HARRISBURG – Three judges from the Superior Court of Pennsylvania agree with a state court that judicial immunity and the doctrine of res judicata effectively bar an abuse of process complaint surrounding breach of contract litigation from continuing.
Judge Mary Jane Bowes spoke for the Court in this matter, authoring the court’s May 7 opinion on behalf of herself and fellow Superior Court judges John T. Bender and Dan Pellegrini, as it related to plaintiffs Adam J. Hammond and Gerald J. Iwanejko, Jr. appealing both the dismissal of their amended complaint, and an order that sustained preliminary objections filed collectively by the defendants, United States Liability Insurance Company & Group and the law firm of Marshall Dennehey Warner Coleman & Goggin.
In 2011, Hammond worked with Transportation Compliance Associates, Inc. (TCA) to develop computer software for tracking compliance with transportation regulations of hazardous materials. Along with his business agreement with TCA, Hammond purchased a professional liability insurance policy through USLI and began consulting with software firm LANtek.
After TCA opted to end its relationship with Hammond, TCA and LANtek filed a declaratory judgment action to determine ownership of the regulatory compliance software, and also asserted tort and contract claims against Hammond. Hammond contacted USLI about the claims, but USLI denied him coverage.
Hammond filed counterclaims, which TCA and LANtek claimed were raised in bad faith and warranted an award of attorney fees and costs. Hammond went back to USLI and renewed his request for an insurance-based defense and coverage against these new allegations of misconduct, but USLI again declined.
In the end, TCA, LANtek and Hammond resolved the dispute via stipulation, and Hammond obtained discharge of his outstanding financial obligations through bankruptcy.
Hammond then sued USLI in federal court for breach of contract and bad faith, based upon its refusal to provide a defense and coverage. USLI, represented by Marshall Dennehey, won the case through grant of judgment on the pleadings.
The district court determined that USLI properly declined to defend Hammond based upon an intellectual property exclusion contained in the relevant policy.
Specifically, Section II of the business owner’s coverage of the policy, which “excludes coverage for any ‘loss, cost, or expense’ arising out of any ‘infringement of copyright, patent, trademark, trade secret or other intellectual property rights.”
Hammond appealed to the Third Circuit Court of Appeals, arguing that the district court erroneously relied upon language that is “not actually found in the policy exclusion”, while USLI simultaneously advocated for affirmance based upon the very same exclusion.
Ultimately, the Third Circuit affirmed the dismissal and the United States Supreme Court denied Hammond’s petition for a writ of certiorari.
Hammond and Iwanejko then initiated the instant action against both USLI and Marshall Dennehey, with Hammond stating a claim in their amended complaint against both defendants for abuse of process, based upon their reliance in the Third Circuit upon the “loss, cost or expense” language that is not found within the policy exclusion.
Further, attorney Iwanejko alleged a count of intentional interference with contractual relations, contending that defendants’ misrepresentation about the “loss, cost or expense” language deprived him of his contingency fee in the underlying lawsuit.
“Defendants filed preliminary objections claiming that they are immune from any tort liability that is premised upon the content of their pleadings in the [underlying] federal litigation, because such statements in judicial proceedings are absolutely privileged. The trial court agreed, and entered an order sustaining defendants’ preliminary objections and dismissing plaintiffs’ amended complaint with prejudice. Plaintiffs filed a timely notice of appeal,” Bowes stated.
On appeal, the plaintiffs ask “whether reversible error was committed in the decision to dismiss the claims set forth in the amended complaint on the basis of judicial privilege since it is contrary to applicable precedent…holding that judicial privilege does not operate to bar abuse of process and/or interference with contract claims under factual circumstances similar to those involved in this case.”
After reviewing the applicable law on the subject matter, the trio of Superior Court judges upheld and concurred with the ruling, which had been found in the Lawrence County Court of Common Pleas nearly one year ago. That ruling stated that the plaintiffs’ claims were barred by not just the principle of judicial immunity, but also the doctrine of res judicata.
“Judicial immunity applies to all tort claims, not just defamation, and bars actions based upon communications pertinent to any stage of a judicial proceeding…the claims now being asserted against defendants arise exclusively from pertinent statements made during the course of litigation and appeal in the underlying federal court suit. Therefore, the statements made by defendants in the underlying case are privileged and plaintiffs’ claims in this case are barred by judicial immunity,” Lawrence County Judge Dominick Motto said last year.
Bowes explained the trial court opinion regarding applicable Pennsylvania precedent pertaining to judicial privilege, and therefore, the barring of the plaintiffs’ claims (which are solely based upon communication in a judicial proceeding), would also be the opinion of the Superior Court in this case.
“Upon a review of the certified record, the parties’ briefs and the relevant law, we conclude that the opinion that the May 28, 2019 opinion authored by the Honorable Dominick Motto thoroughly addresses and properly disposes of plaintiffs’ arguments. Therefore, we adopt Judge Motto’s May 28, 2019 opinion as our own and affirm on the bases stated therein,” Bowes said.
Superior Court of Pennsylvania case 950 WDA 2019
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com