Is a Voluntary Dismissal With Prejudice a “Favorable Termination”

A recent Court of Appeals case affirmed a trial court’s ruling that a voluntary dismissal with prejudice does not constitute a “favorable termination” for the purpose of a malicious prosecution claim. In Fit2Race, Inc. v. Pope, No. M2015-00387-COA-R3-CV (Tenn. Ct. App. Jan. 29, 2016), the underlying claim initially started during a contentious divorce proceeding. The court granting the divorce ruled in its final decree that the wife had been secretly working with other parties to steal business from and destroy the company started by the husband, and the court held that wife was “sanctioned and [] forbidden to oppose [husband’s] claim that she subverted and destroyed [husband’s] business.”

After the divorce, husband seized upon the findings of the judge in the divorce and filed a federal complaint against wife, another business, and the owners of the other business alleging interference with business relations and civil conspiracy. Husband eventually voluntarily dismissed this case with prejudice.

Not contend to leave well enough alone,  the other business and its two owners (the defendants in the federal court action) filed this malicious prosecution action against husband and husband’s attorney. The trial court granted summary judgment to husband and his attorney, finding that because the trial court in the initial divorce had found that wife and the parties at issue here had worked together to steal/destroy husband’s business, there was “more than ample cause for filing the subsequent federal complaint in the underlying action.” Further, the trial court held that “a voluntary notice of dismissal with prejudice does not constitute a favorable termination without any discussion of the merits of the claim.” The Court of Appeals affirmed the summary judgment.

A plaintiff in a malicious prosecution case must prove that “an earlier action (1) was filed without probable cause, (2) was filed with malice, and (3) was terminated in favor of the plaintiff.” (internal citation omitted). In affirming the grant of summary judgment, the Court of Appeals here looked only to the third element, a favorable termination.

In Himmelfarb v. Allain, 380 S.W.3d 35 (Tenn. 2012), the Tennessee Supreme Court held that “a voluntary nonsuit taken pursuant to Tennessee Rule of Civil Procedure 41 is not a termination on the merits for the purposes of a malicious prosecution case.” The Himmelfarb Court noted that public policy dictated against such a finding, as the Court did not want to adopt a position that would “deter litigants with potentially valid claims from filing those claims because they are fearful of a subsequent malicious prosecution action” or “deter parties from dismissing their claims when a dismissal is the appropriate course of action.”  Plaintiffs here attempted to distinguish their case by pointing out that the dismissal in Himmelfarb was without prejudice, whereas husband took a voluntary dismissal WITH prejudice. The Court, though, rejected this argument, holding that the Supreme Court’s rationale “applies equally whether a case is dismissed with or without prejudice.” Accordingly, summary judgment for husband and his attorney was affirmed.

This was clearly the correct result in this case. Husband and his attorney had cause to bring the underlying action, and it did not result in a “favorable termination” when voluntarily dismissed. Of note, though, is a comment from the Court near the end of the opinion. While stating that a dismissal with or without prejudice should be treated the same, the Court went on to point out that “Rule 41.01(2) of the Tennessee Rules of Civil Procedure provides that if a plaintiff dismisses an action ‘based on or including the same claim’ twice, a notice of dismissal ‘operates as an adjudication upon the merits.’” The Court then notes that husband here had not previously dismissed this claim, thereby indicating that if he had the analysis may have been different if he had.