U.S. Express Lines, Ltd. v. Higgins

Opinions of the United
2002 Decisions States Court of Appeals
for the Third Circuit
2-15-2002
US Express Lines Ltd v. Higgins
Precedential or Non-Precedential:
Docket 0-4205
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Filed February 15, 2002
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 00-4205
U.S. EXPRESS LINES, LTD.; BRENT NOYES, M.D.; LEO
HAMILTON; LENORE MYERS; FRANCIS MYERS, H/W;
MICHAEL PACOR; LLOYD FEIGENBAUM; LYNDA
FEIGENBAUM, H/W; KENNETH DETATO; BRAD MOSES;
MARY POSSI; ERIC N. RUBINO; THOMAS CRAWFORD;
SUSAN M. SIMPSON; JOHN BURKE; GREGORY REPPA;
LEO RASIS, M.D.; JEFFREY W. ALLEN; PATRICIA C.
ALLEN; WARREN CONSTANTINE, JR.,
Appellants
v.
ANN-MICHELE HIGGINS, ESQ.; RAWLE & HENDERSON;
UNITED SHIPPING SERVICES THREE, INC.; UNITED
SHIPPING SERVICES ONE, INC.; HACI ISMAIL
KAPTANOGLU SHIP MANAGEMENT & TRADING CO.,
LTD.; HARRY G. MAHONEY, ESQ.; THOMAS C.
SULLIVAN; DEASEY, MAHONEY & BENDER, LTD.;
SUNRISE MARITIME INC; ZODIAC MARITIME AGENCIES,
LTD.; A. ROBERT DEGEN, ESQ.; FOX, ROTHSCHILD,
O'BRIEN & FRANKEL; TRADE SHIPPING MANAGEMENT,
S.A.; LAURENCE SHTASEL, ESQ.; JEFFREY S. MOLLER,
ESQ.; BLANK ROME COMISKY & MCCAULEY,
Appellees
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
(D.C. No. 99-cv-00992)
District Judge: Honorable John R. Padova
Argued November 26, 2001
Before: ROTH, FUENTES and WEIS, Circuit Judges
Filed February 15, 2002
Thomas S. Myers, Jr., Esquire
(ARGUED)
1800 East Lancaster Avenue
Paoli, Pennsylvania 19301
Vincent P. DiFabio, Esquire
Platt, DiGiorgio & DiFabio
1800 East Lancaster Avenue
Paoli, Pennsylvania 19301
Attorneys for Appellants
Robert B. White, Jr., Esquire
(ARGUED)
Law Offices of Robert B. White, Jr.,
P.C.
1515 Market Street, Suite 1800
Philadelphia, Pennsylvania 19102
Jeffrey P. Lewis, Esquire
McKissock & Hoffman, P.C.
P.O. Box 3086
West Chester, Pennsylvania 19381
William H. Lamb, Esquire
Lamb, Windle & McErlane, PC
24 E. Market Street
West Chester, Pennsylvania 19381
Albert P. Massey, Jr., Esquire
Lentz, Cantor & Massey, Ltd.
Chester County Commons
20 Mystic Lane
Malvern, Pennsylvania 19355
Attorneys for Appellees
2
OPINION OF THE COURT
WEIS, Circuit Judge.
In this appeal, we decide that the defendant lawyers'
decision to invoke federal case law, rather than a
procedural rule, in persuading a district judge to issue a
maritime attachment does not give rise to a cause of action
for malicious abuse of civil process under state law. The
lawyers did not act in bad faith because they disclosed the
existence of the alternative courses to the Court. We also
conclude that the conflict between the procedural rule and
the opinion of a United States Court of Appeals raises a
federal question sufficient to support removal of the
malicious abuse of process claim from the state court to the
federal forum. We will affirm the District Court's judgment
in favor of the defendants.
Plaintiff U.S. Express Lines, Ltd. ("Express Lines") is a
Pennsylvania corporation that chartered vessels from
various shipowners to carry cargo for its customers. The
company maintained its principal place of business in
Paoli, Pennsylvania, within the Eastern District of
Pennsylvania.
Express Lines had arranged financing through a line of
credit from Founders Bank, secured by certificates of
deposit purchased by the individual plaintiffs. When the
company encountered cash flow problems in 1997, it began
negotiating for further financial support from other
institutions. In January 1998, it advised its creditors,
including the defendant vessel owners, of the encouraging
progress of its efforts.
Nevertheless, on February 11, 1998, one of the vessel
owners, through its counsel, defendant Ann-Michele
Higgins of defendant law firm Rawle & Henderson, applied
to the United States District Court for the Eastern District
of Pennsylvania for the attachment of "all assets, goods,
and chattels, belonging to" Express Lines. In seeking the
attachments, the defendant attorneys cited as governing
law an opinion of the Court of Appeals for the Eleventh
3
Circuit, rather than the Supplemental Rules for Admiralty
Claims. On February 17, 1998, the District Court ordered
that the certificates of deposit at Founders Bank be
attached.
Other creditor vessel owners took similar action through
their attorneys, defendants A. Robert Degen and the law
firm of Fox, Rothschild, O'Brien, & Frankel, Ltd., Laurence
Shtasel and Jeffrey S. Moller, both of defendant Blank
Rome Comisky & McCauley, and Harry G. Mahoney and
Thomas C. Sullivan, of the defendant law firm Deasey,
Mahoney, & Bender, Ltd. As a result of these legal actions,
Express Lines defaulted on its loan agreements and was
forced to suspend and eventually cease its commercial
operations.
The District Court vacated the attachments on November
5, 1998, concluding that its decision to depart from the
restrictions imposed by Rule B of the Supplemental Rules
for Certain Admiralty and Maritime Claims of the Federal
Rules of Civil Procedure ("Supplemental Rule B") was in
error. The Court then directed the parties to arbitration in
accordance with the terms of the charter party, ordered
that the assets that Founders Bank had deposited in an
interpleader action remain in the Court's custody, and
retained jurisdiction pending arbitration.
