Lansaw, G. v. Zokaites, F., Lansaw, G. v. Zokaites, F. No. 708 WDA 2016

Background

Garth and Deborah Lansaw sued Frank Zokaites (and related business entities) and attorneys for abuse of process, intentional infliction of emotional distress (IIED), and loss of consortium based on long-running disputes and filings in bankruptcy adversary proceedings and related litigation.
The Lansaws alleged years of harassment, baseless suits, and hundreds of frivolous docket entries in bankruptcy/adversary proceedings that caused business harm and emotional distress; they obtained a bankruptcy-court award of $50,100 against Zokaites.
While Zokaites’ appeal from the bankruptcy judgment was pending in federal district court, the Lansaws filed the state-court complaint (writ in Oct. 2015; complaint Nov. 2015).
Defendants filed preliminary objections claiming federal bankruptcy preemption deprived the state court of subject-matter jurisdiction; the attorney-defendant joined that theory.
The trial court sustained the preliminary objections, dismissed the complaint with prejudice for lack of subject-matter jurisdiction, and the Lansaws appealed.
The Superior Court affirmed, holding the Bankruptcy Code preempts state-law claims grounded in conduct before the bankruptcy court (including abuse of process, and here IIED and loss of consortium), and dismissal with prejudice was proper because amendment could not cure the jurisdictional defect.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether state-law tort claims based on conduct in bankruptcy proceedings are preempted by federal bankruptcy law	Lansaws argued Stone Crushed’s preemption discussion is dicta and federal case law conflicts, so their state claims should proceed	Defendants argued Stone Crushed controls: the Bankruptcy Code (and related federal rules) preempt state tort claims grounded in bankruptcy-court conduct, depriving state court of jurisdiction	Court held Stone Crushed controls: claims grounded in bankruptcy proceedings are preempted and state court lacks subject-matter jurisdiction
Whether IIED and loss of consortium claims (not explicitly addressed in Stone Crushed) survive in state court when they arise from bankruptcy proceedings	Lansaws argued these torts are distinct and not necessarily preempted	Defendants argued the Stone Crushed rationale extends to any state-law damages claims grounded in bankruptcy proceedings	Court held IIED and loss of consortium claims were also preempted because they were central to or litigated in bankruptcy proceedings
Whether federal authority contrary to Stone Crushed (Third Circuit/other federal decisions) controls	Lansaws relied on conflicting federal decisions to avoid preemption	Defendants relied on Pennsylvania Supreme Court precedent as controlling in state courts	Court held Pennsylvania Supreme Court precedent (Stone Crushed) governs in state court absent U.S. Supreme Court authority to the contrary
Whether dismissal should have been without prejudice or leave to amend should have been granted	Lansaws argued dismissal with prejudice was improper and they should have leave to amend	Defendants argued preemption is jurisdictional and cannot be cured by amendment	Court held dismissal with prejudice was appropriate because amendment could not cure the jurisdictional defect — state court never had competence to hear these claims

Key Cases Cited

Stone Crushed P’ship v. Kassab Archbold Jackson & O’Brien, 908 A.2d 875 (Pa. 2006) (Bankruptcy Code and federal rules preempt state-law claims for wrongful use of bankruptcy proceedings)
Shiner v. Moriarity, 706 A.2d 1228 (Pa. Super. 1998) (earlier Pennsylvania authority recognizing federal preemption of state claims in bankruptcy context)
U.S. Express Lines, Ltd. v. Higgins, 281 F.3d 383 (3d Cir. 2002) (federal appellate decision taking a different view on preemption of state torts arising from federal proceedings)
Mazur v. Trinity Area School Dist., 961 A.2d 96 (Pa. 2008) (standards for subject-matter jurisdiction review)
Behrend v. Yellow Cab Co., 271 A.2d 241 (Pa. 1970) (amendment not required where initial pleading shows claim cannot be established)