Opinion
545 MDA 2024 J-A23005-24
12-17-2024
BIRCHWOOD ESTATES REALTY, INC., GEORGE A. DUNBAR, JR., AND MICHAEL G. GALLACHER Appellants v. AARON D. HOVAN, JOSEPH E. MARIOTTI AND CAPUTO & MARIOTTI, P.C.
Benjamin D. Kohler, Esq.
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT O.P. 65.37
Appeal from the Order Dated April 8, 2024 In the Court of Common Pleas of Lackawanna County Civil Division at No(s): 2023-02326.
Benjamin D. Kohler, Esq.
BEFORE: BOWES, J., OLSON, J., and STABILE, J.
MEMORANDUM
BOWES, J.
Birchwood Estates Realty, Inc. ("Birchwood"), George A. Dunbar, Jr.,and Michael G. Gallacher, Esquire (collectively, "Plaintiffs"), appeal from the order sustaining the preliminary objections of Aaron D. Hovan, Esquire, Joseph E. Mariotti, Esquire, and Caputo & Mariotti, P.C. (collectively, "Defendants"), and dismissing Plaintiffs' defamation suit against Defendants. We affirm.
The record reflects that Mr. Dunbar is the principal of Birchwood.
We glean the following from the record. In November 2022, Plaintiffs filed a complaint against Terusso Plumbing and Heating ("Terusso") based upon an allegation that Terusso had been contracted to perform work for Birchwood and was paid a downpayment of $120,000, but failed to complete the project. Plaintiffs sought, among other things, full reimbursement of the downpayment. Terusso retained Attorney Hovan to represent it in the contract matter, who in turn sent a settlement demand letter to Plaintiffs on January 20, 2023, claiming that Terusso had performed some of the requested work and that the termination of the contract by Birchwood cost Terusso $96,000.
On January 24, 2023, Attorney Gallacher responded, demanding an immediate return of the remaining downpayment balance of $24,000, and stating that failure to remit that sum would result in the pursual of criminal theft charges. Attorney Hovan did not promptly respond to the ultimatum nor did Terusso pay Birchwood the requested amount. Therefore, on January 30, 2024, Attorney Gallacher contacted the Lackawanna County District Attorney's Office to pursue criminal charges. On January 31, 2024, Attorney Gallacher emailed Attorney Hovan an "interesting article" about a home improvement fraud case and notified him that the detective identified in the article was the same individual Attorney Gallacher had spoken to the prior day regarding filing criminal charges against Terusso, claimed the contractor in the article was related to Terusso, and advised that Terusso "should have returned the money." Preliminary Objections, 6/27/23, at Exhibit C.
Also on January 31, and in response, Attorney Hovan sent the correspondence underpinning the instant defamation suit. Specifically, he accused Plaintiffs of attempting to extort Terusso. He carbon-copied the letter to Terusso and Chris Caputo, Esquire, and sent it to Attorney Mariotti, as well.Although Attorney Mariotti had not yet been involved in the contract matter, the letter identified Attorney Caputo, another lawyer from his firm, as Terusso's representative regarding any potential criminal investigation. Additionally, Attorney Mariotti entered his appearance in the contract case on February 21, 2023, when he sought to quash Plaintiffs' notice of intent to serve a subpoena on Penn East Federal Credit Union ("PEFCU") to obtain the bank records of Terusso. The motion to quash included Attorney Gallacher's January 24 and January 31 communications, as well as Defendants' allegedly defamatory letter. The motion and its attachments were sent to Lackawanna County Discovery Motion Court, PEFCU, and legal counsel for PEFCU.
The record does not reflect the letter being sent to Attorney Mariotti. However, nobody disputes that it was sent to him, and it is evident he received a copy at some point as he included it in his motion to quash the subpoena. Therefore, we assume for purposes of this appeal that the letter was forwarded to Attorney Mariotti at the time it was initially published.