On January 28, 1999, Express Lines and the individual
owners of the certificates of deposit at Founders Bank filed
suit in the Court of Common Pleas of Chester County,
Pennsylvania, against the vessel owners and their various
counsel. The complaint sought compensatory and punitive
damages for abuse of process, conspiracy, wrongful use of
civil proceedings, and other torts.
Plaintiffs contend that defendants secured the writs of
attachment in direct violation of Rule B, which precludes
the seizure of maritime assets if the debtor is found within
the district in which the litigation is commenced. They
assert that defendants were well aware that Express Lines
kept its principal office in the Eastern District of
Pennsylvania and thus, they acted in bad faith in seeking
attachments in that district.
4
The defendant vessel owners were never served with
process, and the claims against them were ultimately
dismissed.1 The lawyer defendants removed the case to the
District Court, and the plaintiffs moved to remand. The
District Court refused, concluding that, based as it was on
the issuance of maritime attachments, "[t]he federal
element [of the litigation] cuts to the heart of each of
Plaintiffs' claims" and, therefore, federal question
jurisdiction existed.
The District Court dismissed the case under Federal Rule
of Civil Procedure 12(b)(6), holding that the defendant
lawyers' actions were privileged because they had not
misled the Court as to the underlying facts or relevant law
in obtaining the attachment. The Court added that there
had been no abuse of process in the defendants' use of
maritime attachments to collect debts whose legitimacy
plaintiffs did not contest. Because the writs had been
issued with court authorization, the defendants had not
acted in a grossly negligent manner or without probable
cause. Accordingly, the Court held that the plaintiffs had
failed to establish their state law claims.
In this appeal, plaintiffs contend that the defendant
attorneys misled the Court in securing the attachments,
and that the efforts to obtain them were made in bad faith
because the charter party required that disputes be
arbitrated. The plaintiffs also assert that the District Court
erred in declining to remand the case to the state court.
The defendants deny that they engaged in any deception
and argue that the state law claims fail as a matter of law.
Alternatively, they contend that because the challenged
activity occurred in a federal court, no state cause of action
may be applied to their conduct. Finally, defendants assert
that because of an omission in the plaintiffs' notice of
appeal, this Court lacks appellate jurisdiction.
We exercise plenary review of the District Court's
dismissal for failure to state a claim under Rule 12(b)(6).
_________________________________________________________________
1. The plaintiffs have not contested the dismissal of the defendant
shipowners and have treated this case as directed solely against the
lawyers. We will do likewise.
5
Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250,
1261 (3d Cir. 1994). When considering a Rule 12(b)(6)
motion, courts accept as true the allegations in the
complaint and its attachments, as well as reasonable
inferences construed in the light most favorable to the
plaintiffs. Id. Although a district court may not consider
matters extraneous to the pleadings, "a document integral
to or explicitly relied upon in the complaint may be
considered without converting the motion to dismiss into
one for summary judgment." In re Burlington Coat Factory
Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (internal
quotations omitted); see also Pension Benefit Guar. Corp. v.
White Consol. Indus., 998 F.2d 1192 (3d Cir. 1993) (matters
of public record).
We review de novo a district court's denial of remand.
Angus v. Shiley Inc., 989 F.2d 142, 143 n.1 (3d Cir. 1993);
see also Luckett v. Delta Airlines, Inc., 171 F.3d 295, 298
(5th Cir. 1999).
I.
We first address jurisdictional issues. The plaintiffs'
complaint alleges violations of state law. Because the
parties are not diverse, our jurisdiction, as well as that of
the District Court, must rest upon the existence of a federal
question. 28 U.S.C. SS 1331, 1441(b).
At the outset, we address an error in the defendants'
brief that cites Lusardi v. Xerox Corp., 975 F.2d 964 (3d
Cir. 1992), as dispositive of our appellate jurisdiction.
Lusardi holds that, with certain exceptions not pertinent
here, an appeal taken from a specified judgment or part of
a specified judgment does not confer upon the court of
appeals jurisdiction to review other judgments or portions
not specified or inferred from the notice of appeal. 975 F.2d
at 971-72.
Defendants contend that because plaintiffs did not
designate the order denying remand in their notice of
appeal, we do not have authority to review that issue. This
argument is oblivious to the duty of federal courts to
examine their subject matter jurisdiction at all stages of the
litigation sua sponte if the parties fail to raise the issue.
6
That obligation extends to removal cases, as well as to
those originally filed in the district courts. Meritcare Inc. v.
St. Paul Mercury Ins. Co., 166 F.3d 214, 217 (3d Cir. 1999);
Trent Realty Assocs. v. First Fed. Sav. & Loan Ass'n of
Phila., 657 F.2d 29, 30 (3d Cir. 1981). Clearly, Lusardi is
inapposite to the removal jurisdiction issue in this case.
Any civil action brought in state court may be removed
by the defendant to the federal district court in the district
where such action is pending, if the district court would
have original jurisdiction over the matter. 28 U.S.C.
S 1441(a); Franchise Tax Bd. of Cal. v. Constr. Laborers
Vacation Trust for S. Cal., 463 U.S. 1, 7-8 (1983). Where the
parties are not diverse, removal is appropriate only if the
case falls within the district court's original"federal
question" jurisdiction: "all civil actions arising under the
Constitution, laws, or treaties of the United States." 28
U.S.C. SS 1331, 1441(b); Franchise Tax Bd., 463 U.S. at 8.
In determining whether a case arises under federal law,
courts are instructed to look to the plaintiff 's"well-pleaded
complaint." Merrell Dow Pharm. Inc. v. Thompson, 478 U.S.
