## Facts

- U.S. Bank National Association and U.S. Bancorp (together, U.S. Bank) sued Sterne, Agee & Leach, Inc. (Sterne) and others in the U.S. District Court for the Western District of Washington, alleging violations of the Washington State Securities Act arising from a Washington securities offering.
- U.S. Bank resolved its claims against the other defendants through default judgments or settlements, but the litigation continued against Sterne.
- After trial, the federal district court entered judgment in Sterne’s favor as a matter of law; the Ninth Circuit vacated and remanded.
- Following a second trial, the federal district court again entered judgment for Sterne, and the Ninth Circuit affirmed. The Washington federal action thus terminated in Sterne’s favor in Washington.
- Sterne (a Delaware corporation with its headquarters in Alabama and an office in Seattle) then sued U.S. Bank in Alabama state court for malicious prosecution based on the Washington federal lawsuit.
- Alabama and Washington use different substantive rules for malicious-prosecution claims, so the governing law could determine whether Sterne’s complaint stated a viable claim.
- The parties agreed Alabama’s choice-of-law doctrine for torts—lex loci delicti—applied, but disputed where the “injury” occurred for purposes of that doctrine.
- U.S. Bank moved to dismiss, arguing the injury in a malicious-prosecution claim occurs where the underlying lawsuit terminated in the plaintiff’s favor (Washington), requiring Washington law and dismissal.
- Sterne argued the injury was the financial harm of defending the lawsuit and that it was felt at Sterne’s Alabama headquarters, so Alabama law should govern.
- The Jefferson Circuit Court denied the motion to dismiss and also denied U.S. Bank’s request to certify the order for a permissive interlocutory appeal.
- U.S. Bank petitioned the Alabama Supreme Court for a writ of mandamus directing the trial court to apply Washington law and dismiss Sterne’s malicious-prosecution action.

## Issues

1. For Alabama’s lex loci delicti rule, where does the “injury” occur in a malicious-prosecution claim based on prior out-of-state litigation: where the plaintiff later experiences financial effects, or where the underlying lawsuit terminated in the plaintiff’s favor?
2. Does lex loci delicti require applying Washington or Alabama substantive law to Sterne’s malicious-prosecution claim?
3. If the trial court applied the wrong state’s law, is mandamus an available remedy to compel application of the correct law and dismissal?

## Decision

- The Alabama Supreme Court granted U.S. Bank’s petition and issued the writ of mandamus.
- The court held that, for a malicious-prosecution claim, the injury relevant to lex loci delicti occurs where the underlying proceeding terminates in the claimant’s favor.
- Because the Washington federal case terminated in Sterne’s favor in Washington, Washington was the place of injury, and Washington substantive law governed the malicious-prosecution claim.
- Applying Washington law, the court concluded Sterne’s complaint did not state a malicious-prosecution claim under Washington’s requirements.
- The court directed the Jefferson Circuit Court to dismiss Sterne’s malicious-prosecution action.

## Legal Principles

- Alabama applies lex loci delicti in tort cases: the substantive law of the state where the injury occurred governs.
- For lex loci delicti, the place of injury is tied to the last event necessary to make the defendant liable for the tort alleged.
- A malicious-prosecution claim does not accrue until the prior action terminates in the claimant’s favor; that favorable termination is the event that completes the tort for choice-of-law purposes.
- Litigation expenses or other monetary consequences felt in a different state do not control the lex loci delicti location when the tort’s completion depends on an event occurring elsewhere.
- Mandamus may be available to correct a clear legal error when the petitioner shows a clear right to relief, an imperative duty on the trial court, a refusal to act, and no adequate remedy by appeal; the court treated an outcome-determinative choice-of-law error as fitting that standard in this setting.

## Conclusion

The Alabama Supreme Court held that under Alabama’s lex loci delicti rule, the injury in a malicious-prosecution claim occurs where the underlying suit ended in the plaintiff’s favor, not where the plaintiff later feels financial effects; because the prior securities case terminated in Washington, Washington law governed, and mandamus issued directing dismissal of Sterne’s Alabama malicious-prosecution complaint.


Sterne, Agee & Leach, Inc v. U.S. Bank National Association, 148 So. 3d 1060 (2014)