Graham

This case has a hint of the “stranger than fiction” flavor: Foundation sues former substantial donor for malicious prosecution based on the donor’s fruitless federal suit against the foundation for fraud, breach of contract and other causes. The donor urges attorneys general from two states to get involved. One declines but the other launches an accounting action against the foundation in which a purported beneficiary of the donor’s gift intervenes; this action settles.

This appeal—from a judgment for compensatory and punitive damages in favor of the foundation—probes all aspects of the malicious prosecution tort, as well as the constitutionality of punitive damages. It poses the interesting question of where to focus inquiry into whether the underlying action terminated favorably to the foundation—on the federal judgment, or the subsequent settlement in the accounting and related intervention action? We conclude the federal judgment is the proper focus, find the donor’s other arguments to be without merit and affirm the judgment but reverse an order for sanctions.

I. Factual and Procedural Background

A. The Mudd Deed of Gift; Frontera; Land Project

Established in…