804, 808 (1986). It is not enough that a federal question is
or may be raised as a defense. Id.; Trent Realty, 657 F.2d
at 33. "[T]he controversy must be disclosed upon the face of
the complaint, unaided by the answer or by the petition for
removal." Westmoreland Hosp. Ass'n v. Blue Cross of W.
Pa., 605 F.2d 119, 122 (3d Cir. 1979) (quoting Gully v. First
Nat'l Bank in Meridian, 299 U.S. 109, 113 (1936)).
Attachments to the complaint are considered part of it.
The state suit need not invoke a federal law in order to
"arise under" it for removal purposes. It is sufficient that
the merits of the litigation turn on a substantial federal
issue that is "an element, and an essential one, of the
plaintiff 's cause of action." Gully, 299 U.S. at 112. The
controversy must be "genuine and present . . . not merely
. . . conjectural." Id. at 113. In short, the federal law "must
be in the forefront of the case and not collateral, peripheral,
or remote." Merrell Dow, 478 U.S. at 813 n.11; see also
United Jersey Banks v. Parell, 783 F.2d 360, 367 (3d Cir.
1986) (no federal question existed because right to relief
under state law did not require resolution of a substantial
question of federal law). It need not, however, be a situation
7
in which federal law completely preempts state law. See
Goepel v. Nat'l Postal Mail Handlers Union, 36 F.3d 306 (3d
Cir. 1994) (discussing "complete preemption" doctrine).
The case before us does not involve the "artful pleading"
doctrine, which requires a court to peer through what are
ostensibly wholly state claims to discern the federal
question lurking in the verbiage. See, e.g., United Jersey
Banks, 783 F.2d at 367. The complaint filed in the state
court is quite detailed and is augmented by numerous
documents, such as the motions for attachment, the
charter party, and the order attaching Express Lines'
assets. The complaint and the documents affixed to it
charge the defendants with malicious abuse of process in
causing the District Court to override Rule B's restrictions
in erroneous reliance on a Court of Appeals opinion.
The plaintiffs argue that the mere fact that the property
attachments were granted pursuant to maritime law is an
inadequate basis for removal. They point out that under the
saving to suitors clause, 28 U.S.C. S 1333(1), federal and
state courts have concurrent jurisdiction in maritime
matters. See Supplemental Rule B(1); Romero v. Int'l
Terminal Operating Co., 358 U.S. 354 (1959); In re Dutile,
935 F.2d 61, 62-63 (5th Cir. 1991); Furness Withy
(Chartering), Inc., Panama v. World Energy Sys. Assocs.,
Inc., 854 F.2d 410, 411 n.1 (11th Cir. 1985).
The saving to suitors clause "preserves alternatives of
suing on the ``law side' of the federal court or in state court,
with admiralty and maritime law applied to the claim."
George K. Walker, Supplemental, Pendent & Ancillary
Jurisdiction in Admiralty and Maritime Cases: The ALI
Federal Judicial Code Revision Project and Admiralty
Practice, 32 J. Mar. L. & Com. 567, 568 (2001); see also id.at 568 n.8 (listing cases); Lewis v. Lewis & Clark Marine,
Inc., 531 U.S. 438, 444-45 (2001) (explaining that saving to
suitors clause preserves concurrent jurisdiction of state
courts over some admiralty and maritime claims); 14A
Charles A. Wright et al., Fed. Prac. & Proc. S 3672, at 301-
05 (3d ed. 1998). The plaintiffs' argument would carry
weight if their state cause of action were a maritime one.
But it is not; it is a claim for malicious use of process, a
state tort not confined to admiralty.
8
The Supreme Court, construing federal question
jurisdiction in the removal context, has held that admiralty
cases do not fall within the scope of 28 U.S.C.S 1441,
which designates as appropriate for removal only those
cases "arising under the Constitution, treaties or laws of
the United States." Romero, 358 U.S. at 368-69. Thus, an
admiralty case filed in state court may only be removed if
there exists some independent basis for federal jurisdiction,
such as diversity of citizenship. Id. at 380-381. We need not
here discuss the logic or reasoning of Romero , which has
spawned more than its share of commentary.2 It is enough
for us to recognize its existence, because we conclude that
it is not applicable.
As we have noted, the removed case is not an admiralty
action but one involving state tort law. Moreover, the
federal question at the heart of this litigation is the
applicability and construction of Supplemental Rule B.
Although the Rule sets out procedures to be followed in
maritime attachments, it is in fact part of the Federal Rules
of Civil Procedure, adopted under the authority of the Rules
Enabling Act, 28 U.S.C. S 2072.
The Rules of Practice in Admiralty and Maritime Cases,
which took effect in 1920, were rescinded as of July 1,
1966. At that time, admiralty rules were merged into the
Rules of Civil Procedure. This consolidation was similar to
that which abolished the distinction between law and
equity.
_________________________________________________________________
2. See, e.g., Kenneth G. Engerrand, Removal and Remand of Admiralty
Suits, 21 Tul. Mar. L.J. 383, 385 (1997) (discussing removal of admiralty
cases and stating that "[d]espite the fact that the ``congressional
language
. . . is perfectly understandable in ordinary English,' the determination
whether admiralty cases can be removed has been affected by historical
accident rather than traditional principles of statutory interpretation;"
id.
at 386-90 (explaining Romero's effect on federal question jurisdiction in
admiralty claims); George Rutherglen, The Federal Rules for Admiralty
and Maritime Cases: A Verdict of Quiescent Years, 27 J. Mar. L. & Com.
581, 590-92 (1996) (discussing complexities in saving to suitors clause
actions resulting from Romero); David J. Sharpe, The Future of Maritime
Law in the Federal Courts: A Faculty Colloquium, 31 J. Mar. L. & Com.
217, 232-34 (2000) (recognizing the confusion as to removal in
admiralty).
9
Since 1966, admiralty procedure has therefore been
governed by the Federal Rules of Civil Procedure. All rules
governing these procedures are recommended by the
Advisory Committee on Civil Rules and adopted in
accordance with the conventions of the Rules Enabling Act.
