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Roger Cleveland Golf Co., Inc. v. Krane & Smith, APC

California Court of Appeals, Second District, Third Division

April 15, 2014

ROGER CLEVELAND GOLF COMPANY, INC., Plaintiff and Appellant,
KRANE & SMITH, APC et al., Defendants and Respondents.

APPEAL from orders of the Superior Court of Los Angeles County, No. LC093721 James A. Kaddo, Judge.

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Horvitz & Levy, Lisa Perrochet, John F. Querio, Jeremy B. Rosen; Cannon & Nelms, Anthony L. Cannon and Julia A. Mouser for Plaintiff and Appellant.

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Towle Denison Smith & Maniscalco and Michael C. Denison for Defendants and Respondents.

Manatt, Phelps & Phillips, Harry W.R. Chamberlain II; and Michael A. Colton for Association of Southern California Defense Counsel as Amicus Curiae on behalf of Defendants and Respondents.



In this case, we address the applicable statute of limitations when an attorney is sued for malicious prosecution. Almost thirteen months after the resolution in the trial court of Sportsmark Trading, Ltd. v. Roger Cleveland Golf Company, Inc. (Super. Ct. L.A. County, 2007, No. BC365228) (the Sportsmark action), Roger Cleveland Golf Company, Inc. (RCG), the defendant therein, filed a malicious prosecution action against Sportsmark Trading, Ltd. (Sportsmark)[1] and Sportsmark’s attorneys, Krane & Smith, LLC, Marc Smith, Esq., and Ralph C. Loeb, Esq. (collectively, Attorneys). In response, Attorneys filed a special motion to strike under the anti-SLAPP (strategic lawsuit against public participation) statute (Code Civ. Proc., § 425.16).[2] Relying on Vafi v. McCloskey (2011) 193 Cal.App.4th 874 [122 Cal.Rptr.3d 608] (Vafi), Attorneys contended the malicious prosecution complaint was time barred by the one-year statute of limitations set forth in section 340.6, subdivision (a)[3] because the statute was not tolled during the appeal of the judgment in the Sportsmark action. The trial court dismissed the malicious prosecution complaint as time barred, including in its computation of the one-year period, the seven months in which the Sportsmark action was pending in the Court of Appeal.

Here, we address the discrete but related issues of accrual of a malicious prosecution cause of action and commencement of the statute of limitations.

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Pursuant to the “start/stop” computation refined by this court in Rare Coin Galleries, Inc. v. A-Mark Coin Co., Inc. (1988) 202 Cal.App.3d 330 [248 Cal.Rptr. 341] (Rare Coin), a cause of action for malicious prosecution accrues upon entry of judgment in the underlying action in the trial court. (Id. at pp. 334-335.) The statute of limitations begins to run upon accrual and continues to run until the date of filing a notice of appeal. (Id. at p. 335.) The statute is then tolled during the pendency of the appeal because the plaintiff cannot truthfully plead favorable termination of the prior action, which is an element of the malicious prosecution cause of action. At the conclusion of the appellate process, that is, when the remittitur issues, the statute of limitations recommences to run. (Id. at pp. 335-336.)

Applying these principles, the malicious prosecution action against Attorneys is not time barred as the statute of limitations was tolled during the seven-month period in which the Sportsmark action was pending on appeal. Vafi, supra, 193 Cal.App.4th 874did not address this issue. Because section 340.6, subdivision (a) appears to exclude tolling in these circumstances, we respectfully disagree with Vafi and Yee v. Cheung (2013) 220 Cal.App.4th 184 [162 Cal.Rptr.3d 851] (Yee) that section 340.6 is the applicable statute of limitations governing a malicious prosecution action against an attorney. Instead, we conclude the applicable statute of limitations for malicious prosecution is section 335.1, irrespective of whether the party being sued for malicious prosecution is the former adversary (Sportsmark) or the adversary’s attorneys (Attorneys).

We further conclude, however, that the trial court properly granted the anti-SLAPP motion. RCG did not establish the probability of prevailing on the merits as it did not make the minimal evidentiary showing of malice. Thus, we affirm the orders granting the anti-SLAPP motion and awarding fees to Attorneys pursuant to section 425.16, subdivision (c)(1).


Attorneys represented Sportsmark, the sole distributor of RCG’s products in Hong Kong, Macau, China (not Taiwan), India, Pakistan, and Bangladesh. Sportsmark and RCG entered into a distributorship agreement for a period of three years starting from January 1, 1996 and ending December 31, 1998. The distributorship agreement was renewed in 2000 for a three-year term, and again in 2002 for a four-year term with a modification in the territories to include Hong Kong, Macau and China (not Taiwan) (hereafter, the territories). In November 2005, RCG informed Sportsmark that it was renewing the distributorship agreement in the territories for “a period of one (1) year starting from January 1, 2006 and ending December 31, 2006.”

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In September 2006, RCG informed Sportsmark in writing that “this Distributorship will not be renewed or extended beyond December 31, 2006.” Litigation ensued.

1. The Sportsmark Action

a. Complaint, Answer, Counterclaims

In January 2007, Sportsmark filed a complaint against RCG, alleging causes of action for (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) unjust enrichment, (4) declaratory relief re: distributorship agreement, and (5) declaratory relief re: trademark.

