PROFESSIONAL LIABILITY ISSUES

In the State of New Jersey, a Claim of Malicious Use of Process by an Attorney Requires Proof that the Attorney Acted for His or Her Own Legitimate Purpose

In an unpublished opinion, Lobiondo v. Schwartz, 2007 WL 2188600 (N.J. Super. August 1, 2007), Grace Schwartz and her three daughters (“Schwartz”) appealed from a summary judgment order dismissing their counterclaim against James Lobiondo, Jr. and Denise Lobiondo (“Lobiondo”) and a summary judgment order dismissing their third party complaint against Lobiondo’s attorneys, Giordano, Halleran & Ciesla, P.C., Michelle A. Querques, and Steven Berlin (“Giordano”).

The factual background of the dispute giving rise to this appeal is as follows: Lobiondo owned a one-story beach club directly across the street from Schwartz. Schwartz objected to Lobiondo's attempts to increase the size of the beach club and intensify its function. Her objections took the form of communications to local officials and to the community in general. As the result of Schwartz's activities, Lobiondo retained Giordano and filed a complaint alleging defamation, intentional infliction of emotional distress and tortuous interference with business advantage. Schwartz counterclaimed, asserting causes of action sounding in malicious abuse of process, malicious prosecution, and intentional infliction of emotional distress. The jury verdict resulted in a judgment against Grace Schwartz and a modest judgment in favor of two of her daughters on their counterclaims.

The appeals court reversed judgment against Schwartz. The court also held that the facts were sufficient to justify, a conclusion that Lobiondo had committed the tort of malicious abuse of process. Accordingly, the court reversed and remanded for a dismissal of Lobiondo's claims with prejudice and for further consideration of the counterclaims.

On remand, Schwartz filed an amended counterclaim against Lobiondo alleging that Lobiondo had “abused and misused the litigation process” in filing the original complaint and had intentionally inflicted emotional distress upon them. Schwartz also filed a third-party complaint against Giordano alleging malicious use of process by intentionally and in bad faith instituting litigation and continuing the litigation after they knew or should have known that there was no reasonable basis for doing so. The complaint also alleged Giordano's action was “an improper, illegal and perverted use of the legal process” which was intended to inflict emotional harm and was undertaken “in concert with the Lobiondos to abuse the litigation process.” On motions for summary judgment by Schwartz and Lobiondo, the motion judge dismissed all claims and Schwartz appealed.

In this appeal, the Appellate court affirmed the dismissal of the claim that Giordano, while representing Lobiondo in the litigation against Schwartz, committed the tort of malicious use of process against Schwartz. The Court noted that malicious use of process is a disfavored action stating that “[t]he courts must be freely accessible to the people. Extreme care must be exercised so as to avoid the creation of a reluctance on their part to seek redress for civil or criminal wrongs for fear of being subjected to a damage suit if the action results adversely. . . . The need to exercise that care must be heightened to ensure that a litigant, having chosen to seek redress for a perceived injury, will not be limited in the choice of representation by counsel's fear of a later damage suit.” However, the court did recognize that there are circumstances in which an attorney should be held liable for the malicious use of process. The Court looked to the Restatement for guidance on what constitutes malicious use of process by an attorney, as opposed to a litigant.

The Restatement rule provides: A lawyer representing a client in a civil proceeding ... is not liable to a non-client for wrongful use of civil proceedings ... if the lawyer has probable cause for acting or if the lawyer acts primarily to help the client obtain a proper adjudication of the client's claim in that proceeding. Restatement (Third) of the Law Governing Lawyers § 57(2) (2000) (emphasis added). The Court quoted Comment d to the Restatement rule at length:

d. Wrongful use of civil proceeding; abuse of process; false arrest. A person who takes an active part in the initiation, continuation, or procurement of civil proceedings is liable in tort to the defendant for wrongful use of civil proceedings if the person acts without probable cause and primarily for a purpose other than securing a proper adjudication of the claim and if (except for ex parte proceedings) the proceedings have terminated in favor of the defendant (see Restatement Second, Torts § 674). In many jurisdictions, only those suffering certain kinds of harm known as special injury may recover. The tort is called malicious prosecution in many jurisdictions.

The effect of the rule stated in this Section is that, in a claim for wrongful use of civil proceedings, the existence of probable cause and of an improper purpose are assessed separately for a lawyer and for the client on whose behalf the civil proceeding was brought. A lawyer is liable only if there was no probable cause for bringing the civil proceeding, the lawyer did not act primarily to aid the client in securing a proper adjudication of the client's claim, and the civil proceeding has terminated in favor of the defending party. Probable cause exists if the lawyer has a reasonable belief that the facts on which the claim is based can be established to the satisfaction of the trier of fact and has a reasonable belief that there is a sound chance that under those facts the claim may be held valid (see Restatement Second, Torts § 675 & Comments d & e thereto) . . . . Whether probable cause existed is determined on the basis of the facts known to the lawyer at the time. When there is no dispute as to what facts were so known, the existence of probable cause is an issue of law to be decided by the tribunal, not a jury issue (see Restatement Second, Torts § 681B(1)(c)). . . .