Although Rule B delineates procedures that are particularly
applicable to the unique features of maritime attachments,
it is nonetheless an integral part of the Federal Rules of
Civil Procedure.
It is noteworthy that Romero was decided in 1959, prior
to the consolidation of the admiralty and civil rules. Thus,
any effect that Romero might have had on the construction
of rules of admiralty procedure was abrogated by that
consolidation. Support for this position is found in the
language of the Rules Enabling Act itself, which provides
that "[a]ll laws in conflict with such rules shall be of no
further force or effect after such rules have taken effect." 28
U.S.C. S 2072(b); see Henderson v. United States, 517 U.S.
654 (1996) (holding that Fed. R. Civ. P. 4 superseded
service provision in the Suits in Admiralty Act).
At the heart of each of the plaintiffs' state law claims is
the assertion that the defendants acted in bad faith by
urging the District Court to disregard a federal rule of
procedure, which would have barred the attachments, and
to rely instead on case law, which permitted the seizures.
The plaintiffs have thus alleged a substantial question of
federal law involving an apparent clash between a
procedural rule and a contrary holding by a United States
Court of Appeals.3 Moreover, this conflict arises in the area
of maritime attachments, a subject of particular concern to
the federal courts, and one where national uniformity is of
some importance. See Yamaha Motor Corp., U.S.A. v.
Calhoun, 516 U.S. 199, 209-11 (1996) (discussing various
contexts in which "vindication of maritime policies
_________________________________________________________________
3. That the federal question was an essential, and ultimately dispositive,
element is demonstrated by the fact that were we to decide that
Leonhardt, discussed infra, was the correct statement of the law, the
plaintiffs' case could be dismissed on that basis alone. Moreover,
Express Lines sustained its injury at the time the attachments were
served and the assets seized. The District Court's decision vacating the
attachments came too late to save the company.
10
demanded uniform adherence to a federal rule of decision,
with no leeway for variation or supplementation by state
law."). Although not determinative, it is worth noting that
this case also implicates the Federal Arbitration Act, 9
U.S.C. S 1 et seq.
Fundamentally, the plaintiffs argue that the Eleventh
Circuit opinion is incorrect, and it is that allegedly
erroneous interpretation of federal law upon which their
state claim depends. Where a plaintiff 's complaint requires
the juxtaposition of a court of appeals decision and an
apparently conflicting procedural rule, the federal courts
may properly claim jurisdiction. This is particularly so
where, as here, the decision in controversy has not been
overruled or reversed. The Eleventh Circuit opinion is a
carefully reasoned exposition, concluding that Rule B does
not limit admiralty's historic jurisdiction. The Court did not
overlook Rule B, but analyzed it and found that its
restrictions did not apply.
We are persuaded that in the unique circumstances here,
the federal issue set forth in the complaint is an essential
element of the plaintiffs' cause of action. Accordingly, the
case was properly removed and the District Court did not
err in denying the motion to remand.
II.
Having resolved the jurisdictional issue, we now consider
the federal and pendent state claims on the merits. We
invoke our discretion in choosing to first consider the
federal defenses to the state suit.
The fact that a federal question permits removal does not
go so far as to support the defendants' contention that
preemption applies. They argue that because the events
complained of occurred in a federal court, the state claims
are superseded and the plaintiffs are limited to the relief
afforded by Federal Rule of Civil Procedure 11, 28 U.S.C.
S 1927, and the inherent powers of a court as explicated in
Chambers v. Nasco, Inc., 501 U.S. 32 (1991).
Not surprisingly, the plaintiffs disagree. They rely on
Pennsylvania's Dragonetti Act, 42 Pa. C.S.A.S 8351 et seq.,
11
and common law, both of which provide a cause of action
for the wrongful use of civil proceedings. The Act
establishes liability when "[a] person who takes part in the
procurement, initiation or continuation of civil proceedings
against another" acts "in a grossly negligent manner" or
without probable cause and primarily for an improper
purpose. Id. S 8351(a). A plaintiff may recover under the Act
for harm resulting from interference with the advantageous
use of land, chattels or other things, and other expenses
which include reasonable attorneys' fees, harm to
reputation, specific pecuniary loss resulting from the
proceedings, emotional distress, and punitive damages. Id.S 8353.
The recovery under Dragonetti can be more expansive
than the sanctions available under Rule 11, which are
generally limited to counsel fees or fines, or counsel fees
alone under 28 U.S.C. S 1927. Even assessments made
under the inherent power of the courts have not been held
to cover such matters as consequential damages, loss to
reputation, or emotional distress.4
The breadth of the remedy provided by the state statute
is a strong indication of its substantive nature. Under the
Rules Enabling Act, 28 U.S.C. S 2072(b), procedural rules
may not supplant substantive rights but the line between
_________________________________________________________________
4. The damages that might be awarded for wrongful attachment have not
been fully explored. Neither party has raised or briefed the preemption
aspect in this context. A brief examination of the case law indicates that
damages in this area, if awarded at all, generally consist of attorneys'
fees, costs, and expenses "directly" attributable to the attachment. See
Furness Withy (Chartering), Inc., Panama v. World Energy Sys. Assocs.,
Inc., 772 F.2d 802 (11th Cir. 1985) (no bad faith, therefore no damages
awarded); Ocean Ship Supply, Ltd. v. MV Leah, 729 F.2d 971 (4th Cir.
1984) (same); Frontera Fruit Co., Inc. v. Dowling, 91 F.2d 293 (5th Cir.
