess Diana as a person, the contention that it had acquired secondary meaning at the time of the underlying lawsuit was, as the district court in the underlying lawsuit observed, "absurd." (Cairns v. Franklin Mint Co. (C.D. Cal. 2000) 107 F.Supp.2d 1212, 1222 (Cairns III).) Therefore, we conclude that the trademark dilution claim was untenable.
Manatt argues, however, that we should not find that the claim lacked probable cause, because the issues are complex and there is no directly controlling authority. But the fundamental principles of trademark law -- a trademark must identify a source of a product or service, and a descriptive mark such as a personal name must acquire secondary meaning in the minds of the public -- were clear and well-established, and their application to this case is straightforward and uncomplicated. The complexity of the issues arises only from Manatt‟s attempts to avoid those fundamental principles. Accordingly, we reverse the judgment and remand for trial on malice and damages issues.
The parties‟ briefs on appeal contain extensive discussion of the factual background of this case, including many facts relevant only to the issue of malice. Because the only issue in this appeal is whether there was probable cause for the trademark dilution and false advertising claims, our discussion of the facts will be limited to those facts relevant to that issue.
A. Events Leading Up To The Underlying Lawsuit
From the time of her engagement to Charles, Prince of Wales, in 1981, until her untimely death on August 31, 1997, Diana, Princess of Wales (Princess Diana) "was one of the most beloved, most photographed and most talked about celebrities" of the latter part of the twentieth century. (Cairns v. Franklin Mint Co. (C.D. Cal. 1988) 24 F.Supp.2d 1013, 1021 (Cairns I).) During her lifetime, Franklin Mint, a direct mail marketer of collectible memorabilia, sold over $9 million of products related to Princess Diana.
Immediately after her death, Franklin Mint decided to design a line of products featuring Princess Diana, including one product from which all proceeds would be donated to charity in her honor. On September 5, 1997, the vice president and general counsel of Franklin Mint, Howard Lucker, wrote to the trustees of The Diana, Princess of Wales Memorial Fund, which was a charitable trust established on September 4, 1997, at the direction of the executors of Princess Diana‟s estate, to receive contributions made in her memory. Lucker informed the trustees that Franklin Mint wanted to create and market a collectible porcelain plate in tribute to Princess Diana, from which all net proceeds would be donated to her favorite charities, and proposed that the Fund distribute those proceeds. Lucker stated that, if Franklin Mint and the Fund were able to come to an agreement quickly, Franklin Mint could advertise that it was officially authorized by the Fund and that all profits would be donated to the Fund.
The Fund did not immediately respond. Franklin Mint then decided that it would donate all proceeds from the tribute plate to charity. On September 9, 1997, Franklin Mint issued a press release stating that it was developing a tribute plate at its own expense and that all of the proceeds from the sale of the plate "will go directly to The Diana, Princess of Wales Charities." Five days later, it ran print advertisements for the tribute plate that featured a picture of the plate and stated, "All proceeds to go to Diana, Princess of Wales‟ Charities" and "100% of your purchase price will be donated to Diana, Princess of Wales‟ favorite charities." The Fund eventually declined Franklin Mint‟s proposal on October 31, 1997.
Because Franklin Mint wanted to "associate" its Princess Diana collectibles with donations to charities that supported causes that were important to her, and the Fund was not responsive to its proposal, Franklin Mint entered into an agreement with the Great Ormond Street Children‟s Hospital (a charity in England with which Princess Diana had been involved). Under that agreement, the charity allowed Franklin Mint to use its name in advertising Princess Diana collectibles in exchange for a promise by Franklin Mint to donate a minimum of £250,000 to the charity from sales of the tribute plate. Franklin Mint ultimately paid over $1.5 million to Great Ormond Street Children‟s Hospital from sales of the tribute plate outside the United States.
