The state Superior Court said in an unpublished decision issued Thursday that a business partner in the juvenile detention facilities at the center of the Luzerne County judicial scandal cannot sustain his malicious prosecution claims against the Juvenile Law Center and the law firm of Hangley Aronchick Segal Pudlin & Schiller.

Gregory R. Zappala was a business partner in Mid-Atlantic Youth Services with Robert Powell, who colluded with former Luzerne County Court of Common Pleas Judges Michael T. Conahan and Mark A. Ciavarella Jr. to confine juveniles in two juvenile detention facilities by paying the judges close to $3 million, according to the opinion in Zappala v. Hangley Aronchick Segal & Pudlin .

The former judges and Powell are now serving time in federal prison and “Powell has publicly asserted that Zappala was not a party to the offenses,” Superior Court Judge John T. Bender wrote on behalf of the panel of Judge Kate Ford Elliott and Senior Judge Robert E. Colville.

A number of juveniles who had been incarcerated in the facilities filed lawsuits related to what became known as the “kids-for-cash” scandal.

In separate lawsuits, Zappala sued law firms, as well as several attorneys of those firms, representing the juveniles who were incarcerated.

The Law Office of Barry H. Dyller, Gelb Law Firm, Richard G. Freeman, Caroselli Beachler McTiernan & Conboy, Cefalo & Associates, Riker Danzig Scherer Hyland & Perretti, Eckert Seamans Cherin & Mellott and Metzger & Kleiner had their cases consolidated with the case of Hangley Aronchick and the Juvenile Law Center (JLC).

The court affirmed Philadelphia Court of Common Pleas Judge Gary S. Glazer, who granted preliminary objections to dismiss Zappala’s wrongful use of civil proceedings claims under the Dragonetti Act, in all of the separate lawsuits.

Zappala himself was sued over the claims that the juveniles were deprived of their constitutional rights and were wrongfully imprisoned, and he argued that the law firms’ voluntary discontinuance of that litigation “without prejudice to refile at the completion of discovery” satisfied the requirement that a plaintiff bringing a malicious prosecution claim must have the underlying proceedings favorable terminate in favor of him or her, Bender said.

Zappala’s counsel sent a letter July 6, 2009, stating, “‘I think it is only fair to you that I point out that, if necessary, my clients will file for summary judgment and will prevail. At that time, you and your clients will be liable to my clients for damages, costs and attorneys’ fees under the Dragonetti Act,’” the opinion said.

Counsel for Hangley Aronchick and the JLC entered a discontinuance without prejudice under Federal Rule of Civil Procedure 41(a)(1)(A)(i) within weeks of the letter, Bender said.

“Apparently not satisfied, however, by the ‘conditional’ nature of a dismissal without prejudice and the attendant possibility that the action might be refiled against him at any time, Zappala commenced the ‘Dragonetti’ action that underlies this appeal,” Bender wrote.

Richard A. Sprague of Sprague & Sprague represents Zappala. Robert C. Heim of Dechert represents Hangley Aronchick and the JLC.

Sprague was not available for comment immediately Thursday.

Heim said Jeffrey B. McCarron of Swartz Campbell and he made argument on behalf of all of the law firms.

There has not been a final termination in the case because there has been “no adjudication with respect to the potential liability” of Zappala, Heim said.

McCarron and he argued that the law should encourage the policy of attorneys who have brought an action and then “learn a fact that casts doubt about your lawsuit” to discontinue the action.

“The law should support and endorse the conduct [of] the Hangley firm and the Juvenile Law Center,” Heim said.

The new fact in the case was that, when Powell pled guilty, he originally appeared to implicate Zappala but Zappala’s attorney later asked to correct the record and explained Powell would testify that Zappala had no knowledge of the scheme, Heim said.

All of the law firms thought they had ethical obligations to their clients to not abandon a claim against Zappala entirely but that dismissing the claims without prejudice was also the ethical course, Heim said.

The court disagreed with Zappala’s argument that Glazer’s opinion is in conflict with the Superior Court’s 1997 decision in Bannar v. Miller .

While the panel in that case did find that a voluntary discontinuance of the underlying civil action before the Dragonetti lawsuit was brought in Bannar constituted a termination of the underlying claims in favor of the plaintiff, the lawyer in the case “invoked the process of the court to subject opposing parties to extended discovery, only to venture into court on the very day of trial and request permission to withdraw the action,” Bender said.

Bannar did not create a bright-line, “intractable rule,” Bender said.

Bender and his colleagues reasoned that each Dragonetti case involves a context-specific inquiry into the dismissal or discontinuance of the underlying case.

“In assessing potential claims of wrongful use of civil proceedings in other cases, our courts … have derived guidance from circumstantial nuances, considering an array of factors to adjudge whether the procedures used to terminate the underlying action preclude further litigation of the issues it raised … or whether they reflect merely a tactical maneuver designed to thwart inevitable resolution favorable to the defendant and would-be Dragonetti plaintiff,” the panel said.

Unlike Bannar , the civil action against Zappala only went on for four months, and discovery had not yet started, the panel said.

“The federal civil action enumerated claims that, notwithstanding Zappala’s opposition address recognized injuries in a matter of extraordinary public importance, culpability for which has yet to be finally adjudicated,” the panel said. “Under such circumstances, the suggestion that a voluntary discontinuance issued upon nothing but counsel’s demand should amount to a favorable termination of the underlying action is simply untenable.”

Conahan entered a guilty plea, and a federal jury found Ciavarella guilty of accepting more than $2.8 million in kickbacks from the builder, Robert Mericle, and former co-owner of a private juvenile detention facility, Powell. Conahan was sentenced to 17.5 years in federal prison, while Ciavarella was sentenced to 28 years in federal prison.

Powell and Mericle also each entered a guilty plea related to the case.

Amaris Elliott-Engel can be contacted at 215-557-2354 or aelliott-engel@alm.com. Follow her on Twitter @AmarisTLI.

(Copies of the 18-page opinion in Zappala v. Hangley Aronchick Segal & Pudlin, PICS No. 12-1197, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •