Opinion
CHIN, J.We granted review to decide whether a person may sue for the malicious prosecution of an action that the parties resolved through contractual arbitration. Because a contractual arbitration proceeding does not result in a favorable termination of a prior action, a necessary element of malicious prosecution, we conclude a person may not do so.
I. The Facts and Procedural History
In 1992, Tremco Incorporated (Tremco) sued a former employee, Walter M. Brennan, after he went to work for one of Tremco’s competitors. The *313complaint alleged breach of contract, conversion, misappropriation of trade secrets, intentional interference with prospective economic advantage, fraud, and unfair competition. Brennan obtained summary adjudication of some of the causes of action. Thereafter, in 1996, the parties agreed to arbitrate Tremco’s remaining claims. The trial court orally summarized the agreement: “With regard to this particular matter, the parties have stipulated to a[d]judicate the matter by binding arbitration. That, of course, means a waiver of any trial de novo, also any right of appeal.” A subsequent written agreement provided: “It is stipulated and agreed by the parties and their attorneys that trial by judge or jury is waived and the entire case will be submitted to Hon. G. Keith Wisot for final and binding decision from which there is no trial de novo or appeal.” Ultimately, the arbitrator ruled in Brennan’s favor on the remaining claims. The court confirmed the arbitration award and entered judgment in Brennan’s favor.
Brennan then filed this action against Tremco and its attorneys for maliciously prosecuting the original action. He alleged that the original action had terminated completely in his favor. The attorneys settled the case and are no longer parties to this action. Tremco demurred. The trial court sustained the demurrer “without leave to amend based upon the fact that the underlying action was terminated by private arbitration and a malicious prosecution action cannot as a matter of law be based upon private arbitration. (Sagonowsky v. More (1998) 64 Cal.App.4th 122 [75 Cal.Rptr.2d 118].)” Brennan appealed, and the Court of Appeal reversed. We granted Tremco’s petition for review.
H. Discussion
“[I]n order to establish a cause of action for malicious prosecution of either a criminal or civil proceeding, a plaintiff must demonstrate ‘that the prior action (1) was commenced by or at the direction of the defendant and was pursued to a legal termination in his, plaintiff’s, favor [citations]; (2) was brought without probable cause [citations]; and (3) was initiated with malice [citations].’ ” (Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 871 [254 Cal.Rptr. 336, 765 P.2d 498].) We must decide whether the result of the arbitration proceeding was a favorable termination of a prior action that can give rise to an action for malicious prosecution.
Courts have decided that various proceedings may or may not give rise to a future malicious prosecution action, largely depending on their nature. (E.g., Hardy v. Vial (1957) 48 Cal.2d 577 [311 P.2d 494, 66 A.L.R.2d 739] [malicious prosecution action may be based on administrative proceeding]; Camarena v. Sequoia Ins. Co. (1987) 190 Cal.App.3d 1089 [235 Cal.Rptr. 820] [malicious prosecution action may be based on declaratory relief *314action]; Stanley v. Superior Court (1982) 130 Cal.App.3d 460 [181 Cal.Rptr. 878] [malicious prosecution may be based on judicial arbitration proceeding]; Pace v. Hillcrest Motor Co. (1980) 101 Cal.App.3d 476 [161 Cal.Rptr. 662] [malicious prosecution may not be based on action in small claims court].) We now decide the question regarding contractual arbitration.
In sustaining the demurrer to the malicious prosecution action, the trial court cited Sagonowsky v. More, supra, 64 Cal.App.4th 122 (Sagonowsky). In Sagonowsky, the parties resolved a real estate dispute by contractual arbitration without judicial action. One party to the arbitration then sued the other party’s attorney for maliciously prosecuting that arbitration. The Court of Appeal affirmed dismissal of the action. It held that a “private, contractual arbitration” is “not a ‘prior action’ of the sort which will support” a malicious prosecution claim. (Id. at p. 134.) Sagonowsky is not precisely on point. There, the underlying action began and ended in arbitration; here, it began in court and only ended in arbitration. But, as we explain, we conclude the Sagonowsky court was correct, and its rule also applies here. Whether the underlying action started in court or in arbitration, if it ends in contractual arbitration, that termination will not support a malicious prosecution action.