At some point, Franklin Mint stopped running advertisements for the tribute plate that included the "all proceeds" language, although it continued to advertise the tribute plate. Those later advertisements, as well as additional advertisements for other Princess Diana collectibles, instead included a statement that Franklin Mint had pledged a minimum of $1.5 million worldwide to charity in tribute to Princess Diana. Franklin Mint included a "response code" on all of its advertisements so it could track which purchases came from each advertisement. When a customer sent in the coupon at the bottom of the advertisement to purchase an item, the response code was printed on the coupon, and if the customer called Franklin Mint to order an item, the customer service representative asked for the response code; Franklin Mint sorted all purchases by response code. Using the response code, Franklin Mint was able to determine that the "all proceeds" tribute plate advertisement generated approximately $2.5 million in sales, and the tribute plate advertisement without the "all proceeds" language generated approximately $3.5 million in sales in the United States, and $3.5 million to $4 million in sales outside the United States ($1.5 million of which was paid to Great Ormond Street Children‟s Hospital). Franklin Mint eventually interpleaded with the district court in the underlying lawsuit $2,527,107 from sales attributable to the "all proceeds" advertisement, to be distributed to charity upon resolution of the lawsuit.
B. The Underlying Lawsuit
1. Princess Diana's Estate And The Fund Retain U.S. Attorneys
By the middle of September 1997, Princess Diana‟s estate had retained an attorney in New York who specialized in intellectual property litigation, Paul LiCalsi, to advise it about intellectual property issues in the United States. The estate was aware of the advertisement for the tribute plate, which had run in the New York Times on September 16, 1997. It also was aware that, a few weeks before Princess Diana‟s death and in the weeks after, Franklin Mint had applied to the United States Patent and Trademark Office to register various trademarks related to its Princess Diana products, all of which used some form of Princess Diana‟s name or nicknames (such as "The People‟s Princess").*fn3 On September 19, 1997, LiCalsi advised the estate that a "cease and desist" letter should be sent to Franklin Mint, and a few days later he sent to the attorneys in England who represented the estate a draft of a proposed letter to Franklin Mint. That draft letter stated that Franklin Mint‟s use of Princess Diana‟s name and likeness in its advertisements "not only violate many states‟ laws of publicity, but also violate federal trademark law in that they are so orchestrated as to mislead the public that they were sponsored or approved by Princess Diana or her personal representatives." He did not send the letter because he was told that counsel for the Fund would take over that function.
The Fund had hired separate counsel in New York to represent its interests. On September 25, 1997, that attorney, Randy Lipsitz, sent a letter to counsel for Franklin Mint, stating that the Fund "owns the worldwide trademark rights concerning Princess Diana including, but not limited to the Diana, Princess of Wales and Diana, Princess of Wales Memorial Fund names and trademarks." The Fund then asked Lipsitz to consider whether litigation should be instituted against Franklin Mint. Lipsitz wrote to the Fund‟s English attorneys on October 14, 1997, recommending that litigation be commenced in California, with the estate as co-plaintiff, asserting causes of action under Lanham Act section 43(a) for false designation of origin (15 U.S.C. § 1125(a)(1)(A)) and under section 43(c) for trademark dilution (15 U.S.C. § 1125(c)). He provided no legal analysis in the letter.
Institution of litigation was delayed, however, due to complications that arose regarding the transfer of Princess Diana‟s name and likeness rights from her estate to the Fund. Eventually, the estate granted exclusive licenses to the name and likeness rights in Princess Diana to the Fund. Those licenses were not approved by the Charities Commission in England and Wales until February 27, 1998.
2. The Fund Hires Manatt To File A Lawsuit Against Franklin Mint
In the meantime, on October 9, 1997, defendant Lee wrote to English counsel for Princess Diana‟s estate. He introduced himself, and said that his office was representing Tiger Woods in litigation against Franklin Mint. He noted that during the course of that litigation, he discovered that Franklin Mint was planning to exploit Princess Diana‟s name and likeness. He said that Franklin Mint had applied for a trademark in the phrase "Diana, A Princess Forever" shortly before her death, and that it recently began advertising a "Commemorative Plate" featuring Princess Diana‟s name and image. He commented that "[t]he advertisement states that all proceeds from the sale will go to "Diana, Princess of Wales‟ charities,‟ but based on our experience in the [Tiger Woods] litigation we are not confident this will actually occur." He explained that "there are several avenues available to Princess Diana‟s estate under U.S. laws" to prevent unauthorized commercial exploitation of her name and image, and mentioned that "legal theories of unfair competition and what is known as the "right of publicity‟ provides significant remedies through litigation." He closed by inviting counsel to contact him if he could be of further assistance to the estate.
