Engel v. CBS, Inc., 93 N.Y.2d 195 (1999)

In New York, a malicious prosecution claim requires a showing of ‘special injury,’ meaning the defendant suffered a concrete harm considerably more burdensome than the typical demands of defending a lawsuit, akin to the effect of a provisional remedy.

Summary

Attorney Donald Engel sued CBS for malicious prosecution after CBS sued him in a prior action to allegedly interfere with his representation of his client, Donald Thomas Scholz. The Second Circuit certified a question to the New York Court of Appeals regarding the ‘special injury’ element of a malicious prosecution claim under New York law. The Court of Appeals held that New York law requires a showing of special injury, but it is not limited to situations where a provisional remedy was imposed. However, the Court found that Engel’s allegations, as presented in the certified question, did not demonstrate a sufficient undermining of his representation to constitute special injury.

Facts

CBS sued the rock group Boston and its leader, Donald Thomas Scholz, for breach of contract. Scholz hired Engel to represent them. Engel successfully negotiated a contract with MCA Records on Scholz’s behalf. CBS then sued MCA, Scholz, Engel, and others, alleging breach of contract and copyright infringement based on the MCA deal. Engel claimed CBS sued him, in part, to dissuade him from representing Scholz. Engel alleged that this created conflicts of interest, made effective service to Scholz more onerous, increased the burden of discovery requests, and caused him to absorb these costs. He also claimed to have lost at least one potential client and suffered emotional and financial harm due to damage to his reputation.

Procedural History

The District Court granted Engel’s motion for summary judgment in the CBS action, dismissing him as a defendant. Engel then commenced a malicious prosecution action in the Central District of California. The California Federal court granted CBS’s motion for summary judgment, which was reversed by the Ninth Circuit Court of Appeals, holding that New York law applied. The case was transferred to the Southern District of New York, which granted CBS’s motion for summary judgment. The Second Circuit Court of Appeals then certified a question to the New York Court of Appeals regarding the special injury requirement under New York law.

Issue(s)

Whether an attorney, sued by his client’s adversary for the purpose of interfering with the attorney’s zealous representation of his client, and whose representation is actually undermined by the suit, may satisfy the required element of special injury in an action for malicious prosecution of a civil lawsuit under New York law where no provisional remedy is had against him.

Holding

No, because under the specific facts presented in the certified question, Engel did not demonstrate the requisite added grievance, or a sufficient undermining of his representation, to constitute special injury.

Court’s Reasoning

The Court acknowledged the argument against the special injury requirement, noting its English origins and the American rule on attorney’s fees. However, the Court emphasized that New York law has consistently required special injury in malicious prosecution claims, citing Williams v. Williams and other cases. The Court stated that the special injury requirement ensures open access to the courts and prevents endless litigation. While special injury typically involves interference with person or property, such as through a provisional remedy (arrest, attachment, or injunction), the Court clarified that special injury is not confined to the imposition of a provisional remedy. The court found that a verifiable burden substantially equivalent to the provisional remedy effect can amount to special injury. It must be a concrete harm considerably more cumbersome than the physical, psychological, or financial demands of defending a lawsuit.

Regarding Engel’s situation, the Court found that the allegations of injury presented in the certified question fell short of the special injury standard. The Court stated, “The question itself begs us to assume that an attorney-client relationship was ‘actually undermined,’ but on the facts given to us, we cannot so conclude.” The Court noted that Engel complained about the burdens imposed by the conflict of interest but that avoiding conflicts and dealing with actual conflicts are part of the lawyer’s profession. The court explained that although his burden was slightly increased, it did not form the critical mass necessary to be cognizable as special injury. The Court also noted that the claims of lost business were too general and not sufficient to establish special injury. The court emphasized the need to balance concerns of open access to courts with preventing the courts from being used for oppression and harassment, echoing the sentiment in Burt v. Smith. Although the court found CBS’s actions reprehensible, the consequences never materialized to the degree necessary to constitute special injury. The Court stated that a malicious civil prosecution is one that is begun in malice, without probable cause, and which, after imposing a grievance akin to the effect of a provisional remedy, finally ends in failure: “see, Burt v Smith, supra, 181 NY, at 5“. The Court explicitly declined to create a special rule for attorneys.