Reported / Citable
Background
Citizens of Humanity, LLC, a California denim brand, found itself on the wrong end of a consumer-fraud class action in federal court — then turned the tables by suing its accusers for malicious prosecution. The original suit, filed in 2014 by Del Mar Law Group, alleged that Citizens violated California’s “Made in the U.S.A.” labeling law (Business and Professions Code § 17533.7) by selling jeans assembled with fabrics and components imported from Japan and China. California law at the time was unambiguous: any “Made in USA” label was unlawful if the product contained any significant foreign components.
The named plaintiff, Louise Clark, was the sister-in-law of one of the lead attorneys at Del Mar Law Group. When Citizens moved to disqualify the firm based on that relationship, Clark withdrew and was replaced by Coni Hass. While Hass’s claims were pending, the California Legislature amended § 17533.7 in 2016 to allow “Made in USA” labeling when foreign materials make up no more than 5% of the product’s final wholesale value (or up to 10% if those materials could not be sourced domestically). The federal court dismissed Hass’s case under the amended statute, and Hass declined to amend her complaint.
Citizens then filed this malicious prosecution action against the two attorneys, their law firm, and both named plaintiffs, arguing the class action was filed and prosecuted without probable cause. After a bench trial on the probable cause issue, the San Diego Superior Court found in defendants’ favor. Citizens appealed to the Fourth District.
The Court’s Holding
The Fourth District Court of Appeal (Division One) affirmed the judgment for defendants. The central legal question was whether Clark’s status as the sister-in-law of class counsel automatically defeated probable cause under Apple Computer, Inc. v. Superior Court (2005). Citizens argued that Apple categorically prohibits attorneys’ relatives from serving as class representatives, and therefore defendants could not have had probable cause to bring the suit with Clark as plaintiff. The court rejected this argument on two independent grounds.
First, Apple does not hold what Citizens claimed. The relevant passage is dictum — Apple actually addressed a different conflict of interest (a plaintiff who was an employee of one of his own attorneys) and merely quoted a federal decision noting that most courts had been reluctant to allow relatives of class counsel to serve as representatives. Because courts nationwide remain genuinely split on this question, no reasonable attorney can be charged with knowing that California law categorically bars the practice. A claim that is merely contested — not settled — cannot support malicious prosecution.
Second, and independently, even a disqualifying conflict would not defeat probable cause. Probable cause asks whether the underlying claims had legal merit, not whether a particular plaintiff was a permissible vehicle for them. If Clark had been disqualified, the defendants could have proceeded with a different representative (as they ultimately did, with Hass). Any defect in Clark’s standing did not strip the claims of legal validity. The court also rejected all seven of Citizens’ evidentiary challenges, finding Citizens showed neither an abuse of discretion by the trial court nor any resulting prejudice from the exclusions — including the exclusion of a “paper airplane” demonstration intended to show the plaintiffs did not truly understand what “Made in the U.S.A.” means.
Key Takeaways
- A class representative’s family relationship with class counsel does not automatically establish that a lawsuit lacked probable cause — even if the relationship would support disqualification of counsel, probable cause turns on the merits of the underlying claim, not the identity of the plaintiff.
- California’s “Made in USA” labeling law (Bus. & Prof. Code § 17533.7) was amended in 2016: manufacturers may now lawfully use “Made in USA” labels if foreign materials total no more than 5% of the product’s final wholesale value (or 10% if the foreign material could not be domestically sourced) — a significant relaxation from the prior all-or-nothing rule.
- The probable cause inquiry in malicious prosecution is objective: the question is whether any reasonable attorney would have thought the claim tenable, not whether these particular defendants harbored subjective bad intent.
- Trial courts have broad discretion under Evidence Code § 352 to exclude relevant evidence when admitting it would risk time-consuming “mini trials” on collateral matters — particularly where the probative value on the key legal issue is limited.
- Appellate arguments about excluded evidence must be preserved by raising them for the specific purpose at issue in the trial court — arguing evidence is relevant to malice does not preserve a claim that the same evidence was improperly excluded on the probable cause issue.
Why It Matters
For California consumer-product manufacturers, this case illustrates how difficult malicious prosecution claims are to win against failed class actions. The fact that legislation changed during litigation — making what was once unlawful now permissible — does not mean the original lawsuit was meritless when filed. Businesses facing class actions under California consumer protection statutes should expect courts to find probable cause in borderline situations where the law was not clearly settled at the time of filing.
For plaintiffs’ class action attorneys, the ruling offers some reassurance: recruiting clients from personal and professional networks does not automatically create malicious prosecution exposure, even when a named plaintiff’s relationship to counsel is later challenged. The safer practice, however, is still to ensure that named plaintiffs have no financial or familial relationship with counsel — in this case, the conflict forced an expensive substitution and generated years of additional litigation beyond the class action itself.