September 19, 2013
CONTEMPORARY MOTORCAR LTD AND GEORGE LYONS, Appellants
MACDONALD ILLIG JONES & BRITTON LLP, W. PATRICK DELANEY, JAMES E. SPODEN, MATTHEW W. MCCULLOUGH, BRENT DOOLITTLE, AND CARTER DOOLITTLE, Appellees
Appeal from the Order Entered April 18, 2012 In the Court of Common Pleas of Erie County Civil Division at No(s): 12818-2011.
BEFORE: BOWES, DONOHUE, and MUNDY, JJ.
Contemporary Motorcar Ltd ("Contemporary") and George Lyons appeal from the April 18, 2012 order sustaining preliminary objections to their first amended complaint and dismissing Appellants' count of wrongful use of civil proceedings, 42 Pa.C.S. § 8351. Section 8351, et seq. is known as the Dragonetti Act. We affirm.
Appellants instituted this action against MacDonald Illig Jones & Britton, LLP, W. Patrick Delaney, James E. Spoden, Matthew W. McCullough, Brent Doolittle, and Carter Doolittle ("Appellees"). The complaint raised a Dragonetti Act count as well as an abuse of process count, which was pled solely against the Doolittles. Mr. Delaney, Mr. Spoden, and Mr. McCullough are attorneys employed by MacDonald Illig Jones & Britton, LLP. The law firm and three named lawyers will be collectively referred to as the attorneys.
The underlying litigation that forms the basis of the present action involved the following facts. The Doolittles owned a minority interest in a business known as Gary Miller Dodge. The attorneys instituted an action on behalf of the Doolittles in the Court of Common Pleas of Erie County. That lawsuit involved claims that they were being improperly excluded from the management and operation of Gary Miller Dodge. Gary Miller sold a franchise to Appellant Contemporary. Appellant Lyons and Gary Miller have an ownership interest in Appellant Contemporary. Gary Miller as well as the two Appellants herein were named as defendants in the underlying action instituted by the attorneys on behalf of the Doolittles. After the conduct of some discovery, Appellants filed preliminary objections in that case. Before the court ruled upon those objections, Appellees voluntarily discontinued the action against Appellants, and Appellants consented to their dismissal therein.
Appellants thereafter brought the present Dragonetti Act case against Appellees based upon Appellants' joinder in the underlying litigation, which remains pending against other defendants. Before filing an answer, Appellees presented preliminary objections to the complaint. The trial court herein concluded that, since Appellants consented to their dismissal from the underlying lawsuit almost immediately after it was instituted, that litigation was not terminated in Appellants' favor. Thus, the trial court held that Appellants could not pursue a Dragonetti Act claim against Appellees, granted Appellees' preliminary objections, and dismissed the Dragonett Act count. Appellants then voluntarily discontinued the abuse-of-process cause of action pled against the Doolittles, and appealed the grant of the preliminary objections. Appellants raise these contentions:
I. Whether or not the lower court erred in sustaining Appellees' preliminary objections to the "Dragon[e]tti Act" (42 Pa.C.S.A. §8351) claim and dismissing Appellants' complaint with prejudice by holding that Appellees' voluntary dismissal did not constitute a "termination in favor" of Appellants for purposes of a claim made under the Dragonetti Act.
II. Whether or not the lower court erred in sustaining Appellees' preliminary objections to plaintiffs' punitive damages claim and dismissing plaintiffs' complaint with prejudice as the "Dragonetti Act" (42 Pa.C.S.A. §8353) specifically provides for recovery of punitive damages.
III. Whether or not the lower court erred in sustaining Appellees' preliminary objections to the Appellants' claim for attorney's fees and dismissing appellant's complaint with prejudice as the Dragonetti Act (42 Pa.C.S.A. §8353) specifically provides for recovery of attorney's fees.
Appellants' brief at 4.
Initially, we outline our standard of review.
[O]ur standard of review of an order of the trial court overruling or granting preliminary objections is to determine whether the trial court committed an error of law. When considering the appropriateness of a ruling on preliminary objections, the appellate court must apply the same standard as the trial court.