Plaintiffs filed the underlying complaint on June 2, 2023, accusing Defendants of defamation per se and per quod, commercial disparagement, trade libel, and conspiracy to defame. Defendants filed preliminary objections, asserting judicial privilege for the challenged communication. Following oral argument and briefing, the trial court sustained the preliminary objections and dismissed Plaintiffs' complaint.
According to Plaintiffs' counsel, oral arguments were not recorded, and no transcript of those proceedings has been ordered or included in the certified record.
This timely appeal followed. Plaintiffs complied with the trial court's order to file a Pa.R.A.P. 1925(b) statement, raising three claims: (1) the court erred in sustaining the preliminary objections and dismissing the suit; (2) the "court erred in finding that the [c]omplaint was legally sufficient[;]" and (3) the court erred in applying judicial privilege to Defendants' communications. See Concise Statement, 4/25/24, at unnumbered 1-2. In lieu of a Rule 1925(a) opinion, the trial court directed us to its April 8, 2024 memorandum and order addressing the issues raised by Plaintiffs. In their brief, Plaintiffs have focused only on the court's finding of judicial privilege, presenting the following questions:
1. Did the trial court err in sustaining preliminary objections and dismissing Plaintiffs' defamation complaint by finding that defamatory statements accusing [Plaintiffs] of a crime were judicially privileged even though the statements were not part of a "judicial proceeding" and were not "pertinent and material" to any legal proceeding?
2. Even if the defamatory statements were part of a judicial proceeding and pertinent and material to same, did the court err in failing to hold that the publication of same to third parties negated any claim of judicial privilege?Plaintiffs' brief at 7 (capitalization altered).
At the outset, we must address whether these issues are properly before us. Beginning with Rule 1925 waiver, the two issues included in Plaintiffs' brief were plainly not raised verbatim in the concise statement. However, our Supreme Court has seen fit to provide some leniency in this regard: "Each error identified in the Statement will be deemed to include every subsidiary issue that was raised in the trial court[.]" Pa.R.A.P. 1925(b)(4)(v). Assuming Plaintiffs raised both brief issues before the trial court, their third claim of error in their Rule 1925(b) statement would encompass both issues raised in this Court. Therefore, we decline to find Rule 1925 waiver.
Moving past assumptions, the record bears out that Plaintiffs did not present the second issue to the trial court. As noted, Defendants filed preliminary objections to the defamation suit based upon judicial privilege. In the trial court, Plaintiffs challenged application of the privilege because the communications were not part of a judicial proceeding and were not material to the relief sought, i.e., the same argument raised in their first issue. Plaintiffs did not raise the second issue, and alternative argument that, if there was privilege, it was lost by publishing the communication to third parties. As a result, the trial court did not address that issue in its opinion sustaining the preliminary objections. "Issues not raised in the trial court are waived and cannot be raised for the first time on appeal." Pa.R.A.P. 302(a). Based on the foregoing, Plaintiffs waived their second issue by failing to present it to the trial court, and we will not address it.
We now turn to Appellant's preserved issue, which requires us to determine whether the purportedly defamatory statements included in the January 31 letter and republished as part of the motion to quash were protected by judicial privilege. The following principles inform our analysis of this query, which we review de novo. See Greenberg, 161 A.3d at 981 n.4 (noting that the determination of whether a privilege exists is a question of law).
Our standard of review of an order of the trial court overruling or granting preliminary objections is to determine whether the trial court committed an error of law. When considering the appropriateness of a ruling on preliminary objections, the appellate court must apply the same standard as the trial court.Greenberg v. McGraw, 161 A.3d 976, 980 (Pa.Super. 2017) (cleaned up). Regarding judicial privilege:
All communications pertinent to any stage of a judicial proceeding are accorded an absolute privilege which cannot be destroyed by abuse. Thus, statements by a party, a witness, counsel, or a judge cannot be the basis of a defamation action whether they occur in the pleadings or in open court. This protected realm has traditionally been regarded as composed only of those communications which are issued in the regular course of judicial proceedings and which are pertinent and material to the redress or relief sought. Thus, when alleged libelous or defamatory matters, or statements, or allegations and averments in pleadings or in the trial or argument of a case are pertinent, relevant and material to any issue in a civil suit, there is no civil liability for making any of them.