1937) (same). See also Coastal Barge Corp. v. M/V Maritime Prosperity,
901 F. Supp. 325 (M.D. Fla. 1994) (damages assessed included
attorneys' fees and expenses, direct and derivative damages); State Bank
& Trust Co. of Golden Meadow v. Boat "D.J. Griffin," 755 F. Supp. 1389(E.D. La. 1991) (attorney's fees and lost profits assessed). We have not
encountered an award of such items as consequential damages, loss of
reputation, or punitive damages that are available under the Dragonetti
Act.
12
procedure and substance is notoriously difficult to draw. In
Burlington Northern Railway Co. v. Woods, 480 U.S. 1(1987), the Supreme Court held that "Rules which
incidentally affect litigants' substantive rights do not
violate" the Rules Enabling Act if they are "reasonably
necessary to maintain the integrity of that system of rules."
480 U.S. at 5 (emphasis added).
Following that rationale, the Court later emphasized that
Rule 11 was intended to deter frivolous suits in the district
courts. Business Guides, Inc. v. Chromatic Communications
Enters., Inc., 498 U.S. 533, 552-53 (1991). In pursuing that
goal, courts can impose sanctions by way of attorneys' fees
without reallocating the burdens of litigation, as prohibited
by the American Rule set forth in Alyeska Pipeline Service
Co. v. Wilderness Society, 421 U.S. 240 (1975). Id.Business Guides also rejected the argument that "Rule 11
creates a federal common law of malicious prosecution."
498 U.S. at 553. Continuing, the Court stated, "[t]he main
objective of the Rule is not to reward parties who are
victimized by litigation," but to deter baseless filings. Id.Although it conceded that sanctioning a party might benefit
its adversary, the Court was "confident that district courts
will resist the temptation to use sanctions as substitutes
for tort damages," id., and noted that in the event that a
district court misapplied the Rule in a particular case, the
error could be corrected on appeal. Id. at 554. Business
Guides found no need for such a correction because there,
the district court had properly declined to include
consequential damages in awarding attorneys' fees and out-
of-pocket expenses. Id.In Tarkowski v. County of Lake, 775 F.2d 173, 175 (7th
Cir. 1985), the court held that the state tort law of
malicious abuse of process applies to federal litigation as
well. Our experience in this field has been limited, but two
of our opinions that we will discuss support that holding.
The Bankruptcy Code provides more extensive sanctions
than those afforded by the Rules of Civil Procedure or 27
U.S.C. S 1927. Section 303(i)(2) of the Code permits the
assessment of damages -- including those of a punitive
nature -- caused by a person who files a petition for
13
involuntary bankruptcy in bad faith. 11 U.S.C. S 303(i)(2).
Despite the broad scope of remedies available in the Code
and the general exclusivity of the federal courts in
bankruptcy, we have held that a state claim for malicious
abuse of process was not preempted. Paradise Hotel Corp.
v. Bank of Nova Scotia, 842 F.2d 47, 51-52 (3d Cir. 1988).
In that case, we discovered that because of a gap in the
text the Code failed to provide a remedy against a creditor
that had improperly filed an involuntary petition for
bankruptcy against a debtor. We concluded that Congress
did not intend preemption to extend to the point of barring
a debtor from the use of a state remedy.5 Id.; see also Silver
v. Mendel, 894 F.2d 598 (3d Cir. 1990) (malicious filing of
involuntary petition for bankruptcy not protected by
judicial privilege).
Our review of extant case law persuades us that the
Federal Rules of Civil Procedure do not preempt claims for
abuse of process and similar torts providing relief for
misconduct in federal litigation. Therefore, victims of such
misconduct may, in appropriate circumstances, bring suit
to recover damages under state causes of action.
In a number of cases, district courts within this circuit
have reached conflicting results on the preemption issue.6
_________________________________________________________________
5. We recognize that the Court of Appeals for the Ninth Circuit has held
that the Bankruptcy Code completely preempts state actions for
malicious use of process, Gonzales v. Parks, 830 F.2d 1033 (9th Cir.
1987), and is thus in tension with Paradise Hotel.
6. Compare Mruz v. Caring, Inc., 39 F. Supp.2d 495 (D.N.J. 1999)
(district court whose federal question jurisdiction has been invoked
applies federal rather than state law on abuse of process), and Thomason
v. Lehrer, 183 F.R.D. 161 (D.N.J. 1998) (federal court is exclusive forum
to seek redress for litigation abuses committed in a federal suit), with
Fumo v. Gallas, 2001 WL 115460 (E.D. Pa. Feb. 6, 2001) (federal law
does not preempt state law claims), T.B. Proprietary Corp. v. Sposato
Builders, Inc., 1996 WL 674016 (E.D. Pa. Nov. 20, 1996) (stating that
neither Rule 11 nor 28 U.S.C. S 1927 preempts state law cause of action
for abuse of process), Cannon v. Sheller, 825 F. Supp. 722 (E.D. Pa.
1993) (Dragonetti Act not preempted by ERISA where action does not
relate directly or indirectly to ERISA plan), and Plavin v. Bristol
Borough,
1988 WL 100814 (E.D. Pa. Sept. 27,1988) (recognizing that there is no
federal tort of malicious prosecution, and state law reaches litigation
abuses).
14
We recognize that some of these courts have relied on
legitimate public policy concerns in concluding that the
federal rules foreclose state claims in the nature of abuse of
process arising out of federal litigation. We also
acknowledge that inevitably conflicts will arise between the
federal rules and state substantive claims.
Although federal preemption would forestall such
controversies, the precepts of federalism and the
congressional decision to restrict the sanctions available
within the federal system militate against such a resolution
of the problem. As in so many other overlapping areas of
federal and state law, we must rely on the traditional
comity between the two systems to deal adequately and
innovatively with such common problems.
III.
Under Pennsylvania law, lawyers may be sued in their
individual capacities for wrongful use of civil proceedings.
E.g., Dietrich Indus., Inc. v. Abrams, 455 A.2d 119 (Pa.