Preliminary objections in the nature of a demurrer test the legal sufficiency of the complaint. When considering preliminary objections, all material facts set forth in the challenged pleadings are admitted as true, as well as all inferences reasonably deducible therefrom. Preliminary objections which seek the dismissal of a cause of action should be sustained only in cases in which it is clear and free from doubt that the pleader will be unable to prove facts legally sufficient to establish the right to relief. If any doubt exists as to whether a demurrer should be sustained, it should be resolved in favor of overruling the preliminary objections.
Feingold v. Hendrzak, 15 A.3d 937, 941 (Pa.Super. 2011) (quoting Haun v. Community Health Systems, Inc., 14 A.3d 120, 123 (Pa.Super. 2011)). Section 8351 provides in pertinent part:
(a) Elements of action.—A person who takes part in the procurement, initiation or continuation of civil proceedings against another is subject to liability to the other for wrongful use of civil proceedings:
(1) He acts in a grossly negligent manner or without probable cause and primarily for a purpose other than that of securing the proper discovery, joinder of parties or adjudication of the claim in which the proceedings are based; and
(2) The proceedings have terminated in favor of the person against whom they are brought.
The first and crucial issue on appeal pertains to whether Appellant's satisfied § 8351(a)(2), i.e., whether the underlying action was terminated in favor of Appellants for purposes of the Dragonetti Act. If it was not, then all of Appellants' issues fail because they are premised upon the viability of a Dragonetti Act cause of action. "The determinative question in the instant case revolves around an interpretation of Section 8351(a)(2) of the Dragonetti Act. Questions of statutory construction are questions of law; therefore, our review is de novo." The Betts Industries, Inc. v. Heelan, 33 A.3d 1262 (Pa.Super. 2011).
Appellees attached two documents as exhibits to their preliminary objections to establish the manner in which the underlying action was terminated with respect to Appellants. The Doolittles voluntarily discontinued the underlying action against Appellants:
PRAECIPE TO DISCONTINUE WITHOUT PREJUDICE AS TO DEFENDANTS BARBARA MILLER, CONTEMPORARY MOTOR CARS, LTD. AND GEORGE LYONS
To: Patrick L. Fetzner, Clerk of Records Prothonotary (Civil) Division
Please discontinue the above-captioned civil action as to Defendants Barbara Miller, Contemporary Motor Cars, Ltd., and George Lyons only, WITHOUT PREJUDICE. Pursuant to Pa.R.C.P. 229(b)(1), the consents of John F. Mizner, Esq. and Charles V. Longo, Esq. to a discontinuance as to less than all defendants are attached hereto.
Additionally, counsel for Appellants consented to the voluntary discontinuance of that case by the Doolittles (emphasis added):
CONSENT TO DISCONTINUE AS TO LESS THAN ALL DEFENDANTS
The undersigned, counsel for Defendants Contemporary Motor Cars, Ltd. and George Lyons, does hereby consent, pursuant to Pa.R.C.P. 229(b)(1), to the discontinuance without prejudice as to Barbara Miller, contemporary Motor Cars, Ltd., and George Lyons, as defendants in the above-referenced civil action.
CHARLES V. LONGO (61642)
Charles V. Longo Co., L.P.A.
Attorney for Defendants Contemporary Motor Cars and George Lyons
The voluntary discontinuance was filed after Appellants filed preliminary objections but before the court ruled upon those objections.
In this case, the trial court concluded that (a)(2) of Appellants' Dragonetti Act claim was not established by the pleadings. We agree with that assessment. D'Elia v. Folino, 933 A.2d 117 (Pa.Super. 2007), is dispositive. Therein, the trial court granted the defendants' preliminary objections in a Dragonetti Act case based on a finding that the prior action at issue was not terminated in the plaintiff's favor. The defendants in the Dragonetti Act case represented a woman in a medical malpractice lawsuit instituted against the Dragonetti Act plaintiff. The Dragonetti Act plaintiff was granted summary judgment in the medical malpractice case, but he subsequently entered into a settlement agreement with the medical malpractice litigant. The malpractice case was voluntarily discontinued against the Dragonetti Act plaintiff pursuant to an agreement whereby the malpractice litigant agreed not to appeal the prior grant of summary judgment in favor of the Dragonetti Act plaintiff, and the Dragonetti Act plaintiff agreed not to pursue the Dragonetti Act action against the malpractice litigant. The lawyers representing the malpractice litigant were excluded from the terms of the Dragonetti Act plaintiff's release.