English counsel for the Fund contacted Lee sometime in early to mid-March 1998, and retained him in late March 1998 (sometime around March 27, 1998) to conduct the litigation against Franklin Mint. Lee spoke by telephone with LiCalsi, the New York attorney representing Princess Diana‟s estate, a few times in late March, and faxed him a draft of the complaint on March 31. After receiving the draft complaint, LiCalsi spoke to Lee about certain issues, including the trademark dilution claim. LiCalsi asked Lee "about the issue of establishing secondary meaning for Princess Diana under trademark law," and specifically, "whether the fact that she had not been in commerce prior to her death, would that affect the secondary meaning issue." According to LiCalsi, Lee "indicated that there was substantial case law which supported using Princess Diana‟s very well-known charitable activities as a basis for establishing secondary meaning." LiCalsi relied upon Lee‟s statement as being accurate. He returned Lee‟s draft complaint to Lee with a few minor suggested changes.
On May 18, 1998, Manatt, representing the Fund and the executors of Princess Diana‟s estate, filed the complaint in federal district court. The complaint alleged five causes of action against Franklin Mint, Roll International Corporation, Inc., and Stewart and Lynda Resnick:*fn4 (1) false designation of origin under the Lanham Act (15 U.S.C. § 1125(a)); (2) trademark dilution under the Lanham Act (15 U.S.C. § 1125(c)); (3) infringement of the California statutory right of publicity (former Civ. Code, § 990, repealed and replaced by Civ. Code, § 3344.1); (4) false advertising under the Lanham Act (15 U.S.C. § 1125(a)); and (5) unfair competition and false and misleading advertising under Business and Professions Code sections 17200 and 17500.
The complaint alleged that Princess Diana "was one of the best known and most widely admired public figures of the last half of the 20th century" and "for 16 years was the object of intensive public interest and media scrutiny." It went on to allege that "[a]s a member of the British Royal family and a tireless worker for charitable causes, Princess Diana‟s name, likeness and image have become uniquely identifiable throughout the United States and the world, have achieved extraordinary fame, are identified in the minds of the public as the source of the charitable activities which Princess Diana performed, and possess a valuable goodwill." The complaint alleged that after Princess Diana‟s death, "[h]er assets, including the rights to her name, likeness, image and marks, passed by will to the Estate," which granted exclusive licenses to Princess Diana‟s name and likenesses and the trademarks "Diana, Princess of Wales" and "Diana, Princess of Wales Memorial Fund" to the Fund. It asserted that, both before and immediately after her death, Franklin Mint filed applications for trademarks for Princess Diana‟s name, image, and phrases identified in the public‟s mind with Princess Diana, and used Princess Diana‟s name and image on products and in advertising. Finally, the complaint alleged that, by using Princess Diana‟s name and likeness on products and in advertising, Franklin Mint was falsely and misleadingly implying an endorsement, association, or affiliation with Princess Diana, her estate, and the Fund.
The false designation of origin (also known as false endorsement) cause of action simply incorporated all of the previous allegations and requested injunctive and monetary relief, destruction of infringing articles, treble damages, and cost and attorney fees.
The trademark dilution claim alleged that the Fund‟s "mark" was inherently distinctive and had acquired distinction "from its past use for charitable activities" such that Princess Diana‟s name and image had come to mean and be recognized as distinctive marks that identify the source of the charitable activities of Princess Diana. It alleged that "[the] marks including "Diana Princess of Wales‟ and "Diana Princess of Wales Memorial Fund‟ are famous and distinctive within the meaning of [the Lanham Act]" and that Franklin Mint‟s unauthorized use of those marks had caused and would continue to cause dilution of the Fund‟s marks.
