In the continuing saga of the Auto Admit case, the Eastern District of Pennsylvania has ruled on the defendants’ motion to dismiss and motion to strike.
Defendants Ross Chanin, ReputationDefender, Mark Lemley, and Heide Iravani asserted that they lacked the minimum contacts required for the exercise of personal jurisdiction over them in Pennsylvania. (Op. at 17) However, the Court held:
[Ciolli] presented sufficient factual allegations to demonstrate the need for jurisdictional discovery in this case. Defendants Chanin, ReputationDefender, Lemley, and Iravani have all admitted to, and Plaintiff has alleged the existence of, some contact with Pennsylvania that potentially supports the exercise of personal jurisdiction. Plaintiff should have the opportunity to investigate the extent of these contacts and their relation to his claims. (Op. at 22)
Defendant’s Rosen & Associates and David Rosen did not challenge the Court’s jurisdiction.
Motion to Dismiss for Failure to State a Claim
The Court granted some of the defendant’s motions to dismiss on some counts, but denied them on others. The Court determined that it was premature to resolve ReputationDefender, Chanin, and Iravani’s motion to dismiss until after jurisdictional discovery. (Op. at 23). However, with respect to David Rosen and Rosen & Associates, who did not challenge personal jurisdiction, the Court split its decision — dismissing the abuse of process claim, but refusing to dismiss the Dragonetti Act claim — a Pennsylvania Act prohibiting the wrongful initiation of civil proceedings.
Pennsylvania’s Dragonetti Act, 42 Pa. Cons. Stat. Ann. §§ 8851-54, codified the common law tort of wrongful use of civil proceedings. Schmidt v. Currie, 470 F. Supp. 2d 477, 480 (E.D. Pa. 2005).
Under this statute:
A person who takes part in the procurement, initiation or continuation of civil proceedings against another is subject to liability to the other for wrongful use of civil proceedings [where]:
(1) He acts in a grossly negligent manner or without probably cause and primarily for a purpose other than that of securing the proper discovery, joinder of parties or adjudication of the claim in which the proceedings are based; and
(2) The proceedings have terminated in favor of the person against whom they are brought.
42 Pa. Cons. Stat. Ann. § 8851(a). An attorney who brings a case, or who takes any steps in the proceedings, on behalf of his client “is not liable if he ha[d] probable cause for his action.” (Op. at 23)
The Court ruled that there is enough, at least at this stage, for the complaint to move forward.
Taking Plaintiff’s allegations as true, as we must at this stage in the litigation, we cannot say that Rosen and Rosen & Associates had probable cause to bring the Connecticut Litigation. As described above, Plaintiff’s Complaint adequately establishes that Heller and Iravani knew that Ciolli was not associated with T14 Talent and had never made defamatory posts about them on any website. Because they allegedly knew that Ciolli was not involved, Heller and Iravani did not reasonably have probable cause to assert that he was. Thus, Plaintiff’s allegations support the fact that Heller and Iravani did not have probable cause to assert the causes of action alleged in the Connecticut Litigation against Ciolli.
Defendants Rosen and Rosen & Associates argue that, as lawyers, they were entitled to rely in good faith on statements made by their clients and that therefore, even if Heller and Iravani knew that there was no probable cause to bring the Connecticut Litigation against Ciolli, Rosen and Rosen & Associates are not also liable. (Defs. Rosen & Rosen & Associates Mem. Supp. Mot. Dismiss 6.) However, as we have already determined that the Complaint adequately alleges that Heller and Iravani knew that Ciolli was not involved in the organization of T14 Talent or the offensive posts, we cannot assume that Heller and Iravani nevertheless told their lawyers a different story and that Rosen and Rosen & Associates relied on such statements in good faith. Because Rosen and Rosen & Associates bring a motion to dismiss, we must draw all reasonable inferences in Plaintiff’s favor. It is reasonable to infer that, if Heller and Iravani knew that there was no probable cause to bring suit against Ciolli, then their lawyers knew it too. Thus, we find that the allegations of the Complaint support the fact that Defendants Rosen and Rosen & Associates lacked probable cause to bring the Connecticut Litigation against Ciolli.
(Op. at 25-26)
Although the Court struck many of Ciolli’s allegations as violative of FRE 408, which excludes settlement discussions from being admissible, the Court still held that it could be inferred that joining Ciolli in the case without probable cause in order to obtain concessions from a non party.
“An improper purpose may be inferred where the action is filed without justification.” Broadwater, 725 A.2d at 284 (citing Gentzler v. Atlee, 660 A.2d 1378, 1382 n.6 (Pa. Super. Ct. 1995)). Moreover, whether an alleged purpose is improper is an issue for the jury to decide. Bannar v. Miller, 701 A.2d 242, 249 (Pa. Super. Ct. 1997). Defendants Rosen and Rosen & Associates have identified no cases where their conduct would be proper as a matter of law. In fact, the initiation of a suit to force an unrelated settlement has been recognized as an example of improper purpose. Shaffer v. Stewart, 473 A.2d 1017, 1021 (Pa. Super. Ct. 1984) (quoting Restatement (Second) of Torts § 676 cmt. c). Generally, cases recognizing settlement as an improper purpose involve the filing of nuisance suits to either coerce the defendant into settling the baseless claim rather than deal with the expense of litigation or to coerce the defendant into settling unrelated claims. We think that the reasoning behind those cases extends to the present situation-here a case is filed without probable cause for the purpose of coercing the settlement of unrelated claims by a non-party. For these reasons, we find that the improper purpose identified by Plaintiff will support his claim for wrongful initiation of civil proceedings. (Op. at 27-28)
I’m looking forward to seeing how the jurisdictional discovery in this case develops — and find it heartening that the court did not dismiss the Dragonetti Act claim. If Ciolli can prove the contested elements of the claim, that the Connecticut litigation was brought against him for an improper purpose and without probable cause to do so, he deeply deserves vindication.