In D'Elia, we first observed that, since the propriety of the grant of summary judgment in favor of the Dragonetti Act plaintiff in the malpractice case was never evaluated on appeal, the grant of summary judgment did not constitute a favorable termination in his favor. Thus, we examined whether the malpractice litigant's voluntary discontinuance entered pursuant to the settlement agreement terminated the malpractice case in favor of the Dragonetti Act plaintiff. We noted, "Generally, when considering the question of 'favorable termination' in a wrongful use of civil proceedings case, whether a withdrawal or abandonment constitutes a favorable, final termination of the case against who the proceedings are brought initially depends on the circumstances under which the proceedings are withdrawn." Id. at 122.
Nevertheless, we specifically ruled that this general rule is not implicated "where the parties to the underlying suit agree jointly to end the underlying suit in a non-litigious nature, " because, in that scenario, "the liability of the underlying defendant, i.e., the plaintiff in the wrongful use of civil proceedings suit, is never determined with finality. Therefore, the underlying suit is not a 'favorable termination' within the meaning of 42 Pa.C.S.A. § 8351." Id. at 122-23. (relying upon Electronic Laboratory Supply Co. v. Cullen, 712 A.2d 304 (Pa.Super. 1998)). In a situation where there was a voluntary discontinuance by agreement, and thus the liability of the Dragonetti Act plaintiff in the underlying case was not ruled upon, the Dragonetti Act plaintiff is not considered victorious in the underlying litigation. D'Elia, supra.
Since the announcement of our decision in D'Elia, we have held specifically that, unless the voluntary withdrawal of the prior case was "tantamount to [an] unbidden abandonment of a claim brought in bad faith, " the discontinuance of the underlying action does not constitute a favorable termination in favor of the Dragonetti Act plaintiff. Majorsky v. Douglas, 58 A.3d 1250, 1270 (Pa.Super. 2012); see also Rosenfield v. Pennsylvania Automobile Insurance Plan, 636 A.2d 1138 (Pa.Super. 1994) (previous litigation was voluntarily discontinued after it became moot and before determination of liability of Dragonetti Act plaintiff; it therefore was not terminated in favor of Dragonetti Act plaintiff). Cf. Buchleitner v. Perer, 794 A.2d 366 (Pa.Super. 2002) (summary judgment was entered in favor of the Dragonetti Act plaintiff in the underlying litigation and other defendants in the other lawsuits unilaterally negotiated a universal settlement in which the Dragonetti Act plaintiff never participated); Bannar v. Miller, 701 A.2d 242, 248 (Pa.Super. 1997) (prior lawsuit was withdrawn on the eve of trial and was characterized as a "last-second dismissal in the face of imminent defeat"); Robinson v. Robinson, 525 A.2d 367 (Pa.Super. 1987) (no discussion of circumstances under which wife discontinued a prior action against her husband, who filed Dragonetti Act case against her).
In the present matter, the pleadings established that Appellees were not faced with imminent defeat when they voluntarily discontinued the underlying action. To the contrary, the litigation was in the very preliminary stage. Additionally, Appellants consented to the voluntary dismissal of the underlying action, and their liability was never adjudicated to any extent. Furthermore, Appellants were under no legal requirement to assent to their dismissal. Instead, Appellees could have obtained court approval in that respect. Pa.R.C.P. 229(b)(1) (emphasis added) ("Except as otherwise provided in subdivision (b)(2), a discontinuance may not be entered as to less than all defendants except upon the written consent of all parties or leave of court after notice to all parties.").
There is no doubt that the underlying action was ended by voluntary discontinuance with Appellants' consent in a non-litigious manner. Appellants do not have a viable Dragonetti Act action under D'Elia and Majorsky because the underlying action was not terminated in their favor. Thus, the trial court properly granted the preliminary objections to the Dragonetti Act claim and must be affirmed.