The right of publicity claim alleged that Franklin Mint had willfully misappropriated the Fund‟s rights under former Civil Code section 990 (now Civ. Code, § 3344.1), causing the Fund irreparable harm.
The false advertising claim alleged that Franklin Mint had carried out "a large scale program of deceptive advertising" in which it made misleading and deceptive representations about the use of the proceeds from the sale of its products. It alleged that "[a]mong the false and misleading representations made by Defendants are, inter alia, that "100% of the... price [of Defendants‟ dolls and plates] will be donated to Diana, Princess of Wales‟ charities‟ and that "all proceeds to go to Diana, Princess of Wales‟ Charities.‟" (Ellipses and additions in original.) The claim asserted that those representations were false "in that Defendants have never donated a penny to the Fund," and that the Fund had been and would continue to be damaged by the false advertisements in that the advertisements attempt to benefit from the goodwill associated with Princess Diana‟s identity. The claim also included the following allegation: "As a result of Defendants‟ representations, members of the public are induced to purchase Defendants‟ dolls and plates in the mistaken belief that Defendants‟ products are endorsed by and/or associated or affiliated with Princess Diana, her Estate, and/or the Fund."
The state law unfair competition and false and misleading advertising claim basically repeated the previous claim‟s allegations regarding the false and misleading advertisements and sought injunctive relief.
4. The Right Of Publicity Claim Is Dismissed And The Remaining Claims Are Disposed Of On Summary Judgment
Franklin Mint moved to dismiss each of the claims, and moved to strike certain inflammatory language referring to Franklin Mint and the other defendants as "vultures feeding on the dead"; the Fund moved for a preliminary injunction with respect to the false endorsement, false advertising, and trademark dilution claims. The district court granted Franklin Mint‟s motion to dismiss with respect to the right of publicity claim, on the ground that the law of Great Britain (which does not recognize a right of publicity) applied, and granted the motion to strike the inflammatory language.*fn5 (Cairns I, supra, 24 F.Supp.2d at pp. 1022-1023.) The court denied the motion to dismiss the remaining claims and denied the motion for a preliminary injunction. (Ibid.)
With regard to the trademark dilution claim, the district court noted that a party alleging trademark dilution with respect to a personal name asserted as a mark must allege that the mark has acquired secondary meaning. The court observed that the Fund had made such an allegation, by alleging that Princess Diana‟s name and image had come to mean and be recognized as distinctive marks that identify the source of the charitable activities of Princess Diana. (Id. at pp. 1034-1035.) Although the court indicated that "Diana, Princess of Wales has such a clear primary meaning as a description of the person herself that it seems unlikely that any secondary meaning could be acquired in her name, at least in the context of fundraising for charitable services similar to those she was allegedly famous for endorsing," the court concluded that it was required to take the allegations as true on a motion to dismiss and therefore denied the motion as to the trademark dilution claim. (Id. at p. 1036.) The court also denied the Fund‟s motion for a preliminary injunction with respect to that claim, finding that the Fund did not show it had a fair chance of succeeding on the merits of the claim because the evidence presented did not suggest it could establish that Princess Diana‟s name or likeness had acquired secondary meaning. (Id. at p. 1044.)
With regard to the false advertising claim, the district court denied Franklin Mint‟s motion to dismiss because it found that the Fund had adequately alleged that Franklin Mint‟s advertisements falsely implied that it would donate proceeds to the Fund and/or that Princess Diana and the Fund endorsed Franklin Mint‟s products or advertisements. (Cairns I, supra, 24 F.Supp.2d at p. 1036.) But the court denied the Fund‟s motion for preliminary injunction on that claim because it found that the Fund did not provide sufficient evidence to support a finding that it had a fair chance of demonstrating the likelihood of confusion necessary to prove false endorsement, and because "neither the Court‟s reading of the advertisements nor the record before the Court supports [the Fund‟s] position" that the advertisements falsely imply that proceeds would be donated to the Fund. (Id. at p. 1043.)