Two converging legal trends support this conclusion: (1) the trend against creating or expanding derivative tort remedies, including malicious prosecution; and (2) the trend in favor of allowing the parties voluntarily to choose binding, private arbitration to end the entire dispute.
Seeking to avoid “an unending roundelay of litigation” (Silberg v. Anderson (1990) 50 Cal.3d 205, 214 [266 Cal.Rptr. 638, 786 P.2d 365]), we have cautioned against creating or expanding derivative tort remedies, at least when the underlying litigation provided adequate remedies. “In the past, we have favored remedying litigation-related misconduct by sanctions imposed within the underlying lawsuit rather than by creating new derivative torts.” (Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1, 8-9 [74 Cal.Rptr.2d 248, 954 P.2d 511]; see also Temple Community Hospital v. Superior Court (1999) 20 Cal.4th 464, 469-470 [84 Cal.Rptr.2d 852, 976 P.2d 223]; id. at p. 486 (dis. opn. of Kennard, J.); Rubin v. Green (1993) 4 Cal.4th 1187, 1199 [17 Cal.Rptr.2d 828, 847 P.2d 1044].) For these reasons, we have said that the tort of malicious prosecution “should not be expanded.” (Crowley v. Katleman (1994) 8 Cal.4th 666, 680 [34 Cal.Rptr.2d 386, 881 P.2d 1083].) “[T]he most promising remedy for excessive litigation does not lie in an expansion of malicious prosecution liability. . . . [I]n our view the better means of addressing the problem of unjustified litigation is through the adoption of measures facilitating the speedy resolution of the *315initial lawsuit and authorizing the imposition of sanctions for frivolous or delaying conduct within that first action itself, rather than through an expansion of the opportunities for initiating one or more additional rounds of malicious prosecution litigation after the first action has been concluded.” (Sheldon Appel Co. v. Albert & Oliker, supra, 47 Cal.3d at p. 873.)
A parallel development has been the increasing awareness that parties to litigation should be permitted to choose private arbitration as a means of resolving their dispute once and for all. “[P]rivate arbitration is a process in which parties voluntarily trade the safeguards and formalities of court litigation for an expeditious, sometimes roughshod means of resolving their dispute.” (Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 831 [88 Cal.Rptr.2d 366, 982 P.2d 229]; see also id. at pp. 843-844 (cone. & dis. opn. of Brown, J.) [“[T]he Legislature enacted the arbitration statutes in order to provide a viable alternative to the courts”].) When, as here, the parties choose private nonjudicial arbitration, they “typically expect ‘ “their dispute will be resolved without necessity for any contact with the courts.” ’ ” (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 373 [36 Cal.Rptr.2d 581, 885 P.2d 994].) “This expectation of finality strongly informs the parties’ choice of an arbitral forum over a judicial one. The arbitrator’s decision should be the end, not the beginning, of the dispute.” (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 10 [10 Cal.Rptr.2d 183, 832 P.2d 899].)
The growing antipathy for litigation spawning litigation, together with the recognition that the parties who voluntarily choose arbitration generally expect and desire that the arbitration will end their dispute, convinces us that private arbitration should not be the basis for future malicious prosecution actions. The arbitration agreement may allow for the imposition of sanctions for bringing a frivolous action. (David v. Abergel (1996) 46 Cal.App.4th 1281, 1283-1284 [54 Cal.Rptr.2d 443] [noting that the actual agreement determines the arbitrator’s powers].) The arbitrator here did not impose sanctions, and the parties dispute whether the actual agreement of this case permitted him to do so. We need not decide that question, for the important point is that the parties at least could have provided for the imposition of sanctions when agreeing to use arbitration as a means of finally ending the dispute.