Significantly, judicial privilege is applicable to communications made prior to the institution of proceedings if such communications were pertinent and material and had been issued in the regular course of preparing for contemplated proceedings. Further, we have observed that, the purpose for which the privilege exists cannot fully be achieved by limiting the privilege to structured or formal proceedings. Accordingly, the privilege extends not only to communications made in open court, but also encompasses pleadings and even less formal communications such as preliminary conferences and correspondence between counsel in furtherance of a client's interest. In fact, the absolute privilege has been extended to statements made by private parties to law enforcement officials for the purpose of initiating the prosecution of criminal charges, as well as to statements made
to mental health officials for the purpose of initiating involuntary commitment proceedings.Id. at 981-82 (cleaned up).
Moreover:
Pennsylvania broadly applies the privilege to pertinent, relevant and material statements made during the judicial process. Courts have continually protected a variety of communications made at various proceedings as well as statements with only minor relation to the underlying case. In fact, statements made during judicial proceedings are privileged even if the statements are made falsely or maliciously without reasonable and probable cause.Freundlich & Littman, LLC v. Feierstein, 157 A.3d 526, 530-31 (Pa.Super. 2017) (cleaned up). Finally, we bear in mind that "all doubt as to whether the alleged defamatory communication was indeed pertinent and material to the relief or redress sought is to be resolved in favor of pertinency and materiality." Richmond v. McHale, 35 A.3d 779, 785 (Pa.Super. 2012).
The trial court provided the following explanation for its application of the judicial privilege in this matter:
The exchange between the attorneys is a judicial privilege because they were in relation to the original case between the attorneys and grew from the furtherance of their client's interest. While the communication had moved from settlement negotiations to issues of criminal charges, the entire conversation still relate[d] to the original case between the two. . . . [J]udicial privilege is extremely broad, so although the conversation had shifted away from settlements it still is protected by stemming from the original case.Trial Court Opinion, 4/8/24, at 7.
Plaintiffs contend that the trial court erred in classifying the communication as being judicially privileged. They claim that the court "failed to even consider whether the document was published in the regular course of a judicial proceeding and whether it was pertinent and material to the relief sought." Plaintiffs' brief at 25. Rather, the "court concluded that it was privileged simply because it was in relation to the original case between the attorneys and grew from the furtherance of their client's interest." Id. Plaintiffs insist that inserting the letter into a motion to quash a subpoena did not transform it into a communication subject to judicial privilege because it was not material to the relief sought. See Plaintiffs' brief at 22-24. Similarly, they argue that the initial letter was not part of a judicial proceeding because one of the recipients, Attorney Mariotti, had not yet entered his appearance in the contract matter.
Notably, Plaintiffs analogize the instant case to our Supreme Court's decision in Post v. Mendel, 507 A.2d 351 (Pa. 1986). In Post, the Court considered whether judicial privilege applied to a letter sent to opposing counsel, which was forwarded to the Disciplinary Board, a judge in the underlying proceeding, and a witness who was a client of opposing counsel. Ultimately, the Court determined that it did not qualify for judicial privilege:
We do not regard the alleged defamatory letter in the instant case as having been issued in the regular course of judicial proceedings as a communication pertinent and material to the redress sought. Although the letter made reference to matters which occurred in an ongoing trial, the letter was not directly relevant to the court proceedings. Accordingly, we do not believe issuance of the letter was within the sphere of activities which judicial immunity was designed to protect. The privilege is not a license for extra-judicial defamation, and there is unnecessary potential for abuse if letters of the sort written in this case are published with impunity. Formal
procedures are available to address the grievances which the writer of the letter perceived, without resort to extra-judicial defamation.