Super. 1982). That tort as applied in Pennsylvania
conforms with section 674 of the Second Restatement of
Torts. Rosenfield v. Pennsylvania Auto. Ins. Plan, 636 A.2d
1138, 1141 (Pa. Super. 1994). The Dragonetti Act's
definition of the tort is in agreement with that of the
Restatement, Rosen v. American Bank of Rolla, 627 A.2d
190, 192 (Pa. Super. 1993), and an attorney who knowingly
prosecutes a groundless action to accomplish a malicious
purpose may be held accountable under the Act. Elec. Lab.
Supply Co. v. Cullen, 712 A.2d 304 (Pa. Super. 1998).
Some distinction has been drawn between malicious use
of process and abuse of process. Malicious use has to do
with the wrongful initiation of civil process, as contrasted
with abuse, which is concerned with perversion of process
after litigation has begun. Dumont Television & Radio Corp.
v. Franklin Elec. Co. of Phila., 154 A.2d 585, 587 (Pa. 1959).
Whatever may have been the importance of that
distinction before the Dragonetti Act was adopted, it
appears that both torts are subsumed within the general
scope of the Act, which includes persons who take part in
the procurement, initiation or continuation of civil
15
proceedings for wrongful purposes. 42 Pa. C.S.A.S 8351(a).
Liability attaches to those who act in a grossly negligent
manner or without probable cause and primarily for a
purpose other than adjudication of a claim. Id . In addition,
the proceeding must have been terminated in favor of the
person who invokes the Act. Id. S 8351(a)(2).
It may be seen that a party seeking redress under
Dragonetti bears a heavy burden. Here, it is somewhat
questionable whether the allegedly offending procedure was
terminated in favor of the plaintiff. Although the
attachments have been dissolved, the District Court, as
noted earlier, retained jurisdiction pending arbitration.
Thus, no final judgment has been entered in favor of the
plaintiffs. Section 674(b) of the Restatement, however,
makes an exception from the finality rule in ex parte
proceedings. In view of the somewhat unusual status of the
earlier litigation and in the interests of judicial economy, we
will assume arguendo that we may, under state law,
proceed to the merits because the ex parte attachment
proceedings had been terminated in favor of the plaintiffs.
The plaintiffs' first contention is that seeking maritime
attachments, despite the arbitration clause in the charter
party, demonstrated bad faith. This argument is utterly
lacking in merit. The Federal Arbitration Act provides that
in admiralty actions, "the party claiming to be aggrieved
may begin his proceeding . . . by libel and seizure of the
vessel or other property of the other party according to the
usual course of admiralty proceedings, and the court shall
then have jurisdiction to direct the parties to proceed with
the arbitration . . . ." 9 U.S.C. S 8.
Indeed, so fundamental is the right to attach that the
parties cannot consent in advance to forego that remedy. In
The Anaconda v. American Sugar Refining Co., 322 U.S. 42,
43 (1944), the charter party provided for arbitration but
specifically precluded application of section 8. Nevertheless,
the aggrieved party began legal process by foreign
attachment. The Supreme Court held that although the
parties had agreed to arbitrate, the attachment remedy
could be enforced. Id. at 45-46. See also Marine Transit
Corp. v. Dreyfus, 284 U.S. 263, 275 (1932) ("By the express
terms of S 8, the libel and seizure are authorized as an
16
initial step in a proceeding to enforce the agreement for
arbitration . . . ."). Clearly, the defendants in this case did
not act in bad faith by carrying out procedures authorized
by the Federal Arbitration Act.
The plaintiffs next argue that the defendants, knowing
that Federal Rule B did apply, nevertheless secured
the writs of attachment by improperly prevailing upon
the District Court to follow the opinion in
Schiffahartsgesellschaft Leonhardt & Co. v. A. Bottachi S.A.
De Navegacion, 773 F.2d 1528 (11th Cir. 1985) (en banc).
The District Court later released the attachments, believing
that Rule B, rather than Leonhardt, provided the controlling
law. The plaintiffs seize on this reversal by the District
Court of its earlier ruling as evidence of the defendants' bad
faith in misleading the court.
We cannot accept the plaintiffs' argument. The Leonhardt
opinion was written by a distinguished judge of the
Eleventh Circuit for an en banc court. The Court was fully
aware of Rule B, but after reviewing the history of admiralty
law determined that federal courts are empowered to apply
maritime procedures as they existed at the time of the
Constitution's adoption. Leonhardt, 773 F.2d at 1533. In
the Court's view, Rule B was not intended to be the
exclusive source of maritime attachments available to the
court, nor was it intended to limit or impair the traditional
power of the court in exercising admiralty jurisdiction. Id.The defendants' motions for issuance of a writ of
attachment stated, "This court has the power apart from
Rule B to issue a maritime attachment" and cited
Leonhardt. The defendants, therefore, did not misinform the
District Court as to the interplay between Rule B and the
Court of Appeals opinion. In announcing the decision to
vacate the attachments, the District Judge acknowledged,
"The Court may have been wrong but there was no
deception on the Court."
There is a paucity of case law on this particular point,
and it reaches the point of absurdity to contend that
competent attorneys were guilty of bad faith in urging the
District Court to follow this respectable authority. The fact
that the District Court later reversed its reliance on the
17
Eleventh Circuit case and concluded that Rule B governed
does not establish that the lawyers exercised bad judgment,
let alone bad faith. Indeed, in a number of cases, Rule B
has been attacked as being unconstitutional. See , e.g.,
Polar Shipping Ltd. v. Oriental Shipping Corp., 680 F.2d 627,
642-45 (9th Cir. 1982) (Byrne, J., dissenting).
We conclude that the plaintiffs have failed to establish
bad faith as required under the Dragonetti Act and
Pennsylvania common law. Accordingly, we affirm the
District Court's dismissal of the state law claims.
Having explored the background at length and concluded
that the plaintiffs have not shown bad faith on the part of
the defendants, we find it unnecessary to resolve the
conflict between Leonhardt and Rule B. On the facts, the
plaintiffs cannot recover under either version of the law.
