Latham Sued For Malicious Prosecution
Latham still has an opportunity to defend itself, but the language of the opinion is not encouraging.
Yesterday, a California appellate court overturned the lower court’s dismissal of a malicious prosecution claim against Biglaw mainstay Latham & Watkins. According to the opinion, the lower court was wrong on the statute of limitations, but the opinion also went out of its way to express just how likely the plaintiffs were to prevail on the merits of their claim that Latham doggedly pursued them on a “non-viable” legal theory.
Latham still has an opportunity to defend itself, but the language of this opinion is certainly not encouraging.
The plaintiff already recovered over $1.6 million in fees from Latham’s client, let’s see how they do against the firm…
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The underlying action seems pretty technical because of all the mumbo-jumbo getting tossed around, but when it’s boiled down to its elements, this is a pretty straightforward “we don’t want our former employees to start their own business” case.
Latham’s clients in the original action were FLIR and Indigo Systems. The companies had sued their former employees for walking off and trying to start their own business with trade secrets that FLIR and Indigo claimed belonged to them. The employees thought this was hogwash and ultimately beat back the claim and prevailed in their argument that the whole case was brought in bad faith, securing the hefty $1.6-million-and-change award in the process.
But the employees weren’t satisfied with that ruling and launched a case against Latham & Watkins and litigation partner Daniel Schecter. As one would expect, Latham made their anti-SLAPP motion, and it was granted. Enter the Second Appellate District. They disagreed.
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According to the opinion, FLIR and Latham accused the employees of pursuing a business plan that they conceived while working for a newly-acquired FLIR subsidiary, thereby making the whole venture FLIR’s intellectual property. The employees argued that the business plan existed prior to the company FLIR acquired and provided evidence backing this up (specifically evidence that Raytheon was the party involved in the business plan). By virtue of Latham not owning a time machine, they could have accepted this. However, they wrote a letter arguing, basically, “yeah… but that would take a long time to get off the ground so you must have been planning to steal our technology to make this business plan work.” The problem with taking this tack, according to the court:
Indeed, the complaint alleged that Former Employees’ assurances that they would not use FLIR’s intellectual property in their new venture were “belied” by [Former Employee E. Timothy] Fitzgibbons’s assertion that the business plan had been developed before he had joined Indigo. In other words, the complaint alleged that this purported misrepresentation was a reason to disbelieve Former Employees in general.
The glaring reversal of their original argument would be bad enough. Unfortunately, Latham’s new theory of the case rested on “inevitable disclosure.” The appellate court observes:
Latham knew or should have known that inevitable disclosure is not a viable legal theory in California, and that its theory therefore lacked a legal basis.
The basis for the inevitable disclosure theory pursued by Latham were a pair of expert witnesses:
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At trial, both experts explained that their opinions were based only on public domain information regarding technology held by third parties; they did not consider private technology third parties may possess. While this limitation might not render the experts’ declarations affirmatively false, it utterly undermined their value in establishing the point for which Latham offered them.
“Utterly undermined.” This is dancing into benchslap territory.
But hey, experts are experts. It’s not like any of the principals in the underlying case knew the whole thing was speculative, right?
FLIR’s President gave testimony indicating that he had no factual basis for the assertion that Former Employees would use FLIR’s intellectual property, and strongly implying that this action was nothing more than a preemptive strike.
Oh. Well, yeah that’s unfortunate.
This evidence, taken together, supports the conclusion that Latham pursued an obviously meritless claim against Former Employees.
Yikes.
Yeah, good luck with all that, Latham.