The Fund appealed the dismissal of the right of publicity claim and the denial of the motion for preliminary injunction. The Ninth Circuit affirmed the district court. (The Diana Princess of Wales Memorial Fund v. Franklin Mint (9th Cir. Feb. 24, 2000, Nos. 98-56722, 99-55157) 1999 WL 1278044.) With respect to the trademark dilution claim, the circuit court stated: "The name "Diana, Princess of Wales‟ has not acquired a secondary meaning such that it is synonymous in the public mind with charitable activities. [Citation.] While Princess Diana received a great deal of media attention for her charitable acts, she received equal if not greater attention for her status as a member of England‟s royal family, her divorce from Prince Charles, and her tragic death. Thus, the district court‟s finding that the Estate/Fund had failed to show a fair chance of success on their trademark dilution claim was not an abuse of discretion." (Id. p. 4.) With respect to the false advertising claim, the circuit court noted that the Fund did not challenge the district court‟s holding regarding whether Franklin Mint‟s advertisements falsely implied that proceeds would be donated to the Fund. (Id. at p. 4, fn. 5.)
Franklin Mint subsequently moved for summary judgment, which the district court granted.*fn6 With regard to the trademark dilution claim, the court noted that the Fund was required to demonstrate that Diana, Princess of Wales had acquired secondary meaning as to charitable and humanitarian services. It observed, "[i]n this case, secondary meaning would occur when, "in the minds of the public, the primary significance of a [mark]‟ identifies charitable and humanitarian services rather than Princess Diana the individual." (Cairns III, supra, 107 F.Supp.2d at p. 1222.) It continued: "Although Princess Diana is certainly well-recognized for her humanitarian work and fund-raising, she is undisputably also well-recognized for her status as a member of the royal family, her role as a mother, and her image as a fashionable princess. A finding of secondary meaning in this case would mean that the words "Diana, Princess of Wales‟ would no longer primarily identify the individual, Princess Diana, but instead identify [the Fund‟s] charitable activities. This is an absurd contention to say the least. "Diana, Princess of Wales‟ has not, and the Court suspects, will never, acquire a secondary meaning limited to charitable works. [Citation.] [¶] Because secondary meaning is required for an otherwise descriptive name to be "famous,‟ and famousness is required for protection under 15 U.S.C. § 1125(c)(1), [Franklin Mint is] entitled to summary adjudication of [the Fund‟s] claim for dilution." (Id. at p. 1222.)
In granting summary adjudication of the false advertising claim, the district court observed that the claim as alleged in the complaint -- and as argued in opposition to Franklin Mint‟s motion for summary judgment -- was based upon the assertion that advertisements saying that "all proceeds" or "100% of the proceeds" from sales of Franklin Mint products would go to charity were false because Franklin Mint "retained "many times more from [its] sales of Princess Diana merchandise than they have "pledged" to charity.‟" (Cairns III, supra, 107 F.Supp.2d at p. 1223, quoting the Fund‟s opposition to Franklin Mint‟s motion for summary judgment.) The court also noted that only one of the advertisements before the court included the "all proceeds" or "100% of the proceeds" language -- the advertisement for the tribute plate -- and that uncontroverted evidence demonstrated that Franklin Mint contributed $1,538,640 to the Great Ormond Street Children‟s Hospital and had interpleaded another $2,527,107 with the court to be given to charity upon resolution of the lawsuit. In light of evidence that the amount of money given to charity reflected the amount of cash Franklin Mint collected from sales associated with that advertisement, the court concluded that undisputed evidence established that the "all proceeds" advertisement (which was the only advertisement the Fund pointed to) was literally true. (Ibid.)
5. Franklin Mint Is Awarded Attorney Fees Under The Lanham Act
Franklin Mint moved for attorney fees under the Lanham Act.*fn7 In ruling on the motion, the district court noted that the Lanham Act permits an award of attorney fees to a prevailing party only ""in exceptional circumstances,‟" which ""can be found when the non-prevailing party‟s case "is groundless, unreasonable, vexatious, or pursued in bad faith."‟" (Cairns v. Franklin Mint Co. (C.D. Cal. 2000) 115 F.Supp.2d 1185, 1187 (Cairns IV).) The court examined the three Lanham Act claims that the Fund alleged -- false endorsement, trademark dilution, and false advertising -- in light of this standard.
