Perelman, J. v. Perelman, R.
125 A.3d 1259
| Pa. Super. Ct. | 2015Background
- Jeffrey Perelman (plaintiff) sued Raymond Perelman and multiple lawyers/firms, including Dilworth Paxson LLP and attorneys Jacovini, McMichael, and Obod ("Dilworth"), under the Pennsylvania Dragonetti Act for wrongful use of civil proceedings arising from state and federal litigation about family business transfers.
- Raymond originally sued Jeffrey in Pennsylvania state court (State Action) alleging contract, fraud, trust, and related claims; the state trial court sustained Jeffrey's preliminary objections and the Pennsylvania Superior Court affirmed dismissal based on the parol evidence rule.
- Jeffrey had separately filed a federal action in which Raymond asserted compulsory counterclaims duplicative of the State Action; Jeffrey moved for Rule 11 sanctions against Raymond and Dilworth based on the same alleged litigation misconduct, and the federal district court denied the sanctions motion.
- After resolution of the underlying disputes, Jeffrey filed a Dragonetti Act complaint in state court against Dilworth and others alleging lack of probable cause, gross negligence, and improper purpose; Dilworth filed preliminary objections arguing collateral estoppel/res judicata based on the federal court's Rule 11 denial.
- The state trial court overruled Dilworth's preliminary objections; on appeal, the Pennsylvania Superior Court affirmed, holding that a denied Rule 11 motion (an abbreviated proceeding with limited discovery) does not provide a full and fair opportunity to litigate Dragonetti claims and therefore does not preclude the later state tort action.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the federal court's denial of Rule 11 sanctions precludes Jeffrey's Dragonetti claim (collateral estoppel) | Jeffrey: Rule 11 proceedings are limited (no routine discovery, narrow scope), so he lacked a full and fair opportunity to litigate Dragonetti elements; thus issue preclusion does not apply | Dilworth: The district court found Raymond's counterclaims "colorable," so Jeffrey's later Dragonetti claim is barred as relitigation of the same issues | Held: Collateral estoppel does not apply; Rule 11 denial did not afford a full and fair opportunity to litigate Dragonetti issues, so preliminary objections were properly overruled |
| Whether Dilworth could raise collateral estoppel via preliminary objections (demurrer) | Jeffrey: Collateral estoppel is affirmative matter and should be raised in new matter, not via preliminary objection | Dilworth: Relevant prior-case facts were referenced in Jeffrey's complaint and are public record, so collateral estoppel may be raised by preliminary objection | Held: Court agreed with Dilworth — prior cases were referenced sufficiently in the complaint, so collateral estoppel could be asserted in preliminary objections |
| Whether Rule 11 and Dragonetti actions are mutually exclusive remedies | Jeffrey: Rule 11 sanctions are procedural and do not displace state tort remedies or permit recovery of consequential damages; Dragonetti claims seek distinct tort damages | Dilworth: Federal denial of sanctions shows the litigation was colorable and thus negates Dragonetti elements like lack of probable cause | Held: Court agreed with Jeffrey — Rule 11 aims to police filings, is narrower, and denial does not foreclose state tort claims |
| Whether the trial court abused discretion in denying preliminary objections at demurrer stage | Jeffrey: Demurrer standard requires resolving doubts in favor of plaintiff; facts and need for discovery support overruling objections | Dilworth: Some Dragonetti elements (probable cause) can be decided as a matter of law on preliminary objections | Held: No abuse of discretion; given Rule 11's limited process and demurrer standard, plaintiff is entitled to proceed to develop the Dragonetti claim |
Key Cases Cited
- De Lage Landen Fin’l Servs., Inc. v. Urban P'ship, LLC, 903 A.2d 586 (Pa. Super. 2006) (standard of review for preliminary objections)
- Hykes v. Hughes, 835 A.2d 382 (Pa. Super. 2003) (preliminary objections test legal sufficiency of complaint)
- Haun v. Comm. Health Sys., Inc., 14 A.3d 120 (Pa. Super. 2011) (demurrer standards and pleading rules)
- Keystone Freight Corp. v. Stricker, 31 A.3d 967 (Pa. Super. 2011) (probable cause and attorney liability under Dragonetti/related standards)
- Hart v. O’Malley, 781 A.2d 1211 (Pa. Super. 2001) (Dragonetti requires gross negligence; no need for actual malice)
- Morris v. DiPaolo, 930 A.2d 500 (Pa. Super. 2007) (attorney may pursue claims with even a slight chance of success)
- Meiksin v. Howard Hanna Co., Inc., 590 A.2d 1303 (Pa. Super. 1991) (lawyers may rely on facts stated by clients)
- Gentzler v. Atlee, 660 A.2d 1378 (Pa. Super. 1995) (improper purpose may be inferred where action filed without justification)
- Werner v. Plater-Zyberk, 799 A.2d 776 (Pa. Super. 2002) (denial of Rule 11 sanctions does not foreclose state malicious-prosecution/Dragonetti claims)
- Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153 (3d Cir. 1993) (Rule 11 denial ≠ bar to malicious prosecution claim)
- Cohen v. Lupo, 927 F.2d 363 (8th Cir. 1991) (Rule 11 proceedings are procedural and limited; do not substitute for malicious prosecution tort)
- Amwest Mortg. Corp. v. Grady, 925 F.2d 1162 (9th Cir. 1991) (Rule 11's limited process, incl. lack of discovery, counsels against precluding state tort actions)
- Faigin v. Kelly, 184 F.3d 67 (1st Cir. 1999) (circumscribed scope of Rule 11 limits its preclusive effect)
- Port Drum Co. v. Umphrey, 852 F.2d 148 (5th Cir. 1988) (Rule 11 sanctions must be sought by motion; Rule 11 does not create an independent cause of action)
- Del Turco v. Peoples Home Sav. Ass’n, 478 A.2d 456 (Pa. Super. 1984) (when prior suit facts are set forth in complaint, res judicata/collateral estoppel can be raised in preliminary objections)
- Catroppa v. Carlton, 998 A.2d 643 (Pa. Super. 2010) (elements of collateral estoppel/issue preclusion)