Suit Against Engel Dismissed

A Superior Court judge Monday dismissed a malicious-prosecution lawsuit filed against Southwest Marine owner Art Engel by a former employee.

Engel, who is also a member of a team of investors trying to buy the San Diego Padres ball club, was sued by Gerard F. Cotter.

Cotter played a key role in a separate lawsuit filed by several Northern California shipyards against Engel and Southwest Marine. He informed the shipyards of a scheme used by Engel to win a $150-million repair contract from the Navy. To obtain the contract, Engel laid off about 500 workers so his company could qualify as a small business, which would let Engel get favorable treatment when bidding for federal jobs. The laid-off workers were later rehired.

Cotter revealed the scheme to the Northern California shipyards, which sued Engel and Southwest Marine. In August, 1989, a federal judge in San Francisco agreed with the contentions and ruled that Southwest Marine and Engel had engaged in a fraudulent scheme to win the contract. Engel settled the lawsuit out of court. As part of the settlement, the judge sealed details of the agreement and agreed to a request from Engel’s attorneys that his finding of fraud be stricken from court records, which had been previously publicized.

After the settlement, Engel sued Cotter for revealing trade secrets. Engel’s lawsuit later dismissed and Cotter countersued for malicious prosecution. However, Judge Harrison Hollywood threw out Cotter’s lawsuit, ruling that Cotter’s attorney did not prove that Engel acted with malice when he sued Cotter.