Addressing the false endorsement claim, the court observed that, "[a]lthough it is clear that this case was well outside the bounds of any previous decision, [the Fund‟s false endorsement] claim could be considered an attempt to extend existing law," and therefore did not "rise to the level of "groundless, unreasonable, vexatious or bad faith.‟" (Cairns IV, supra, 115 F.Supp.2d at p. 1188.) The court continued: "In contrast, [the Fund‟s] claims for dilution and false advertising were groundless and unreasonable. Unlike the endorsement claim which could be considered argument for an extension of existing law, the dilution claim had no legal basis." (Ibid.) The court noted that the dilution claim "was based on the "absurd‟ contention that "Diana, Princess of Wales‟ had taken on a meaning other than identification of an individual," and remarked that arguing that that name had acquired secondary meaning "falls just short of frivolous." (Id. at p. 1189.) The court also noted that the false advertising claim was groundless because the statements at issue were true, and the Fund presented no evidence to cast doubt on their veracity. The court concluded that the claim also was unreasonable because the Fund "should have either not brought the claim in the first instance, or voluntarily dismissed it when it was clear that there was no evidence to support it." (Ibid.)
Having found that the trademark dilution and false advertising claims were groundless and unreasonable, the district court awarded Franklin Mint $1,635,000 for defending those two claims.
6. The Judgment Becomes Final And Franklin Mint Disperses The Funds That Had Been Interpleaded
The Fund appealed from the denial of its motion to reinstate the right of publicity claim, the summary adjudication of the false endorsement claim, and the award of attorney fees. (Cairns v. Franklin Mint Co. (9th Cir. 2002) 292 F.3d 1139, 1144 (Cairns V).) The Ninth Circuit affirmed all three orders in June 2002. (Id. at p. 1159.)
At some point after the litigation was over, the $2.5 million that had been interpleaded with the district court was returned to Franklin Mint. Franklin Mint then distributed the money to several charities in the United States that Franklin Mint determined supported causes that Princess Diana had supported. Only one of those charities, however, had a direct connection with Princess Diana -- the Breast Cancer Research Foundation, to which Princess Diana had donated a dress for a fund raiser. Most of the remaining charities focused on medical issues or education and arts programs for underprivileged children or adults.
On November 15, 2002, Franklin Mint filed the instant lawsuit against Manatt and the Fund, alleging a single cause of action for malicious prosecution of the trademark dilution and false advertising claims. Manatt moved for summary judgment on the ground that there was probable cause for both claims. The trial court (Hon. John P. Shook, presiding) denied the motion, declaring that neither claim was tenable.
With respect to the trademark dilution claim, the court found (1) that Manatt had "failed to produce any evidence that Princess Diana‟s name is inherently distinctive as opposed to descriptive of the person Princess Diana"; (2) that "[t]he name Diana, Princess of Wales has not acquired a secondary meaning attributable to her charitable activities"; and (3) that the items Manatt submitted to show "Princess Diana‟s name being used in conjunction with certain charity events... do not mention any services she provided." With respect to the false advertising claim, the court found that Manatt "provided no evidence [Franklin Mint] had misled a substantial segment of its advertising audience regarding [Franklin Mint‟s] donation of proceeds to charity. The evidence presented [in the underlying lawsuit], of which [Manatt was] aware, was that [Franklin Mint] had donated a portion of the more than $4 million in sales to one of Princess Diana‟s favorite charities and had interpled the balance into district court. The evidence was uncontroverted then and remains so, even in this lawsuit."
The case went to trial before a different judge (Hon. Warren L. Ettinger). Both parties filed pretrial briefs on the issue of probable cause, in which Franklin Mint argued that the issue could be decided by the court based upon undisputed facts, while Manatt argued that there were factual issues that needed to be decided by the jury before the court could rule on probable cause. The case proceeded to jury trial, without a prior determination regarding probable cause. After Franklin Mint rested, Manatt filed a motion for nonsuit based on probable cause. The trial court did not rule on the motion at that time, and the jury trial continued. Shortly before the close of evidence, the court stated that it would allow Manatt to orally supplement the motion in order to consider it as a motion for a directed verdict.
