Court Opinion

ID: 9954152
Source: CourtListenerOpinion
Date Created: 2024-03-25 18:12:51.092315+00
Date Added: 2024-06-11T08:11:51.601316
License: Public Domain

J-A05031-24

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT O.P. 65.37

  PENCOYD IRON WORKS, INC.                     :   IN THE SUPERIOR COURT OF
                                               :        PENNSYLVANIA
                       Appellant               :
                                               :
                                               :
                v.                             :
                                               :
                                               :
  STEPHEN LEWIS JONES AND DAVID                :   No. 616 EDA 2023
  M. KOLLER, ESQ. & KOLLER LAW LLC             :

             Appeal from the Orders Entered February 23, 2023
    In the Court of Common Pleas of Philadelphia County Civil Division at
                            No(s): 201102171

BEFORE:       DUBOW, J., KING, J., and LANE, J.

MEMORANDUM BY LANE, J.:                                 FILED MARCH 25, 2024

       Pencoyd Iron Works, Inc. (“Pencoyd”) appeals from the orders granting

the preliminary objections in the nature of a demurrer filed by Stephen Lewis

Jones (“Jones”) and David M. Koller, Esquire, and Koller Law LLC (collectively,

“Koller”), and dismissing with prejudice Pencoyd’s third amended complaint.1

After careful review, we are constrained to reverse.

____________________________________________

1 Previously, Pencoyd appealed from the trial court’s dismissal of its second

amended complaint. This Court observed, however, that just before the
dismissal order was entered on the docket, Pencoyd filed a third amended
complaint, rendering both the second amended complaint and the subsequent
order dismissing it to be nullities. See Pencoyd Iron Works, Inc. v. Jones,
290 A.3d 708 (Pa. Super. 2022) (unpublished memorandum). Accordingly,
this Court quashed the appeal, and remanded for the trial court to proceed on
the basis of the third amended complaint and the preliminary objections filed
thereto. See id.
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       Pencoyd employed Jones as a plant manager from February 2016 to May

2017, when Pencoyd terminated his employment.           Jones, represented by

Koller, filed discrimination charges against Pencoyd with the United States

Equal Employment Opportunity Commission (“EEOC”).           In June 2018, the

EEOC issued a dismissal and right-to-sue letter to Jones, advising it was

unable to conclude any statutes were violated.2

       In September 2018, Jones filed a federal lawsuit against Pencoyd in the

Eastern District of Pennsylvania, asserting claims for age and disability

discrimination in his employment termination. See Jones v. Pencoyd Iron

Works, 2019 U.S. Dist. LEXIS 214799 (E.D.Pa. Dec. 13, 2019). Meanwhile,

in September 2019, Jones filed a second discrimination charge against

Pencoyd with the EEOC, which the EEOC similarly dismissed as unfounded.3

Ultimately, the federal district court dismissed the age discrimination claims,

and the remaining disability claims proceeded to a jury trial, at the conclusion

of which the jury found against Jones and in favor of Pencoyd. Jones did not

appeal from this verdict.

____________________________________________

2 Before initiating an employment discrimination lawsuit, “a plaintiff must
exhaust [his] administrative remedies by filing a timely discrimination charge
with the EEOC. The EEOC will then investigate the charge, and the plaintiff
must wait until the EEOC issues a right-to-sue letter before [he] can initiate a
private action.” Barzanty v. Verizon Pa., Inc., 361 F. Appx. 411, 413 (3d
Cir. 2010) (citing, inter alia, 42 U.S.C. § 2000e-5(b), (e)(1), (f)(1)).

3 The record does not indicate whether the EEOC issued a “right to sue” letter

for this second charge.

                                           -2-
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        In November 2020, Pencoyd commenced the instant litigation pursuant

to the Dragonetti Act,4 alleging wrongful use of civil proceedings. On May 5,

2021, Pencoyd filed a third amended complaint, raising claims of wrongful use

of civil proceedings against Jones and Koller and claims based on agency and

respondeat superior against Koller. With respect to Jones’ termination, the

third   amended      complaint     acknowledged   that   Jones   claimed   he   was

experiencing “acute leg pain” and had presented a note from his family doctor

which stated he could work “part-time modified work duty.” Pencoyd’s Third

Amended Complaint, 5/5/21, at ¶ 16. Pencoyd claimed that it accommodated

Jones’ request to perform part-time modified work, but that neither the

medical note nor Jones’ age played any factor in his subsequent termination.

Id. at ¶ 17.      Instead, the complaint averred, Jones was terminated for

performance and attendance deficiencies. Id. at ¶ 13.