Similarly, regardless of the client's purpose, even if a lawyer “has no probable cause and is convinced that his client's claim is unfounded, he is still not liable [for wrongful use of civil proceedings] if he acts primarily for the purpose of aiding his client in obtaining a proper adjudication of his claim” (Restatement Second, Torts § 674, Comment d; see also id. § 676). A desire to earn a contingent or other fee does not constitute an improper motive. But if a lawyer acts without probable cause “ and for an improper purpose, as, for example, to put pressure upon the person proceeded against in order to compel payment of another claim of his own or solely to harass the person proceeded against by bringing a claim known to be invalid, he is subject to the same liability as any other person” (Restatement Second, Torts § 674, Comment d ). . . . The lawyer's motive is assessed separately from that of the client. However, the client's motives, if known to a lawyer, may constitute evidence bearing on the lawyer's motives.

The Court read the Restatement to require, as a condition of attorney liability, proof that the attorney (a) knew the client's claim was baseless and either (i) knew the client was litigating for an improper purpose which furthered the lawyer's improper purpose or (ii) litigated for the attorney's own improper purposes. The Court held that “[g]iven the requirement that Giordano had to be shown to have acted for its own illegitimate purpose, we conclude that the judge properly dismissed the malicious use claim. Even assuming Giordano could have been found to know that Lobiondo was litigating for an improper purpose-a doubtful proposition-no reasonable fact finder could determine that Giordano pursued this litigation with the intent to further its own illegitimate purpose or that it had adopted an illegitimate purpose of the client.”

Accordingly the Court affirmed the summary judgment order dismissing the claims against Giordano. Further, the court affirmed the dismissal of Schwartz's counterclaim against Lobiondo for malicious abuse of process and reversed and remanded the dismissal of the malicious use of process and emotional distress claims.

EMPLOYMENT LAW ISSUES

The Third Circuit Court of Appeals Rules That Individual Members of a Decertified Class Must Each Met the Notice and Filing Requirements of the ADEA in Order to Pursue Subsequent Individual Claims of Age Discrimination.

In Ruehl v. Viacom, Inc., --- F.3d ----, 2007 WL 2555244 (3d Cir. September 7, 2007), Plaintiff James Ruehl brought suit against Viacom, inc., his former employer, alleging violations of the Age Discrimination in Employment Act of 1967 (“ADEA”). The District Court denied the motion for summary judgment of Viacom, Inc. Viacom appealed that decision. The Third Circuit Court of Appeals reversed the District Court’s ruling, and remanded the matter for entry of judgment in favor of Viacom, Inc.

In March 1997, Plaintiff Ruehl, a 24 year employee of Viacom, inc., was transferred from his position to a different department, the tax department. In late 1997 or early 1998, Mr. Ruehl then learned that the tax department was to be eliminated, and he was a part of the transition team. Mr. Ruehl was then terminated, effective August 31, 1998. On his final day of employment, Mr. Ruehl was asked to sign a “Separation Agreement, General Release and Provision Not to Sue,” which included a waiver of claims under the ADEA.

Testimony presented showed that as early as 1994, Mr. Ruehl suspected age discrimination. Further, testimony was presented that in the summer of 1998, Mr. Ruehl suspected his termination might be related to his age.

In December 1998, two other terminated employees, Mssrs. Mueller & Bellas, filed EEOC charges against Viacom, alleging “a pattern and scheme of systematic discrimination against older workers.” A complaint was filed in the Western District of Pennsylvania in August 1999. In March 2001, that matter was certified as a class action. Mr. Ruehl opted into that class. However, the class was decertified in December 2002, and the matter was dismissed.

In October 2003, over 5 years after his termination, Mr. Ruehl filed his first charge of age discrimination with the EEOC. Viacom, Inc. filed a motion for summary judgment, alleging that the EEOC charge and the Complaint were time-barred. Mr., Ruehl countered that the time had been tolled by the single-filing rule. The District Court agreed with Mr. Ruehl. Following denial of that motion, Viacom filed an interlocutory appeal.

In Pennsylvania, a complaint under the ADEA must be filed with the EEOC within 300 days of notification to the employee of an adverse employment action. This period may be tolled in certain circumstances, such as the single filing rule. The single filing rule provides that the notice and conciliation purposes of the filing of an EEOC charge are met by the entire class where a single representative of that class timely filed a charge with the EEOC. This finding was based upon the understanding that the class members were all similarly situated, and so proper notice from one equated to proper notice from all.

The issue presented by Ruehl, however, was whether the single filing rule should apply to the individual actions filed by former class members after decertification. The Third Circuit concluded that the single filing rule should not apply in such a situation, noting that the class had been decertified because the members were not similarly situated. Accordingly, notice from one would not equate to notice from all, based upon the differing set of facts of each individual. Thus, because no exception applied, the Third Circuit vacated the Order, and remanded the matter for entry of summary judgment in favor of Viacom, Inc., based upon Mr. Ruehl’s untimely filing of an EEOC charge.