Commercial Division Blog

Posted: April 20, 2014 / Categories Commercial, Law Firms and Professional Ethics, Motion to Dismiss; Motion for Judgment on the Pleadings

Malicious Prosecution and Abuse of Process Claims Dismissed for Failure to Meet Heavy Pleading Burden

On April 8, 2014, Justice Schweitzer of the New York County Commercial Division issued a decision in Khandalavala v., LLC, 2014 NY Slip Op. 30939(U), explaining the legal standards applicable to counterclaims for malicious prosecution and abuse of process.

In an action brought by investors alleging mismanagement of an art investment fund, the defendants asserted counterclaims alleging that the action was defamatory and malicious, which the plaintiffs moved to dismiss.

The court first dismissed the malicious prosecution claim, stating that “the gravamen of a civil malicious prosecution case is the wrongful initiation, procurement or continuation of a legal proceeding. To succeed on a claim for malicious prosecution, a plaintiff must show that the defendant initiated a proceeding that terminated in favor of the plaintiff, an entire lack of probable cause in the prior proceeding, malice, and special injury.” (Emphasis in original.) The court held that, because some of the plaintiffs’ claims had not been dismissed, there was neither a final termination in defendants’ favor nor an entire lack of probable cause: “where, as here, there is potential merit in at least some of the causes of action, a malicious prosecution claim is not maintainable.”

The court similarly dismissed the abuse of process claim. “Abuse of process has three essential elements: (1) regularly issued process, either civil or criminal, (2) an intent to do harm without excuse or justification, and (3) use of the process in a perverted manner to obtain a collateral objective.” More specifically, “the gist of the action for abuse of process lies in the improper use of process after it is issued.” Defendants alleged that plaintiffs abused process when they instituted the action, and when they obtained a TRO against defendants. However, “the institution of a civil action by summons and complaint is not legally considered process capable of being abused,” and the TRO could only be the basis of a claim if “it actually was used in a manner inconsistent with the purpose for which it was designed.” Malicious intent, standing alone, cannot support an action for abuse of process. Defendants also failed to allege facts supporting their claim that the TRO caused them losses of $500,000.

The conclusions to be drawn from Justice Schweitzer’s opinion are first, that malicious prosecution should be alleged in a separate action—as a counterclaim, it will be dismissed if any part of the underlying action survives a motion to dismiss—and second, that abuse of process is applicable only under very specific circumstances, and should not be asserted as an alternative to malicious prosecution, but only when the necessary facts can be alleged with particularity.