The parties argued the issue of probable cause following the close of evidence. After extensive argument, the trial court stated its ruling: "[I]t seems to me that it is overwhelmingly clear that Mr. Lee had probable cause to bring his action and indeed confronted by a client seeking a remedy... and having consulted with other lawyers to determine whether or not that client‟s cause had merit, had he failed to file a cause of action, one would have had a serious question of whether or not he committed malpractice."
Based on its finding that there was probable cause to prosecute the underlying lawsuit, the court entered judgment in favor of Manatt. Franklin Mint timely filed a notice of appeal from the judgment.
Franklin Mint contends the trial court improperly ruled that Manatt had probable cause to prosecute the trademark dilution and false advertising claims because (1) Manatt is bound by the district court rulings in the underlying case that those claims were "groundless and unreasonable"; (2) the Fund did not own a protectable trademark in Princess Diana‟s name or image; and (3) the Fund did not have standing to bring a false advertising claim and lacked evidence to show that the advertisements at issue were false.
A. Effect of District Court Rulings
As noted above, the district court in the underlying case awarded Franklin Mint its attorney fees under the Lanham Act (15 U.S.C. § 1117(a)), finding that the trademark dilution claim "had no legal basis" and that there was no reasonable basis to believe that the advertising at issue was false, and therefore both claims were "groundless and unreasonable." (Cairns IV, supra, 115 F.Supp.2d at pp. 1188-1189.) Franklin Mint argues that the district court‟s ruling establishes that there was no probable cause to prosecute those claims and that, under the principles of collateral estoppel, Manatt is barred from relitigating probable cause. Manatt contends that Franklin Mint failed to preserve the collateral estoppel issue on appeal because it failed to present evidence in the trial court to support its argument, failed to obtain a ruling on the issue, and expressly waived the issue during the hearing on probable cause in the trial court. Manatt is correct.
"[C]ollateral estoppel must be proved [in the trial court] or it is waived." (Jordan v. Consolidated Mut. Ins. Co. (1976) 59 Cal.App.3d 26, 45.) Although Franklin Mint made references to the collateral estoppel effect of the district court rulings, it did not identify the elements of collateral estoppel, let alone attempt to apply the facts of the case to those elements.*fn8 Indeed, Franklin Mint never attempted in the trial court to submit evidence from the underlying proceedings to prove that the same issues were tried and determined in that action.*fn9 (See Haun v. Hyman (1963) 223 Cal.App.2d 615, 619 ["a party relying upon the doctrine of collateral estoppel has the burden of proving that a particular issue was actually tried and determined in the prior action"].) In any event, Franklin Mint waived the issue during the hearing on the probable cause issue, by failing to argue that the district court decisions were binding on Manatt under collateral estoppel and instead stating that the district court "decisions are not binding on a state court." We note, however, that even though the district court rulings are not binding in this case, they nevertheless can be considered as evidence relevant to the issue of probable cause. (Mattel, Inc. v. Luce, Forward, Hamilton & Scripps (2002) 99 Cal.App.4th 1179, 1191.)
B. Probable Cause in a Malicious Prosecution Case
To establish a cause of action for malicious prosecution, a plaintiff must prove that the underlying action was (1) terminated in the plaintiff‟s favor, (2) prosecuted without probable cause, and (3) initiated with malice. (Zamos v. Stroud (2004) 32 Cal.4th 958, 966, 973.) A claim for malicious prosecution need not be addressed to an entire lawsuit; it may, as in this case, be based upon only some of the causes of action alleged in the underlying lawsuit. (Bertero v. National General Corp. (1974) 13 Cal.3d 43, 57 ["We see no reason for permitting plaintiffs... to pursue shotgun tactics by proceeding on counts and theories which they know or should know to be groundless"]; see also Crowley v. Katleman (1994) 8 Cal.4th 666 ...