The letter was not addressed to Judge Kelton, but rather a copy was merely sent to him. The letter did not state or argue any legal position, and it did not request any ruling or action by the court. Nor did the communication request that anything contained in it should even be considered by the court. The letter was clearly not a part of the judicial proceedings to which it made reference, and merely forwarding a copy of the letter to the court did not make it a part of those proceedings. Likewise, forwarding copies of the letter to plaintiff's alleged client, William H. Simon, M.D., and to the Disciplinary Board of the Supreme Court of Pennsylvania did not render the letter a part of the trial proceedings, and transmittal of those copies would not logically have been expected to affect the course of trial. Thus, the policy of promoting an unfettered airing of issues at trial is not infringed by our holding that the letter published in this case was outside the ambit of judicial immunity.Id. at 355-56.
Upon de novo review, we find the instant communication distinguishable from that in Post because the January 31 letter was part of the settlement process of the contract dispute. Specifically, it pertained to Defendants' attempt to represent their client in the settlement negotiations, which was complicated by Plaintiffs' decision to seek criminal charges when the negotiations did not immediately favor them.
The subsequent inclusion of that communication with the motion to quash a subpoena likewise was part of a judicial proceeding, and was an attempt by Defendants to place a check on what they perceived to be Plaintiffs' improper use of discovery against their client. See Defendants' brief at unnumbered 11-12 ("The publication of the motion was pertinent and necessary because it sought, and prevailed, to preclude overreaching discovery of irrelevant banking information. Further, the motion sought to prevent questionable litigation tactics, similar to those used in the effort to force a settlement, from being employed in discovery." (cleaned up)).
Our review of this matter would be incomplete if we did not address the Pennsylvania Rules of Professional Conduct. While recognizing that Plaintiffs reported to the District Attorney's Office, not the Disciplinary Board, we nonetheless remind them that our ethical rules provide that "[t]he discretionary reporting of misconduct should not be undertaken for purposes of tactical advantage over another lawyer, to punish or inconvenience another for a personal or professional slight, or to harass another lawyer." Pa.R.P.C. 8.3 comment 4. Moreover, it was unprofessional for Plaintiffs to resort to the District Attorney's Office to pursue criminal charges when Defendants did not immediately comply with their settlement demand. Although the rules do not explicitly prohibit an attorney from threatening and pursuing criminal sanctions for failure to comply with a demand letter, we deem it obvious that this should not be an attorney's default approach when dealing with opposing counsel. See also Pa.R.P.C. Preamble and Scope ("A lawyer should use the law's procedures only for legitimate purposes and not to harass or intimidate others. A lawyer should demonstrate respect for the legal system and for those who serve it, including judges, other lawyers and public officials."); Pa.R.P.C. 1.3 comment 1 ("The lawyer's duty to act with reasonable diligence does not require the use of offensive tactics or preclude the treating of all persons involved in the legal process with courtesy and respect."). However, it was likewise unprofessional for Defendants to accuse Plaintiffs of the crime of attempted extortion and may be unfair to assume that Plaintiffs would pursue retaliatory discovery. We expect attorneys to be able to work together while simultaneously representing their respective clients zealously. Civility does not walk out the door when advocacy enters the room. Such intimidating and petty tactics as were utilized in these matters have no place in legal practice and only serve to tarnish the reputation of lawyers in the community.
Overall, we agree with Defendants' summation: "The statement at issue in this case was made by an attorney during settlement discussions concerning ongoing litigation, and that statement was repeated solely during discovery in the same litigation by another attorney and his law firm." Id. at unnumbered 11. Since the communications were part of the contract dispute's judicial proceedings and pertained to the settlement negotiations and discovery practice, we affirm the trial court's order finding the communications to be judicially privileged. See Freundlich & Littman, LLC, 157 A.3d at 530-31.
Order affirmed.
Judgment Entered.