The California Court of Appeal has reaffirmed the demanding standard required to pursue a malicious prosecution claim following the dismissal of a consumer class action. In Citizens of Humanity, LLC v. Donboli, the court held that a family relationship between a proposed class representative and class counsel does not automatically deprive a class action of probable cause, reinforcing that malicious prosecution claims remain difficult to sustain absent evidence that the underlying lawsuit was entirely without merit.
Background
The dispute originated in a 2014 federal consumer class action alleging that Citizens of Humanity improperly marketed certain jeans as “Made in the U.S.A.” despite using fabrics and components sourced from Japan and China. The lawsuit asserted claims under California’s “Made in the U.S.A.” labeling statute, the Consumers Legal Remedies Act, and the Unfair Competition Law.
The original named plaintiff, Louise Clark, had purchased the jeans at issue but was later revealed to be the sister-in-law of one of the attorneys representing the proposed class. After Citizens sought to disqualify class counsel based on that relationship, Clark withdrew from the case and another plaintiff was substituted. The federal court permitted the substitution, finding that it resolved the disqualification issue and concluding there was no evidence that either Clark or her attorneys had acted in bad faith.
While the litigation was pending, California amended its “Made in the U.S.A.” statute to allow limited foreign-sourced components under specified thresholds. Following the statutory amendment, the federal court dismissed the complaint, and the substituted plaintiff elected not to amend, bringing the action to an end.
Citizens subsequently filed a malicious prosecution action against the attorneys, their law firm, and the former named plaintiffs, arguing that the original class action lacked probable cause because the initial representative plaintiff was closely related to class counsel.
Trial Court Finds Probable Cause Existed
Following limited testimony and the submission of documentary evidence, the parties agreed that the trial court would decide the issue of probable cause.
The trial court concluded that the defendants had probable cause to file and pursue the underlying consumer class action and entered judgment in their favor.
Court Of Appeal Rejects Per Se Disqualification Argument
The California Court of Appeal affirmed.
Citizens argued that the underlying action lacked probable cause because the original named plaintiff was an improper class representative as a matter of law under the California decision in Apple Computer, Inc. v. Superior Court. The appellate court disagreed.
First, the court distinguished Apple, noting that the plaintiff in that case was an attorney employed by one of the firms representing the class and therefore had a direct financial interest in any attorney fee award. By contrast, there was no evidence that the sister-in-law in this case had any comparable financial relationship or shared economic interests with class counsel. The court declined to presume such an interdependent relationship solely because of their familial connection.
Second, the court observed that the language in Apple discussing relatives of class counsel was, at most, dicta and therefore did not establish a binding legal rule capable of eliminating probable cause for purposes of a malicious prosecution claim.
Finally, the court emphasized that even if a conflict concerning the original class representative had existed, it would not necessarily have defeated the underlying lawsuit. The representative plaintiff could simply have been replaced, or different counsel could have continued the litigation—precisely what occurred after the original plaintiff withdrew from the case.
Because the underlying claims were not shown to be objectively and completely without merit, the malicious prosecution claim could not succeed.
Practical Takeaways
The decision highlights several important principles for businesses defending consumer class actions:
- A familial relationship between a proposed class representative and class counsel does not automatically disqualify the representative.
- Challenges to the adequacy of a class representative remain highly fact-specific and depend on the existence of actual conflicts rather than presumed ones.
- Even where potential conflicts exist, courts may permit substitution of the representative plaintiff or other corrective measures rather than dismissing the underlying action.
- Companies pursuing malicious prosecution claims continue to face a substantial burden. They must demonstrate not merely that the underlying lawsuit was unsuccessful, but that no reasonable attorney could have believed the claims had merit.
Looking Ahead
The decision reinforces California’s strong preference for resolving adequacy issues within the class action itself rather than allowing those issues to serve as the basis for subsequent malicious prosecution claims. It also illustrates the continued reluctance of California courts to adopt bright-line rules disqualifying relatives of class counsel from serving as class representatives.
For businesses evaluating litigation strategy after successfully defeating a consumer class action, Citizens of Humanity serves as a reminder that the probable cause standard remains a significant hurdle, and only the clearest cases of objectively meritless litigation are likely to support a malicious prosecution claim.