Consequently, we will affirm the District Court's dismissal
of the entire case.
The judgment of the District Court will be affirmed.
18
FUENTES, Circuit Judge, dissenting:
I respectfully dissent because, in my view, this case
presents no federal element sufficient to confer 28 U.S.C.
S 1441(b) "arising under" jurisdiction. Since this case was
improperly removed to federal court, the District Court had
no underlying jurisdiction to adjudicate the merits of
Express Lines's action, and we are without appellate
jurisdiction to address the merits of the appeal. I would
agree with the Ninth Circuit, which held, under similar
circumstances, that a previously dismissed federal action
does not cause a subsequently filed state action for
malicious prosecution to "arise under" federal law. See Berg
v. Leason, 32 F.3d 422 (9th Cir. 1994).
The majority concludes that the conflict between a federal
procedural rule and an opinion of the Eleventh Circuit
"raises a federal question sufficient to support removal of
the malicious abuse of process claim from the state court
to the federal forum." See Maj. Op. at 3. Express Lines's
underlying state court action, however, was filed only after
the federal action had been dismissed, and thus only after
it was no longer necessary to resolve any conflict between
Leonhardt and Rule B. As the majority notes, Leonhardt has
not been overturned by the Eleventh Circuit. At best, it
remains the jurisprudence of another circuit, and it is
undisputed that it is simply not the law of this Circuit. To
my knowledge, the only time Leonhardt has been invoked
by any court in this Circuit was by the District Court in the
underlying attachment action here. The District Court, as
previously noted, ultimately rejected Leonhardt , and its own
earlier reliance on it, and this decision has not been
appealed by either party. Therefore, any purported conflict
between Leonhardt and the Federal Rules does not present
a sufficient federal question upon which to predicate
jurisdiction.
It is well settled that "[o]nly state-court actions that
originally could have been filed in federal court may be
removed to federal court by the defendant." Caterpillar Inc.
v. Williams, 482 U.S. 386, 392 (1987) (citing 28 U.S.C.
S 1441(a)). Additionally, we have held that the removal
statute should be strictly construed against removal and
that if there is any doubt as to the propriety of a removal,
19
a case should not be removed to federal court. See, e.g.,
Boyer v. Snap-on Tools Corp., 913 F.2d 108, 111 (3d Cir.
1990); Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 29
(3d Cir. 1985).
In considering a motion to remand where federal question
jurisdiction is at issue, three recognized requirements must
be satisfied: (1) the federal question must arise from a well-
pleaded complaint, see, e.g., Rivet v. Regions Bank of
Louisiana, 522 U.S. 470, 475 (1998); Westmoreland
Hospital Ass'n v. Blue Cross of Western Pennsylvania , 605
F.2d 119, 122 (3d Cir. 1979); (2) federal law must be an
essential element of the plaintiff 's cause of action, see, e.g.,
Rivet, 522 U.S. at 475; and (3) the federal question must be
substantial. See, e.g., City of Chicago v. International
College of Surgeons, 522 U.S. 156, 164 (1997). I do not
believe that any of these removal requirements were
satisfied in this case.
1. The Well-Pleaded Complaint Rule
As the Supreme Court has held on several occasions,
"[t]he presence or absence of federal-question jurisdiction is
governed by the ``well-pleaded complaint rule,' which
provides that federal [question] jurisdiction exists only
where a federal question is presented on the face of the
plaintiff 's properly pleaded complaint." Caterpillar Inc., 482
U.S. at 392. See also American National Red Cross v. S.G.
and A.E., 505 U.S. 247, 258 (1992); Oklahoma Tax Com'n
v. Graham, 489 U.S. 838, 840-41 (1989). Thus, the
asserted federal question must arise from a well-pleaded
complaint, and not from the answer, the petition for
removal, or an actual or theorized defense. Under the well-
pleaded complaint rule, if a complaint is premised upon
state law, federal question jurisdiction may be established
only if "some substantial, disputed question of federal law
is a necessary element of one of the well-pleaded state
claims," or that, due to complete preemption, the plaintiff 's
claim is "really one of federal law." See Goepel v. National
Postal Mail Handlers Union, a Division of Luna, 36 F.3d
306, 310 (3d Cir. 1994) (internal quotations and citations
omitted). Also, a state case may arise under federal law
" ``where the vindication of a right under state law
necessarily turn[s] on some construction of federal law.' "
20
See Merrell Dow Pharmaceuticals Inc. v. Thompson, 478
U.S. 804, 808 (1986) (quoting Franchise Tax Board v.
Construction Laborers Vacation Trust, 463 U.S. 1, 9 (1983)).
"[T]he vast majority of the cases brought under the general
federal question jurisdiction of the federal courts are those
in which federal law creates the cause of action." Id.Here, however, none of Express Lines's causes of action
were created by federal law, and nothing in the allegations
Express Lines presented in its complaint calls for a
resolution of any tension between the Eleventh Circuit's
decision in Leonhardt and the Federal Rules. As previously
noted, no genuine conflict exists in this Circuit between
Leonhardt and the Federal Rules. To prevail in its case,
Express Lines needs to show only that based upon what
Defendants knew and believed, which are factual queries,
they proffered Leonhardt without probable cause and for a
purpose other than obtaining the proper adjudication of
their claim. See 42 Pa. C.S.A. S 8351 (stating that "[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 h]e 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 . . ."); Silver v. Mendel, 894 F.2d 598, 603-04 (3d Cir.