The complaint alleged Sportsmark acted as the sole distributor of RCG’s golf products in the territories and was “instrumental in developing the markets” for RCG’s products. The distributorship agreement allegedly was “made, renewed, modified, and extended partly orally, partly in writing and/or partly by course of conduct, ” and the “parties agreed that the Distributorship Agreement would continue to be renewed unless good cause existed for nonrenewal.” In September 2006, RCG allegedly breached the distributorship agreement by notifying Sportsmark that it would not be renewed, “despite the fact that Defendant [RCG] did not have good cause for said nonrenewal.” Sportsmark sought a judicial determination of its rights and duties under the distributorship agreement and its rights and duties with respect to the trademark “Cleveland Golf.” Specifically, Sportsmark sought a declaration that it “is an owner” of the rights to the “Cleveland Golf” trademark in the territories.

RCG removed the action to the United States District Court. RCG answered the complaint and asserted two trademark counterclaims against Sportsmark. In its first counterclaim, RCG brought a declaratory relief action seeking a “judicial determination of its exclusive rights to the marks” “Cleveland Golf, ” “Cleveland, ” and other similar marks owned by Cleveland Golf, including but not limited to, “a determination that Sportsmark has no right to use such marks anywhere in the world” and particularly in the territories covered by the distributorship agreement. The second counterclaim sought injunctive relief, “enjoining Sportsmark from the use of the marks ‘Cleveland Golf, ’ ‘Cleveland, ’ and other similar and related marks owned by Cleveland Golf” in the territories or anywhere else in the world.

The United States District Court concluded it lacked subject matter jurisdiction and remanded the action to the Los Angeles Superior Court. By motion, the Sportsmark action was transferred to the Orange County Superior Court.

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b. Preliminary Injunction to Enjoin Sportsmark from Registering or Using RCG’s Trademarks

In February 2008, RCG sought a preliminary injunction to enjoin Sportsmark “from registering and using the marks ‘Cleveland Golf, ’ ‘Cleveland, ’ and other similar marks owned by Cleveland Golf in The People’s Republic of China, Hong Kong, Macau... or anywhere else in the world, pending the outcome of this action on the merits.” After commencing the Sportsmark action, Sportsmark filed an application in Hong Kong to register the trademark “Cleveland Golf.” Sportsmark also registered the trademark “Cleveland Golf” in Macau.

The trial court granted the preliminary injunction. The written ruling stated: “The Court fails to see where Sportsmark gets the Chutzpah to claim it can register Cleveland’s name. As a distributor, Sportsmark cannot appropriate Cleveland’s trademark. Whether or not the distributor agreement was terminated properly does not affect the trademark issue.” The order and preliminary injunction directed Sportsmark to withdraw, cancel, or abandon its trademark application in Hong Kong and trademark registration in Macau, or anywhere else in the world for the mark “Cleveland Golf, ” or “Cleveland.” The preliminary injunction, however, did not prohibit Sportsmark from selling its remaining Cleveland Golf inventory.

c. Dismissal of Trademark Claim, Denial of Summary Judgment on Sportsmark’s Contract Claims

In October 2009, on the eve of the scheduled trial date, Sportsmark dismissed its fifth cause of action for declaratory relief regarding the “Cleveland Golf” trademark without prejudice “in order to avoid further litigation expenses in connection with that cause of action and simplify the trial.” Attorney Loeb’s letter to RCG’s counsel further stated: “[P]lease be advised that Sportsmark hereby disclaims any interest in the trademark ‘Cleveland Golf’.”

The trial was postponed, and RCG moved for summary judgment on the remaining contract claims, and its two trademark counterclaims for declaratory and injunctive relief. The trial court denied the motion. The tentative ruling, which became the final ruling of the court, described the separate statement as “defective” because it “merely recites a partial history of the parties’ written agreements, but includes no facts refuting the complaint’s allegations of an oral contract.” The trial court concluded that RCG did not meet its burden under section 437c, subdivision (p)(2), and therefore the burden never shifted to Sportsmark. The trial court also concluded RCG’s trademark counterclaims were improperly asserted in its verified answer. The

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court noted the trademark dispute was no longer part of the operative complaint, and a summary judgment motion was not the proper vehicle by which a party may seek a permanent injunction.

d. Permanent Injunction, Trial, Nonsuit

In a bifurcated proceeding, the trial court held a bench trial on RCG’s trademark counterclaims for declatory and injunctive relief. On April 9, 2010, the trial court granted a permanent injunction, restraining Sportsmark from registering or using RCG’s trademarks in the “People’s Republic of China, Hong Kong, Macau (collectively, the ‘Territories’), or in the United States of America, or anywhere else in the world.” The trial court also concluded RCG suffered no harm because Sportsmark did not use any of RCG’s trademarks in an “infringing manner.”

Before the jury trial began, Sportsmark dismissed its declaratory relief cause of action seeking a judicial determination that RCG had an obligation to renew the distributorship agreement. Thereafter, trial commenced on the remaining causes of action for breach of contract, breach of the implied covenant, and unjust enrichment.

During trial, Sportsmark, through its principal, testified that the company received notice of the one-year extension of the distributorship agreement, and did not receive any writing from RCG confirming an oral agreement of another two or three-year extension. The evidence established that the agent who allegedly made the oral promise of an extension did not have authority to do so.

RCG moved for nonsuit, contending the evidence established no oral contract to renew the distributorship agreement, any oral contract to renew the distributorship agreement would be barred by the statute of frauds because it could not be completed in one year, and parol evidence was inadmissible to contradict the terms of the one-year extension. RCG also moved for nonsuit of the unjust enrichment claim on the ground that unjust enrichment is a remedy and cannot be maintained when the plaintiff alleges a breach of contract.

Sportsmark dismissed its claim for unjust enrichment. The trial court granted the motion for nonsuit. On April 26, 2010, the trial court signed a written order ...

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