        The third amended complaint further alleged that Jones had a “pattern”

of filing job-related injury claims, all of which resulted in settlements. Id. at

¶ 28. Pencoyd claimed that in 2010, Jones filed a disability discrimination

claim against a prior employer, Aker Philadelphia Shipyard, Inc., which was

ultimately settled. Id. at ¶ 29. Pencoyd averred Jones also filed two workers

compensation claims — against Aker and another employer, Boeing — both of

which were likewise settled out of court. Id. at ¶¶ 30-31. Finally, Pencoyd

____________________________________________

4 See 42 Pa.C.S.A. §§ 8351-8355.

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asserted that Jones had been receiving social security disability benefits since

2008, and during nine of the fifteen months he was employed with Pencoyd.

Id. at ¶ 32.       However, the third amended complaint contended, Jones

admitted in his deposition that he did not tell anyone at Pencoyd that he had

a disability, nor that he was receiving these benefits. Id. at ¶¶ 33-34.

       Finally, Pencoyd’s third amended complaint alleged that Jones initiated

the federal discrimination action “as a nuisance suit” and for improper

purposes — to extract a financial settlement and to “induce Pencoyd to pay a

sum of money to avoid the notoriety of a public trial” — and he knew his claim

was false, not meritorious, and not supported by evidence. Id. at ¶¶ 54, 55.

With respect to Koller, Pencoyd averred they “lacked any factual support to

reasonably believe in the veracity of [his] client,” and therefore acted in a

grossly negligent manner, and lacked a proper purpose in bringing the prior

suit. See id. at ¶¶ 66-68 (emphasis omitted).

       Jones and Koller each filed preliminary objections in the nature of a

demurrer, challenging the legal sufficiency of the third amended complaint.

Pencoyd filed answers to both sets of demurrers.5 On February 23, 2023, the

trial court entered orders, sustaining Jones’ and Koller’s demurrers and

____________________________________________

5 As noted above, Pencoyd purported to appeal from the dismissal of its
second amended complaint; however, this Court quashed the appeal and
remanded for the trial court to proceed on the third amended complaint, as
well as both defendants’ pending preliminary objections thereto. Pencoyd filed
responses to the preliminary objections following remand of the record.

                                           -4-
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dismissing with prejudice Pencoyd’s third amended complaint. Pencoyd filed

a timely notice of appeal.6

       Pencoyd presents the following issue for our review: “When ruling upon

[Jones’ and Koller’s] preliminary objections to a complaint for wrongful use of

civil proceedings, did the trial court erroneously issue improper findings of fact

and conclusions of law that contradicted well-pled allegations[,] and dismiss

the action with prejudice and without leave to amend?” Pencoyd’s Brief at 5.

       We first consider the relevant scope and standard of review:

       When an appeal arises from an order sustaining preliminary
       objections in the nature of a demurrer, which results in the
       dismissal of a complaint, the Superior Court’s scope of review is
       plenary.

            [We apply] the same standard employed by the trial
            court: all material facts set forth in the complaint as well
            as all inferences reasonably deducible therefrom are
            admitted as true for the purposes of review.

Betts Indus. v. Heelan, 33 A.3d 1262, 1264-65 (Pa. Super. 2011) (citations

omitted).     “This Court will reverse the trial court’s decision regarding

preliminary objections only where there has been an error of law or abuse of

discretion.” Hill v. Ofalt, 85 A.3d 540, 547-48 (Pa. Super. 2014) (citations

omitted).    “[A]n abuse of discretion is not merely an error of judgment.

Rather, the trial court commits an “abuse of discretion” when its judgment is

____________________________________________

6 The trial court did not direct Pencoyd to file a Pa.R.A.P. 1925(b) concise
statement of errors complained of on appeal. Nevertheless, the court has
issued a Rule 1925(a) opinion.

                                           -5-
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manifestly unreasonable, or when the law is not applied, or if the record shows

that the decision resulted from partiality, prejudice, bias or ill will.” Betts

Indus., 33 A.3d at 1265 (citations omitted).

      “A demurrer tests the sufficiency of challenged pleadings.” Id. at 1265.

This Court has explained:

      A preliminary objection in the nature of a demurrer is properly
      [sustained] where the contested pleading is legally insufficient.
      Preliminary objections in the nature of a demurrer require the
      court to resolve the issues solely on the basis of the pleadings; no
      testimony or other evidence outside of the complaint may be
      considered to dispose of the legal issues presented by the
      demurrer. All material facts set forth in the pleading and all
      inferences reasonably deducible therefrom must be
      admitted as true.