DISSENTING MEMORANDUM BY DONOHUE, J.
Unlike the Majority, I would conclude that Appellants, Contemporary Motorcar, Ltd ("Contemporary") and George Lyons ("Lyons, and collectively with Contemporary, "Appellants"), obtained a favorable termination of the Underlying Action ("the Underlying Action") filed against them by Appellees, MacDonald, Illig, Jones & Britton, LLP ("the Law Firm"), W. Patrick Delaney ("Delaney"), James E. Spoden ("Spoden"), Matthew W. McCullough ("McCullough"), Brent Doolittle, and Carter Doolittle (collectively "the Doolittles"). Since I would reverse the trial court's order and remand for further proceedings, I respectfully dissent.
As set forth by the Majority, the record reflects that the Doolittles, Delaney, Spoden, McCullough and the Law Firm filed a lawsuit ("the Underlying Action") against Appellants alleging, among other things, tortious interference with contractual relationships. The Doolittles were minority stakeholders in a business known as Gary Miller Dodge. The Doolittles believed Gary Miller was excluding them from the management and operation of Gary Miller Dodge, and they were upset when Gary Miller sold a franchise to Contemporary, in which both Gary Miller and Lyons have an ownership interest.
After the parties exchanged some discovery, Appellants filed preliminary objections in the Underlying Action. Prior to any ruling on Appellants' preliminary objections, Appellees voluntarily dismissed Appellants from the Underlying Action. All parties to the Underlying Action, including Appellants, consented to Appellants' dismissal in accordance with Pa. R.C.P. 229(b)(1).
Thereafter, Appellants initiated this action against Appellees for wrongful use of civil proceedings pursuant to 42 Pa.C.S.A. §§ 8351-8355, commonly known as the Dragonetti Act. Appellees filed preliminary objections to Appellants' complaint, and the trial court sustained those objections on April 18, 2012, reasoning that Appellees' voluntary dismissal of Appellants from the Underlying Action did not constitute a termination in Appellant's favor as contemplated in the Dragonetti Act.
The Dragonetti Act reads in relevant part as follows:
§ 8351. Wrongful use of civil proceedings.
(a) Elements of action. --A person who takes part in the procurement, initiation or continuation of civil proceedings against another is subject to liability to the other for wrongful use of civil proceedings:
(1) he acts in a grossly negligent manner or without probable cause and primarily for a purpose other than that of securing the proper discovery, joinder of parties or adjudication of the claim in which the proceedings are based; and
(2) the proceedings have terminated in favor of the person against whom they are brought.
42 Pa.C.S.A.§ 8351(a).
Applying § 8351(a)(2), our courts have held that "[w]hether withdrawal or abandonment [of a lawsuit] constitutes a final determination in favor of the person against whom the proceedings are brought … depends on the circumstances under which the proceedings are withdrawn." Rosenfield v. Pennsylvania Auto. Ins. Plan, 636 A.2d 1138, 1142 (Pa. Super. 1994) (citing Rest. (Second) of Torts, § 674). In Rosenfeld, the appellee insurance plan sued the appellant, an insurance broker, for failing to abide by the insurance plan's rules. The insurance plan sought injunctive relief. During the pendency of the suit, the appellant broker left the insurance business, mooting the appellee's request for injunctive relief. For that reason, the appellee withdrew the lawsuit.
Citing the Restatement, the Rosenfield Court noted that withdrawals based on compromise, agreement, or the impossibility of bringing the case to trial do not constitute a termination in favor of the defendant. Id. Since the insurance broker's own actions mooted the plaintiff's request for injunctive relief and therefore precluded the possibility of a trial, the Rosenfield Court held that withdrawal of the claim did not constitute a termination in favor of the insurance broker. Id. Therefore, the Court affirmed the summary judgment in favor of the insurance plan on the broker's Dragonetti Act claim. Id.
In the case on appeal, the trial court concluded that the reasoning in Rosenfield supported its finding that the Underlying Action did not terminate in Appellants' favor:
The disposition of the underlying case with respect to [Appellants] was not a 'termination in favor of' [Appellants] sufficient to support a Dragonetti Act claim. This seems especially true to the court because the voluntary dismissal occurred prior to the end of arguments on all preliminary objections (i.e., relatively early in the proceedings). The court recognizes that a voluntary dismissal on the eve of trial might suggest a different outcome, but that is not what we have here.