1990) (finding that, under the Dragonetti Act, the
"imposition of liability for the wrongful use of civil
proceedings [in Pennsylvania] occurs only when litigation is
instituted both without probable cause and primarily for a
purpose other than that of securing the proper adjudication
of the claim in which the proceedings are based"). In other
words, Express Lines needs to show only that Defendants
acted either negligently or without probable cause, and
without a proper purpose in proffering Leonhardt .1
Since no genuine conflict exists between Leonhardt and
the Federal Rules in this Circuit, any legal assertions as to
_________________________________________________________________
1. Since I do not believe we have the requisite jurisdiction to address
this
case on its merits, I will refrain from commenting on the strength of
Express Lines's claims or evidence.
21
the validity of Leonhardt, if made at all, would only properly
be made by Defendants in their Answer or in their defense.
Neither invocation, according to the Supreme Court, is
adequate to confer federal question jurisdiction.
2. The "Essential" Element Requirement
In accordance with Supreme Court jurisprudence, federal
law must be an essential element of a plaintiff 's cause of
action in order to confer federal subject matter jurisdiction.
The meaning of the "essential element" requirement is best
stated in Hunter v. United Van Lines, 746 F.2d 635 (9th Cir.
1984):
[A court must] determine whether the federal element
in the claim was "basic" as opposed to "collateral," and
"necessary" as opposed to "merely possible." . . . .
Similarly, courts have looked to whether the federal
element in the claim was "pivotal," . . . or"substantial,"
. . . as opposed to merely "incidental[ ]," . . . or whether
it was "direct and essential" as opposed to
"attenuated," . . . or "paramount" as opposed to
"collateral," . . . . Thus, the resolution of the federal
question must play a significant role in the
proceedings.
Id. at 646 (internal citations omitted). Here, far from
showing that a federal issue played a "significant role in the
proceedings," the majority determined that it was
"unnecessary" to resolve the issue asserted by Defendants
as the basis for removal. See Maj. Op. at 18. That this case
may be decided without resolving any alleged tension
between Leonhardt and Rule B severely undermines the
idea that this issue was essential to evaluating plaintiff 's
claims. The majority correctly states that a federal issue
sufficiently essential to invoke federal jurisdiction must be
"genuine and present, [and] not merely . . . conjectural."
See id. at 7 (citing Merrell Dow, 478 U.S. at 813-14 & n.11).
Yet, it is difficult to understand how an issue could be any
more conjectural or any less essential than one whose
disposition is explicitly deemed "unnecessary."
3. The "Substantial" Federal Question Requirement
As the majority notes, the federal law present in a
properly removed case "must be in the forefront of the case
22
and not collateral, peripheral, or remote." Yet from the
outset, Express Lines's case was clearly comprised solely of
state law claims, and the majority's ability to resolve this
case without addressing the purported federal issue only
highlights the fact that any federal issue in this case is
"collateral, peripheral, or remote."
Further, in Merrell Dow, the Supreme Court held that no
substantial federal question existed where the plaintiff
alleged a violation of a federal statute as an element of a
state cause of action. The Court explained that"[we have]
sometimes found that formally federal causes of action were
not properly brought under federal-question jurisdiction
because of the overwhelming predominance of state-law
issues." Merrell Dow, 478 U.S. at 814 n. 12. Invoking an
earlier ruling, the Court noted that "the violation of the
federal standard as an element of state tort recovery did not
fundamentally change the state tort nature of the action."
Id. (citing Moore v. Chesapeake & Ohio R. Co., 291 U.S.
205, 216-17 (1934)). The Court also noted that "S 1331
[federal question] decisions can best be understood as an
evaluation of the nature of the federal interest at stake." Id.(emphasis in original).
Here, as in Merrell Dow, the state law nature of Express
Lines's claims is fundamentally unchanged by the asserted
tension between Leonhardt and the Federal Rules. There is
also little, if any, cognizable federal interest in having a
federal court in our Circuit assess the legitimacy of an
Eleventh Circuit case whose viability is not an open issue
anywhere in this Circuit.
Following the guidance of Merrell Dow, the Ninth Circuit
has held in a case very similar to ours that an underlying
prior federal action does not render a fundamentally state
law action cognizable in federal court. In Berg , the plaintiff
brought a malicious prosecution action in state court after
successfully defending himself in a federal court proceeding
in which he was accused of violating federal securities and
racketeering laws. The defendant removed to federal court,
and the District Court denied the plaintiff 's Motion to
Remand. On appeal, the Ninth Circuit held that "the federal
element is insufficiently substantial to confer``arising under'
jurisdiction because the malicious prosecution court need
23
only decide whether the underlying claim was ``legally
tenable[;]' the cause of action is created by state law, and
state law controls the standard by which the strength of the
federal claim in the underlying action is measured." Berg,
132 F.3d at 423. The Ninth Circuit elaborated that"federal
law cannot be controlling when the degree of substance in
the federal claim necessary to trigger the state-law cause of
action is a question of state law." Id. at 425. Ultimately,
then, "federal law is not dispositive because the degree of
strength required to put the underlying claim over the
probable cause threshold is determined by state law." Id.
The same conclusion applies here.
In examining the state law elements of the plaintiff 's
claim, the Ninth Circuit noted that, far from the case
requiring a legal resolution of federal questions,"[a]
factfinder must determine what the defendant knew or
believed about the facts." Id. Similarly, here, the subjective
beliefs, purpose, and purported bad faith of the Defendants
are at issue, and "the court looks at the merits of a claim
for malicious prosecution through the prism of state law."
Id.
This case only asks whether Defendants' underlying
claim, that Leonhardt could trump the Federal Rules, was
legally viable enough to have been asserted legitimately and
not in contravention of the Dragonetti Act. Express Lines's
case presents no real or substantial question of federal law
that compels resolution in a federal court. Rather, their
case was, from the outset, a state case that was properly
brought in state court originally.
For the aforementioned reasons, I would find that this
case was improperly removed to federal court, that the
District Court had no underlying jurisdiction to adjudicate
the merits of Express Lines's claim, and that we are thus
without appellate jurisdiction to entertain this appeal. I
respectfully dissent.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
24