Pazuniak Law Office LLC v. Pi-Net International, Inc.
N14C-12-259 EMD
| Del. Super. Ct. | Aug 25, 2017Background
- Pazuniak Law (a Delaware law firm) represented Pi‑Net/WebX and Dr. Lakshmi Arunachalam under a written retainer; recoveries were placed into Pazuniak’s IOLTA trust account per the agreement.
- Pazuniak was discharged in August 2014; parties disputed the accounting and distribution of funds retained in the IOLTA account.
- Arunachalam filed counterclaims in this Delaware Superior Court action alleging many torts and crimes (malicious abuse of process, IIED, perjury, obstruction, conspiracy, honest‑services fraud/elder abuse, defamation/false light, misappropriation, breach of contract), and named O’Kelly & Ernst as a third‑party defendant.
- Pazuniak Law and O’Kelly moved under Civ. R. 12(b)(6) to dismiss all counterclaims; Arunachalam opposed and sought leave to amend, which the court denied.
- The court dismissed all counterclaims except one: it dismissed all claims against O’Kelly & Ernst and all Arunachalam’s non‑contract claims; it allowed Arunachalam’s breach of contract claim (Count XIII) to proceed against Pazuniak Law only.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Malicious abuse of process (malicious prosecution / abuse of process) | Pazuniak filed/maintained suit and acted deceitfully about agreements and attachments; this amounted to abuse/malicious prosecution | Pleadings do not allege a prior proceeding terminated in plaintiff’s favor (malicious prosecution) or any extra‑procedural coercive act (abuse of process) | Dismissed: no facts showing termination in favor or the requisite overt coercive act |
| Intentional Infliction of Emotional Distress (IIED) | Transfer and alleged misstatements about escrow amounts were extreme, outrageous and caused severe distress | Transfer under §1902 and litigation conduct were lawful and not extreme or outrageous | Dismissed: conduct not beyond bounds of decency; no reasonable dispute |
| Perjury / Obstruction of Justice / Conspiracy | Pazuniak altered documents, submitted false statements, and conspired to unlawfully retain funds | Allegations are vague, not tied to sworn false testimony, identify no obstructive act or solicitation of criminal conduct | Dismissed: claims are criminal in nature, inadequately pleaded and not actionable civilly here |
| Honest‑services fraud / Elder financial abuse | Pazuniak breached fiduciary duties and fraudulently retained/laundered IOLTA funds; elder abuse alternative | Honest‑services is a federal criminal theory (bribes/kickbacks); elder‑abuse statute limited to consumer fraud against 65+ and not pleaded with requisite facts | Dismissed: honest‑services not cognizable here; elder‑abuse not adequately pleaded and merits breach‑of‑contract/fiduciary remedy elsewhere |
| Defamation / False light (against Pazuniak & O’Kelly) | Complaints and filings were malicious and falsely harmed reputation | Statements were made in judicial filings and are protected by absolute judicial/attorney privilege | Dismissed: absolute privilege bars claims based on judicial pleadings; false‑light likewise barred |
| Misappropriation of client funds / Breach of contract | Pazuniak misappropriated/mingled funds and breached the retainer by refusing distribution; seeks substantial monies | Misappropriation unsupported by facts; O’Kelly had no control of IOLTA; breach is a contract claim concerning account accounting/distribution | Misappropriation dismissed; breach of contract claim survives against Pazuniak (but dismissed as to O’Kelly) |
Key Cases Cited
- Central Mortg. Co. v. Morgan Stanley Mortg. Capital Holdings LLC, 227 A.3d 531 (Del. 2020) (standard for pleading and dismissal under Rule 12(b)(6))
- Ramunno v. Crawley, 705 A.2d 1029 (Del. 1998) (courts may ignore conclusory allegations lacking factual support)
- Erikson v. Pardus, 551 U.S. 89 (U.S. 2007) (pro se pleadings are liberally construed)
- Mattern v. Hudson, 532 A.2d 85 (Del. Super. 1987) (IIED standard under Restatement §46)
- Fanean v. Rite Aid Corp. of Delaware, 984 A.2d 812 (Del. Super. 2009) (definition and standards for IIED)
- Skilling v. United States, 561 U.S. 358 (U.S. 2010) (limiting honest‑services fraud to bribe/kickback schemes)
- Carney v. Qualls, 514 A.2d 1126 (Del. Super. 1986) (§1902 transfer is remedial and appropriate when case filed in wrong court)
- Hoover v. Van Stone, 540 F. Supp. 1118 (D. Del. 1982) (absolute privilege for judicial proceedings extends to related tort claims)