A California appellate court has refused to reinstate a vendor's malicious-prosecution lawsuit against a former owner of a dealership that canceled its contract for loan-financing software that it said didn't perform as expected.
The case arose from an earlier lawsuit filed by the dealership, Saturn of Ontario, against the vendor, Howard Pestano, for refusing to honor a money-back guarantee. The dealership dropped that lawsuit because of high litigation costs and the unlikelihood of collecting on a judgment.
The three-judge Court of Appeal panel held that Saturn of Ontario had been justified in dropping its suit against Pestano for cost reasons and agreed with the trial judge that the dealership had met its legal burden in disproving all elements of Pestano's malicious-prosecution claim.
According to the appeals court's decision, Pestano and his employee marketed LoanLogic software to the dealership in 1998. The software was designed to help dealerships find financing for customers with poor credit.
Saturn of Ontario canceled the contract within the 90-day, money-back-guarantee period because "it didn't meet the dealership's needs or expectations," said its current lawyer, Robert Peter Weiss of Sherman Oaks. But Pestano refused to honor the guarantee.
Saturn of Ontario sued. But it dismissed its case on the eve of trial because Pestano's serious health, personal and financial problems made it unlikely that the dealership would be able to collect any damages even if it won the case, says the appellate court.
The court noted that a trial would have cost the dealership more than $10,000 in extra legal fees.
Pestano's malicious-prosecution lawsuit accused Saturn of Ontario and its former law firm of filing a meritless case and sought to recoup his legal costs, which Weiss estimates at $60,000 to $70,000. A San Bernardino County Superior Court judge dismissed Pestano's case.
In upholding that ruling, appellate Justice Barton Gaut said the dealership "provided unrefuted evidence" that it had dropped its contract-related claims only "because of the economic impracticality of incurring additional litigation expenses trying the case when Pestano was believed to be judgment-proof."
As a result, the court said, Pestano had no basis for arguing that the dealership's original lawsuit lacked merit.
Pestano's lawyer has not returned phone calls seeking comment.
You may e-mail Eric Freedman at [email protected]