Brennan relies substantially on Stanley v. Superior Court, supra, 130 Cal.App.3d 460, which permitted a malicious prosecution action based on judicial arbitration. We agree with the Sagonowsky court that judicial arbitration and private contractual arbitration are sufficiently different that the result here should be different: “Nor are we persuaded that the rule which permits judicial arbitrations to be the basis for a malicious prosecution claim *316requires the same result in a contractual arbitration. (Stanley v. Superior Court, supra, 130 Cal.App.3d at p. 472.) Judicial arbitration is fundamentally unlike private contractual arbitration. . . . [T]he outcome of a judicial arbitration proceeding is not a final resolution of the dispute to which the parties have agreed to bind themselves; any party can request trial de novo. (Code Civ. Proc., § 1141.20.) The judicial arbitration procedure has been likened to ‘a minitrial that is in effect a continuation of the settlement negotiation process’ which results in ‘a neutral view from an authoritative figure’ of the merits of the claim and thus gives impetus to settlement. (Stanley v. Superior Court, supra, 130 Cal.App.3d 460, 471.) The crucial difference between the two types of arbitration is that a judicial arbitration does not arise from an agreement to arbitrate entered into by the parties, but is mandated by the Legislature as to certain civil cases filed in court.
“Thus, like a voluntary dismissal, a judicial arbitration award in favor of defendant reflects a decision on the lack of merit of a claim which was brought originally to court. Permitting such terminations to support a claim of malicious prosecution furthers the public purpose underlying the cause of action—namely to discourage abuse of the judicial system by the bringing of maliciously motivated but baseless claims. (See Crowley v. Katleman, supra, 8 Cal.4th at p. 693.) That purpose would not be directly served by permitting malicious prosecution based on a private, contractual arbitration. Indeed, the likely impact on the courts of allowing such claims would be both to increase litigation and to undermine the finality of dispute resolution to which the parties agreed.” (Sagonowsky, supra, 64 Cal.App.4th at pp. 131-132.)
For these purposes, contractual arbitration is closer to small claims litigation than judicial arbitration. After considering its “purpose and nature,” one court held that the small claims process may not support a malicious prosecution action. (Pace v. Hillcrest Motor Co., supra, 101 Cal.App.3d at p. 478.) The court noted that “the small claims process is designed to function quickly and informally.” (Id. at p. 479.) “To permit an action for malicious prosecution to be grounded on a small claims proceeding would frustrate the intent of the Legislature in adopting an expeditious and informal means of resolving small disputes, [and] would inject into a simple and accessible proceeding elements of time, expense, and complexity which the small claims process was established to avoid . . . .” (Ibid.) Similarly, to permit an action for malicious prosecution to follow contractual arbitration would defeat the purpose of that arbitration. As we have noted, contractual arbitration is a relatively quick and inexpensive, but necessarily somewhat “roughshod,” procedure that the parties may voluntarily choose to resolve their dispute and avoid further recourse to the courts. (Vandenberg v. Superior Court, supra, 21 Cal.4th at p. 831.) The parties *317accept the bad with the good. But such arbitration is not the sort of proceeding on which a malicious prosecution action should be based.
Moreover, the nature of private arbitration does not always allow for a ready determination of whether or why the prior action actually terminated in the malicious prosecution plaintiff’s favor. Except for statutory claims (see Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 107 [99 Cal.Rptr.2d 745, 6 P.3d 669]), an arbitrator need not explain the basis of an award. The arbitrator’s decision is also generally nonreviewable. (Moncharsh v. Heily & Blase, supra, 3 Cal.4th at pp. 27-28.) All of these circumstances convince us that an action terminated in contractual arbitration, like a small claims action, should not give rise to a malicious prosecution action.