      In determining whether the trial court properly sustained
      preliminary objections, the appellate court must examine the
      averments in the complaint, together with the documents and
      exhibits attached thereto, in order to evaluate the sufficiency of
      the facts averred. . . .

      When sustaining the [preliminary objections] will result in the
      denial of claim or a dismissal of suit, [the preliminary objections
      may be sustained] only where the case [is] free and clear of doubt.

Hill, 85 A.3d at 547-48 (emphasis and paragraph break added, citations

omitted). “A demurrer by a defendant admits all relevant facts sufficiently

pleaded in the complaint and all inferences fairly deducible therefrom, but not

conclusions of law or unjustified inferences.” Mercer v. Newell, 254 A.3d

755, 758 (Pa. Super. 2021) (citation omitted).

      In order to establish a Dragonetti Act claim for wrongful use of civil

proceedings claim, the plaintiff must establish:

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          (a) Elements of action. — 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 [when]:

              (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.

42 Pa.C.S.A. § 8351(a).     The plaintiff in a Dragonetti Act claim bears the

burden of proving that the defendant did not have probable cause for his prior

action. See 42 Pa.C.S.A. § 8354(3).

      Conversely, a person has probable cause to initiate or continue civil

proceedings:

      if he reasonably believes in the existence of the facts upon which
      the claim is based, and either:

             (1) reasonably believes that under those facts the claim
          may be valid under the existing or developing law;

                (2) believes to this effect in reliance upon the advice of
          counsel, sought in good faith and given after full disclosure of
          all relevant facts within his knowledge and information; or

               (3) believes as an attorney of record, in good faith that
          his procurement, initiation or continuation of a civil cause is
          not intended to merely harass or maliciously injure the
          opposite party.

42 Pa.C.S. § 8352 (emphasis added).

      Pencoyd contends the trial court failed to apply the proper analysis for

a demurrer, and thus erred in sustaining Jones’ and Koller’s preliminary

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objections and dismissing its third amended complaint. First, Pencoyd argues,

the court failed to deem as admitted the allegations pleaded in its complaint —

namely, that both Jones and Koller reasonably knew or should have known

the federal discrimination lawsuit had no merit. Indeed, Pencoyd maintains,

the trial court not only rejected these allegations, but engaged in prohibited

fact finding when the court concluded that Jones presented a credible doctor’s

note, Koller relied in good faith on Jones’ statements, and both Jones and

Koller believed the discrimination claims were valid under existing law.

      Furthermore, Pencoyd disputes the trial court’s reasoning that Pencoyd

relied exclusively on the EEOC’s dismissal of Jones’ claim, and thus the third

amended complaint failed to plead sufficient facts to establish the cause of

action. Instead, Pencoyd points out, its complaint alleged “myriad other facts”

overlooked by the trial court, including: Jones’ nondisclosure, at any time

during his employment, of his disability or the fact he was receiving disability

benefits; his “pattern of suing employers for discrimination;” and “[t]he fact”

that Pencoyd terminated him for performance and attendance issues,” and not

any age or disability-related reason. See Pencoyd’s Brief at 33-34.

      After careful review of the record and the trial court’s opinion, we are

constrained to conclude that the trial court applied an improper legal analysis

when ruling on the demurrers. As stated above, to establish a Dragonetti Act

claim, the plaintiff must show: (1) the defendant generally “act[ed] in a

grossly negligent manner or without probable cause;” and (2) the prior

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proceedings terminated in the plaintiff’s favor. See 42 Pa.C.S.A. § 8351(a).

Here, the parties agreed as to the second prong — that the prior federal

lawsuit and jury trial ended in Pencoyd’s favor. See id.; see also Trial Court

Opinion, 9/8/23, at 6. Thus, the only matter for the trial court to decide was

whether Jones and Koller acted in a grossly negligent manner or without

probable cause.

      We reiterate that, in considering Jones’ and Koller’s demurrers, the trial

court was required to: (1) admit as true all the material facts pleaded in the

third amended complaint and grant all inferences reasonably deducible

therefrom; and then (2) determine whether the complaint was legally

sufficient. See 42 Pa.C.S.A. § 8351(a)(1); see also Hill, 85 A.3d at 547.

Indeed, for purposes of filing their demurrers, Jones and Koller admitted all

relevant facts sufficiently pleaded by Pencoyd, and all inferences fairly

deducible therefrom. See Mercer, 254 A.3d at 758. Thus, a proper demurrer

analysis would have accepted Pencoyd’s allegations that, inter alia, Jones

previously filed discrimination and workers compensation claims against two

other employers which resulted in settlements; Pencoyd was only aware that

Jones had leg pain and a doctor’s note requesting part time modified work,

and was never informed by Jones that he had a disability; and Jones’

termination was based on attendance and performance issues, not his age or

any disability. See Hill, 85 A.3d at 547.

