In a previous column, we discussed one of the questions most frequently asked of a lawyer: “Can I sue the other guy for suing me?” The question arises often, because almost no one believes they deserve to be sued. Nearly every person named as a defendant in a lawsuit believes, and often rightly so, that the plaintiff’s case against him is so plainly frivolous that no one could possibly see it any other way. Surely the judge will quickly slice the case down to its rotten core, and award attorney’s fees plus damages for pain, suffering and the inconvenience to the unjustly accused. This is the all-but universal assumption of the first-time defendant, yet it is almost always wrong.
In English courts, the loser typically does pay the winning party’s legal fees. However, the American rule, more egalitarian than the British, is that each party bears his own legal expenses.
The Pennsylvania legislature has carved out a number of exceptions to the so-called “American rule” such as the Unfair Trade Practices and Consumer Protection Law, and various other consumer protection statutes which shift the burden of attorney’s fees from the aggrieved consumer to the defendant where the consumer prevails on the underlying claim. In addition, a Pennsylvania statute allows the courts to award reasonable counsel fees to any party at the conclusion of a case if it finds that the “conduct of another party in conmmencing the matter or otherwise was arbitrary, vexatious or in bad faith.” 42 Pa. C.S.A. § 2503(9).
All of the remedies discussed above can be awarded as part of the original lawsuit, and need not be pursued as a separate action. In certain limited circumstances, however, a party who believes he has suffered injury as a result of a frivolous or ill-motivated lawsuit filed against him can later file a separate action against the original Plaintiff. In 1980, the Pennsylvania legislature enacted what is commonly known as the Dragonetti Act. The primary provision of the Act, entitled “Wrongful Use of Civil Proceedings”, is codified at 42 Pa.C.S.A. § 8351(a) and reads as follows:
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 [if]:
(1) He acts in a grossly negligent manner or without probable 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.
One critical detail of the Dragonetti Act is that a claim cannot be made until after the prior proceedings have terminated in favor of the party who wishes to proceed with a Dragonetti Act claim. That is, a Dragonetti Act claim is premature if there is still a chance that the original plaintiff might yet prevail at trial or on appeal. The question is whether there has been a final, “favorable termination” of the underlying case.
In a previous column, we noted that even if the case was voluntarily withdrawn by the original plaintiff, a Dragonetti Act claim may still be available, depending on the circumstances, so long as the termination of the underlying claim is final, with no remaining opportunities for appeal or reinstatement. Recent case law has limited the right to pursue a Dragonetti Act claim in cases where the underlying claim was resolved by means other than fully contested litigation.
In a decision handed down on September 14, 2007 in the case of D’Elia v. Folina, et al, the Pennsylvania Superior Court was confronted with a Dragonetti Act claim filed by a physician following the termination of an earlier medical malpractice action against him. Although the court in the earlier proceedings had granted the physician’s motion for summary judgment, finding as a matter of law that the physician was not liable for malpractice, the ruling was still subject to appeal. Therefore, the ruling was not final until the parties entered into a settlement agreement, wherein the underlying plaintiff waived her right to appeal in exchange for the physician’s pledge that he would not sue the plaintiff for wrongful use of civil proceedings. Although the settlement agreement released the underlying plaintiff from liability for wrongful use of civil proceedings, it did not release the plaintiff’s lawyers.
When the physician sued the underlying plaintiff’s lawyers for wrongful use of civil proceedings, those lawyers argued that the underlying case had been settled rather than decided in favor of the physician, such that there was no “favorable termination” on which to premise a claim for wrongful use of civil proceedings. The Pennsylvania Superior Court agreed, finding that the earlier dismissal of the malpractice suit was “insufficiently favorable” to the physician because the summary judgment order was still subject to a potentially successful appeal at the time the underlying case was settled.
Thus, in Pennsylvania, when the parties to the underlying lawsuit end that suit in a non-litigious manner, even when that negotiated ending is premised upon a ruling against the original plaintiff, the “wrongfulness” of the original lawsuit can never be determined with finality. And because there can be no “victor” where the underlying case has been settled, regardless of whether the settlement involved a monetary payment, the law in Pennsylvania now is that an amicable settlement of the underlying claim eliminates the potential for the original defendant to later pursue a claim for wrongful use of civil proceedings.
This brings us back to the conclusion of our original column on this topic, which was that, theoretically, there are any number of mechanisms by which a party wrongfully sued can attain some measure of restitution and damages for the inconvenience, indignity, counsel fees and other losses they have suffered in the process of a lawsuit. But in practice, courts remain concerned about unduly inhibiting access to our judicial system, and are therefore reluctant to penalize plaintiffs for filing suit except in extreme circumstances. As a result, while it is possible to make a claim for counsel fees against a party who has sued in bad faith or without probable cause, the award of counsel fees or other damages to the wrongfully sued remains an extraordinary remedy, and often not worth the additional counsel fees one will incur in pursuing the remedy. Thus, settlement remains preferable to litigation in most instances. But if it is important, for whatever reason, for an individual litigant to preserve a potential claim for wrongful use of civil proceedings against the original plaintiff, Pennsylvania law now suggests that the only way to do that is to resist settlement and fight the underlying case to its bitter end.