Trial Court Opinion, 4/18/12, at 2.
The trial court's reasoning echoes the result in Bannar v. Miller, 701 A.2d 242 (Pa. Super. 1997), appeal denied, 555 Pa. 706, 723 A.2d 1024 (1998). In Bannar, the appellant attorneys represented the plaintiffs in a defamation action. Id. at 245. On the day of trial, the attorneys withdrew the lawsuit against the only remaining defendant. Id. at 247. The defamation defendants filed a Dragonetti Act lawsuit in which they prevailed at trial. Id. at 245. After a lengthy review of the underlying defamation action this Court concluded, "neither clients nor attorneys were attempting to properly adjudicate the [defamation] claim." Id. at 248. We further concluded, "a last-second dismissal in the face of imminent defeat is not favorable" to the appellant attorneys. Id.
Appellants counter that the Appellees' unfounded allegations, rather that the timing of the voluntary dismissal, should control the inquiry. For support, they rely on Robinson v. Robinson, 525 A.2d 367 (Pa. Super. 1987). There, the appellant's wife filed lawsuits against him in federal and state court. She filed a voluntary nonsuit in the federal action, and the federal court dismissed her claims without prejudice to raise them in the ongoing state action. Id. at 368. The wife did not raise the dismissed federal claims in the state action prior to the conclusion of the state action. Id. Nonetheless, the trial court dismissed the appellant's wrongful use of civil process claim because it believed the appellant never received a favorable termination of the dismissed federal claims. Id. This Court reversed, concluding that abandonment of claims prior to trial was sufficient to constitute a favorable termination for purposes of § 8351:
[W]e find that the termination of the [state] action, in which appellee had the opportunity to raise the claims made in the federal action and did not do so, must be considered a favorable termination for appellant under the statute. Any other result would allow a party to initiate suit and then withdraw or abandon the claims before trial so as to escape potential liability. The statute provides protection against such action by imposing liability for the procurement, initiation or continuation of civil proceedings in a grossly negligent manner or without probable cause with improper purposes. Although favorable termination is called for, there is no requirement that it be based upon the merits and to impose such a requirement would lead to unjust results as set forth above.
Id. at 371 (emphasis added).
Appellees, however, argue that Appellants did not obtain a favorable termination of the Underlying Action because they consented to the discontinuance. In some cases, the termination of a lawsuit by settlement or other agreement has been fatal to a subsequent Dragonetti action. For example, in D'Elia v. Folino, 933 A.2d 117 (Pa. Super. 2007), appeal denied, 597 Pa. 706, 948 A.2d 804 (2008), the appellant doctor won summary judgment in a medical malpractice claim. He reached a settlement agreement with the med/mal plaintiffs in order to preclude an appeal. Id. at 120. The appellant doctor then filed a Dragonetti action against some of the med/mal plaintiffs. Id. The trial court found that the settlement of the med/mal case did not constitute a favorable termination for purposes of § 8351. Id. at 121. This Court affirmed, reasoning that "[a] withdrawal of proceedings stemming from a compromise or settlement agreement does not, as a matter of law, constitute a termination favorable to the party against whom proceedings have been brought originally." Id. at 122.
The D'Elia Court relied in part on Electric Lab. Supply Co. v. Cullen, 712 A.2d 304 (Pa. Super. 1988), in which the Dragonetti Act plaintiffs were the defendants in a Lanham Act suit (15 U.S.C.A. § 1501, et. seq.). Id. at 306. The Dragonetti plaintiffs won dismissal of the Lanham Act suit and then entered a settlement whereby the Lanham Act plaintiffs agreed not to pursue an appeal. Id. Citing the Restatement (Second) of Torts, §§ 674 and 660, this Court concluded that an action that ends in compromise does not resolve the culpability of the defendant. Id. at 311. Thus, the Dragonetti plaintiffs did not obtain a favorable termination of the underlying action, pursuant to § 8351. Id.
