State Law Can Be Basis for Federal Misconduct Case

A cause of action under Pennsylvania's Dragonetti Act may be instituted in state court over litigation misconduct in a federal case, a Superior Court panel ruled in a case of first impression. The appeals court overruled a trial court decision to dismiss a lawsuit filed under the Pennsylvania statute imposing liability on lawyers who engage in sharp litigation tactics.

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A cause of action under Pennsylvania’s Dragonetti Act may be instituted in state court over litigation misconduct in a federal case, a Superior Court panel has ruled in a case of first impression. The appeals court overruled a trial court decision to dismiss a lawsuit filed under the Pennsylvania statute imposing liability on lawyers who engage in sharp litigation tactics. The defendants in the case argued that any alleged litigation abuses should be punished under the Federal Rules of Civil Procedure, specifically through sanctions available under Rule 11. But the Superior Court, in an opinion written by Judge Joseph A. Hudock, said that Rule 11 did not create a federal cause of action for malicious prosecution. The federal rule’s purpose, Hudock observed, was to deter sharp practice and baseless filings, not to penalize them. For that reason, Pennsylvania law prohibiting malicious prosecution could apply if an allegedly groundless suit had been brought in federal court. In Werner v. Plater-Zyberk, Hudock wrote that “the damages [plaintiff] seeks are distinct from the various types of penalties that may be imposed by a court as sanctions against a tortfeasor.” The primary purpose of civil damages under the Dragonetti Act, Hudock reasoned, is therefore separate and distinct from the primary purpose of federal sanctions for litigation misconduct. With such a difference in the policies underlying the two remedies, there is no bar to a cause of action under Pennsylvania law sounding in tort. Moreover, Rule 11 sanctions can never compensate a wronged party if there is tort liability, the court said. “While imposing monetary sanctions under Rule 11 may confer a financial benefit on a victimized litigant, this is merely an incidental effect on the substantive rights thereby implicated,” Hudock wrote. “Simply put, Rule 11 sanctions cannot include consequential damages and thus are not a substitute for tort damages.” The plaintiff in Werner, a lawyer named Arthur Werner, had been sued in federal court under the federal Racketeer Influenced and Corrupt Organizations Act. Werner was also sued for state claims. The RICO charges were dismissed on the pleadings by the federal district court for failure to state a legitimate cause of action. The pendent state claims were also dismissed since there was no longer federal jurisdiction over them. Several months after the 3rd U.S. Circuit Court of Appeals affirmed the dismissal of the action against Werner, he filed a complaint in Philadelphia Common Pleas Court, alleging that the individuals who had sued him in federal court engaged in malicious prosecution or abuse of legal process. Werner’s state claim was brought under the Dragonetti Act, which creates a cause of action for wrongful use of civil proceedings. Werner also leveled a common law claim of abuse of process against those who had sued him in federal court. He also included the lawyers for the federal claimant as defendants in the state law complaint. The trial judge in the state case dismissed Werner’s complaint for “legal insufficiency.” Werner then took his appeal to the Superior Court. “Federal sanctions are not in derogation of state common law remedies, and both may be sought predicated on the same underlying factual and procedural events,” Hudock wrote, holding there is no reason that improper litigation conduct in federal court may not form the basis for a complaint under state law. “Neither the Dragonetti Act itself, nor subsequently decided case law concerning malicious prosecution or abuse of process, impose any restriction prohibiting an aggrieved party from seeking redress in Pennsylvania state court predicated on process served in, or ‘civil proceedings’ conducted in, a jurisdiction other than this commonwealth,” Hudock wrote. The trial court’s erroneous decision to set aside the Dragonetti Act claim, Hudock said, was a misreading of federal pre-emption doctrine. If a tort claim is predicated on the filing of an action in federal court, it does not follow that federal law governing the legal proceeding pre-empts any state law on the subject, Hudock said. Pre-emption only occurs when a federal statute includes an “explicit … command” that state law be displaced, Hudock observed. There is a presumption against federal pre-emption, he added. Finally, the Superior Court noted that Werner’s Dragonetti Act claim was a matter within the general jurisdiction of the state trial court. “We see no indication that a torts claim for abuse of process or for malicious prosecution can be said to create a federal question that would vest original subject matter jurisdiction in a federal district court,” Hudock wrote. Moreover, there was no limit in the Dragonetti Act confining state court jurisdiction to allegedly abusive lawsuits filed in state courts. The wrongful use of civil proceedings prohibited by the Dragonetti Act applies to tribunals both within and without the state’s unified judicial system, the court said. Joining Hudock in the decision was Judge Correale F. Stevens. Representing Werner was Alan R. Zibelman of Zibelman & Nerenberg in Philadelphia. Defense counsel in the case was Jeffrey B. Albert of McKissock & Hoffman in Philadelphia.

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