Brennan finds support in the recent decision of Rogers v. Peinado (2000) 85 Cal.App.4th 1 [101 Cal.Rptr.2d 817]. That case, like Sago-nowsky, supra, 64 Cal.App.4th 122, commenced with contractual arbitration. During the arbitration, one party filed a counterclaim against the original claimant. After the arbitration ended, the original claimant sued the other party and that party’s attorneys for maliciously prosecuting the counterclaim. The Rogers court found that the plaintiff could not sue the party to the arbitration. However, expressly disagreeing with Sagonowsky, the court also concluded that the plaintiff could sue the attorneys for maliciously prosecuting the counterclaim because they were not parties to the arbitration agreement. (Rogers, supra, 85 Cal.App.4th at pp. 9-11.) We disagree. As we have explained, it is the nature of the termination that matters, not exactly how it came about or who agreed to it. A termination by contractual arbitration is simply not the sort of favorable termination needed to support a malicious prosecution action. We disapprove Rogers v. Peinado, supra, 85 Cal.App.4th 1, to the extent it is inconsistent with this opinion.
Brennan also argues that our decision in Moore v. Conliffe (1994) 7 Cal.4th 634 [29 Cal.Rptr.2d 152, 871 P.2d 204] supports his position. There, we held that the litigation privilege of Civil Code section 47, subdivision (b) applies to private contractual arbitration, which we described as quasi-judicial for purposes of the privilege. (See 7 Cal.4th at p. 645.) However, we reasoned that contractual arbitration should not lead to additional litigation in the courts. We stated that private contractual arbitration “is designed to serve a function analogous to—and typically to eliminate the need to resort to—the court system . . . .” (Id. at p. 643, italics added.) We found the privilege necessary to “protect[] the integrity and finality of dispute resolution from ‘an unending roundelay of litigation,’ ” and reiterated that finality of decision is “a principal impetus” for the parties to choose arbitration. {Id. at p. 644.) This reasoning supports our conclusion that contractual arbitration should not give rise to a malicious prosecution action.
*318The Court of Appeal in this case concluded that “it is the intent of the parties that controls the issue of whether, in agreeing to submit a matter to private arbitration, the parties intended to preclude a successful defendant from pursuing a claim for malicious prosecution.” To resolve this question, the court held, “the trier of fact will be required to hear evidence concerning the parties’ intent when they stipulated to private arbitration in open court and later in writing.” This procedure would be impractical. Because the arbitration agreement was silent, we may assume the parties reached no agreement. When no agreement exists, the parties may well have had quite different intents. It requires little imagination to suspect that in a case like this, the malicious prosecution plaintiff might claim an intent to allow a malicious prosecution action, and the defendant might claim an intent to preclude such an action. Both sides may be credible regarding what each intended. Moreover, even if the court could discern a mutual intent, the need for a hearing would add yet another round to the spiral of litigation. Instead of ending the dispute, the arbitration would force another hearing on whether it precluded a malicious prosecution action. Arbitration should not itself create new arenas for litigation.
Finally, noting that Sagonowsky, supra, 64 Cal.App.4th 122, was decided after his arbitration, Brennan argues that any ruling against his position should be prospective only and not apply to him. We disagree. “The general rule that judicial decisions are given retroactive effect is basic in our legal tradition.” (Newman v. Emerson Radio Corp. (1989) 48 Cal.3d 973, 978 [258 Cal.Rptr. 592, 772 P.2d 1059].) Courts sometimes make an exception to this general rule when the decision changed a settled rule on which the parties had relied. (Droeger v. Friedman, Sloan & Ross (1991) 54 Cal.3d 26, 45 [283 Cal.Rptr. 584, 812 P.2d 931].) But in this case, we are merely deciding a legal question, not changing a previously settled rule. As discussed above, Stanley v. Superior Court, supra, 130 Cal.App.3d 460, does not control this case. We have not overruled any decision predating the arbitration, much less a prior decision of this court. (Cf. Droeger v. Friedman, Sloan & Ross, supra, 54 Cal.3d at pp. 45-46.) We have certainly not disapproved “of a long-standing and widespread practice expressly approved by a near-unanimous body of lower court authorities.” (Id. at p. 45.) No reason appears not to apply today’s decision to this case.
III. Conclusion
We reverse the judgment of the Court of Appeal and remand the matter for that court to decide any remaining issues consistent with our opinion.
Kennard, J., Baxter, J., and Brown, J., concurred.