In Buchleitner v. Perer, 794 A.2d 366 (Pa. Super. 2002), appeal denied, 570 Pa. 680, 808 A.2d 568 (2002), however, this Court held that the Dragonetti plaintiff, a high school principal, obtained a favorable termination of the underlying action despite an eventual settlement. In the underlying action, the principal won summary judgment in his favor and the case continued against other defendants. Id. at 368. Ultimately, the remaining defendants settled. Id. The settlement agreement listed the principal among the parties to the settlement, though he did not participate in its negotiation. Id. Relying on D'Elia and Electric Lab, the Dragonetti defendants argued that the principal did not obtain a favorable outcome. This Court disagreed: "Appellant has averred that the allegations in his complaint, if accepted as true, would establish that he had not been a party to the settlement agreement […], he had not been given the opportunity to consent to any type of compromise, and the settlement had never been discussed with him." Id. at 375. Thus, the principal achieved a favorable outcome in winning summary judgment before the remaining parties reached a compromise. Id.
Based on my review of this highly fact intensive precedent, I disagree with the Majority's decision to affirm the trial court. As noted above, the trial court relied heavily on Rosenfield in support of its order. I believe that reliance is misplaced. The insurance broker in Rosenfield voluntarily undertook the action that the insurance company sought to compel by injunction. Thus, the broker did not obtain a favorable outcome for purposes of the Dragonetti Act.
Moreover, the timing of Appellees' early discontinuance of the Underlying Action against Appellants does not – by itself – warrant dismissal of Appellants' Dragonetti claim. Our reasoning in Robinson establishes that filing bogus claims and dismissing them prior to trial is insufficient to preclude liability under Dragonetti. The Robinson Court's analysis tracks the plain language of the statute, which applies to "A person who takes part in the procurement, initiation, or continuation of civil proceedings…." 42 Pa.C.S.A. § 8351(a) (emphasis added). Thus, Dragonetti liability attaches from the filing of a lawsuit. To dismiss a Dragonetti action because the underlying lawsuit was discontinued early is to ignore the plain language of § 8351.
Finally, each of the foregoing cases establishes that the existence of a favorable termination depends on the unique circumstances of each case. The D'Elia and Electric Lab. Courts found no favorable termination, but only after a detailed consideration of the terms and circumstances of the settlement agreements. D'Elia, 933 A.2d at 121 (concluding that the language of the settlement agreement foreclosed a Dragonetti suit); Electric Lab., 712 A.2d at 311 (noting that the record evinced a negotiated settlement of all claims). In Buchleitner, on the other hand, the record established that the principal took no part in the settlement negotiation and that the plaintiffs in the underlying action wholly failed to substantiate their case against him. Buchleitner, 794 A.2d at 375-76.
In the instant matter, the trial court's opinion contains no analysis of the unique circumstances of this case. The trial court relied on nothing more than Rosenfield, which is off point, and the timing of the discontinuance, which is not controlling.
Furthermore, I disagree with Appellees' contention that the parties reached a compromise in the Underlying Action. The parties did not enter a settlement agreement, nor did Appellants voluntarily undertake any action that prompted Appellees to discontinue their lawsuit. Appellants' Dragonetti complaint alleges that Appellees, acting "grossly, negligently, and without probable cause, " filed a lawsuit with no basis in fact or legal authority. Complaint, 8/8/11, at ¶¶ 16-17. Appellants further allege that Appellees voluntarily discontinued the lawsuit that they filed after an insufficient pre-filing investigation. Id. at 28-29. Appellants' consent to the discontinuance was a procedural formality required by Pa.R.C.P. 229. I do not believe that compliance with the formalities of Rule 229 deprives a defendant of the ability to proceed with a Dragonetti action.
Appellants also argue that the trial court erred in sustaining Appellees' preliminary objections to Appellants' claims for attorneys' fees and punitive damages. Since the trial court sustained these preliminary objections based on its finding of no favorable termination of the Underlying Action, I agree with Appellants' contention that the trial court erred. Appellants' ability to recover attorneys' fees or punitive damages, if any, must await further development of the record.
Based on the foregoing, I would reverse the trial court's order and remand for further proceedings. I therefore respectfully dissent.