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      In reviewing the defendants’ demurrers, however, the trial court did not

admit as true the factual allegations pleaded in Pencoyd’s third amended

complaint. See id. at 547. First, the trial court’s opinion made no mention

of the allegations that Jones previously brought discrimination and workers

compensation claims against two other employers, nor that these claims were

all settled out of court.    Additionally, the trial court rejected Pencoyd’s

averments on the merits, and determined Pencoyd failed to show Jones and

Koller lacked probable cause or acted in a grossly negligent manner when they

initiated the federal discrimination suit. The court reasoned:

      [Jones and Koller] reasonably believed that the claims were valid
      under existing law. Mr. Jones identified a medical condition by
      submitting a [May 10, 2017,] note from his family doctor[, which
      stated he] was able to work part-time modified work duty. Shortly
      thereafter, Mr. Jones was terminated from Pencoyd on May 30,
      2017. Mr. Jones filed discrimination claims with the EEOC which
      were dismissed, and the dismissal triggered his right to sue.

      [Pencoyd] has provided no evidence as to how [Koller] acted in
      bad faith. [Koller] relied in good faith upon the statement of facts
      made by Mr. Jones and ultimately litigated some of the claims
      during [the federal] jury trial.

                                    ****

      . . . [Jones and Koller] followed the standard course of action by
      first filing EEOC claims, then waiting for dismissal letters before
      finally initiating a discrimination suit. Neither Defendant failed to
      exercise care that even a careless person would exercise. [Koller]
      relied on statements and facts averred to [him] by [his] client.
      Mr. Jones . . . based his claims on his dismissal from his position
      shortly after submitting a doctor’s note that indicated he needed
      part time modified work. Therefore, [Pencoyd] cannot make a
      valid claim of gross negligence against [Jones and Koller].

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Trial Court Opinion, 9/8/23, at 7, 8 (paragraph break added, footnote

omitted).

      We conclude that in ruling on the demurrers, the trial court improperly

weighed the merits of Pencoyd’s factual allegations, and made findings of fact

that were contrary to the allegations pleaded in the third amended complaint.

See Trial Court Opinion, 9/8/23, at 7; see also Hill, 85 A.3d at 547-48.

Specifically, the trial court concluded that Koller relied in good faith upon

Jones’   statements,   and   Jones     and    Koller   reasonably   believed   the

discrimination claims were valid under existing law. Furthermore, the trial

court impermissibly ruled, in the absence of any evidentiary record, on the

ultimate issues in this matter — namely, Jones’ and Koller’s intent or state of

mind in litigating the federal lawsuit. See Trial Court Opinion, 9/8/23, at 7-

8. This analysis is inconsistent with a proper demurrer review. See Hill, 85

A.3d at 547-48.

      Additionally, the trial court erred in requiring Pencoyd to have presented

“evidence” in support of its claims.    See Trial Court Opinion, 9/8/23, at 7

(stating, “[Pencoyd] has provided no evidence as to how [Koller] acted in bad

faith”), 8 (stating, “[Pencoyd] has not presented actual evidence that [Koller]

filed suit with the intent to harass or injure [it]”). Review of a preliminary

objection in the nature of a demurrer includes no such evidentiary analysis.

See Hill, 85 A.3d at 547 (holding that “[n]o testimony or other evidence

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outside of the complaint may be considered to dispose of the legal issues

presented by the demurrer”).7

       For the foregoing reasons, we conclude that the trial court misapplied

the law and thus abused its discretion in sustaining Jones’ and Koller’s

preliminary objections in the nature of a demurrer and dismissing with

prejudice Pencoyd’s third amended complaint. Accordingly, we reverse the

orders which sustained the preliminary objections and dismissed with

prejudice Pencoyd’s third amended complaint.

       Orders reversed. Case remanded. Jurisdiction relinquished.

Date: 3/25/2024

____________________________________________

7 While the trial court cited Behar v. Frazier, 724 A.2d 943 (Pa. Super. 1999),

for the proposition that a “[p]laintiff must have actual evidence that the
attorney filed suit with the intent to harass or injure[,]” Behar addressed the
plaintiff’s burden of proof at trial, rather than a trial court’s proper review of
a demurrer. See Behar, 724 A.2d at 946; see also Trial Court Opinion,
9/8/23, at 8 n.12. Behar made no mention of a demurrer or preliminary
objections, and thus its discussion is not relevant to the particular procedural
posture presented in this case.

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