SIXTH DIVISION

November 7, 1997

No. 1-97-0842

MARSHALL SPIEGEL, ) Appeal from the

) Circuit Court of

Plaintiff-Appellant, ) Cook County

)

v. )

)

ZURICH INSURANCE COMPANY, )

STATE FARM INSURANCE COMPANY, )

CONTINENTAL CASUALTY COMPANY, and )

EMPLOYERS MUTUAL CASUALTY COMPANY, ) Honorable

) Sheldon Gardner,

Defendants-Appellees. ) Judge Presiding.

PRESIDING JUSTICE GREIMAN delivered the opinion of the

court:

Plaintiff Marshall C. Spiegel appeals the trial court's

entry of summary judgment against him, finding that coverage in

insurance policies for malicious prosecution claims does not

include coverage for sanctions imposed by a court. We affirm.

In an unrelated federal case, the seventh circuit imposed

$34,000 in sanctions against plaintiff pursuant to Rule 38 of the

Federal Rules of Appellate Procedure (Fed. R. App. P. 38) for

filing a frivolous appeal. Spiegel v. Continental Illinois

National Bank, 790 F. 2d 638 (7th Cir. 1986). Plaintiff, the

beneficiary of a trust established by his father, Oscar Spiegel,

filed two lawsuits in federal district court against the trustee,

Continental Illinois National Bank, and certain employees of the

trustee, disputing the propriety of the trustee's management of

the trust. The first lawsuit concluded when the district court

granted summary judgment to the defendants and plaintiff did not

appeal. The second lawsuit concluded when the district court

dismissed the complaint based partially on res judicata from the

first lawsuit and partially on the failure of the complaint to

set forth a claim for mail fraud, as a matter of law. Plaintiff

appealed the dismissal of his second lawsuit. The seventh

circuit affirmed the dismissal of plaintiff's complaint and

imposed sanctions against plaintiff under Rule 38 of the Federal

Rules of Appellate Procedure (Fed. R. App. P. 38) for filing a

frivolous appeal. Spiegel, 790 F.2d 638.

Plaintiff then tendered claims for the Rule 38 sanctions to

the four defendant insurance carriers, i.e., Zurich Insurance

Company (Zurich), State Farm Insurance Company (State Farm),

Continental Casualty Company (Continental), and Employers Mutual

Casualty Company, based on the policies' coverage for malicious

prosecution claims. There is no dispute that the insurance

policies at issue afford coverage for "malicious prosecution"

under their coverage for "personal injury."

When the insurance carriers declined to cover the claims

predicated upon the Rule 38 sanctions, plaintiff filed a four-

count complaint alleging breach of contract against each

insurance carrier. Plaintiff voluntarily dismissed, without

prejudice, defendant Employers Mutual Casualty Company and,

therefore, it is not a party in this appeal.

On November 14, 1996, State Farm filed a motion for summary

judgment. In its motion, State Farm asserted that plaintiff's

claim for breach of contract could be resolved as a matter of law

because a cause of action for malicious prosecution was not filed

against plaintiff and the insurance policies did not provide

coverage to plaintiff for these judicially imposed punitive

damages.

On February 5, 1997, the trial court granted summary

judgment in favor of State Farm. The order also noted that the

other defendants (Zurich and Continental) "made oral joinders to

State Farm's motion." Accordingly, the trial court also entered

summary judgment in favor of the other two defendants.

On appeal, plaintiff asserts that the trial court erred in

entering summary judgment because, as a matter of law, the

offense of malicious prosecution is equivalent to the conduct of

frivolous litigation for which sanctions were imposed and,

therefore, falls within the coverage afforded by the subject

insurance policies. We disagree.

Our review of a summary judgment ruling is de novo. McNamee

v. State of Illinois, 173 Ill. 2d 433, 438 (1996); Outboard

Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 102

(1992). Summary judgment is proper where there are no genuine

issues of material fact and the moving party is entitled to

judgment as a matter of law. Outboard Marine, 154 Ill. 2d at

102. Where no factual issues are raised on appeal, the sole

question on review is whether the trial court's entry of summary

judgment is proper as a matter of law. McNamee, 173 Ill. 2d at

438.

To establish malicious prosecution, the plaintiff must (1)

show that the defendant brought the underlying suit maliciously;

(2) show that the defendant brought the underlying suit without

probable cause; (3) establish that the former action was

terminated in his or her favor; and (4) plead and prove some

"special injury" or special damage beyond the usual expense, time

or annoyance in defending a lawsuit. Cult Awareness Network v.

Church of Scientology International, No. 80868, slip. op. at 4

(September 18, 1997).

At the time the federal court imposed sanctions against

plaintiff, Rule 38 of the Federal Rules of Appellate Procedure

provided: "If a court of appeals shall determine that an appeal

is frivolous, it may award just damages and single and double

costs to the appellee." Fed. R. App. P. 38, printed in 28 U.S.C.

R. 38 (1988) (amended 1994).

To apply Rule 38, the federal courts make two

determinations. First, to establish that the appeal was

frivolous, the court must determine whether the result of the

appeal was obvious or the appellant's argument is wholly without

merit. Spiegel, 790 F.2d at 650. Second, the court must

determine whether sanctions are appropriate by looking for "an

'indication of the appellant's bad faith suggesting that the

appeal was prosecuted with no reasonable expectation of altering

the district court's judgment and for purposes of delay or

harassment or out of sheer obstinacy.'" Spiegel, 790 F.2d at

650, quoting Reid v. United States, 715 F.2d 1148, 1155 (7th Cir.

1983).

To exemplify the elements of Rule 38, plaintiff directs

attention to several federal decisions: Munoz v. Strahm Farms,

Inc., 69 F.3d 501 (Fed. Cir. 1995) (sanctions imposed because the

appeal was frivolous as filed and as argued); Leahy v. Board of

Trustees of Community College District No. 508, 912 F.2d 917 (7th

Cir. 1990) (sanctions imposed where the appeal had absolutely no

chance of success and was prosecuted out of sheer obstinacy);

Ruderer v. Fines, 614 F.2d 1128 (7th Cir. 1980) (the court

imposed sanctions sua sponte in light of the appellant's entire

course of conduct over the years and his litigious proclivities);

Ratcliff v. Texas, 714 F.2d 24 (5th Cir. 1983) (Rule 38 sanctions

were imposed where the appeal was prosecuted for the purpose of

harassment or out of sheer obstinacy); Depoister v. Mary M.

Holloway Foundation, 36 F.3d 582 (7th Cir. 1994) (no sanctions

were imposed where the court found that there was no bad faith in

pursuing the appeal). None of these cases, however, address or

compare the tort of malicious prosecution and Rule 38 sanctions.

Applying the law of other states, three federal decisions

have compared malicious prosecution with other causes of actions,

not with Rule 38 sanctions. A claim under a Pennsylvania statute

for wrongful use of civil proceedings was covered in an insurance

policy that included claims for malicious prosecution in

Northwestern National Casualty Co. v. Century III Chevrolet,

Inc., 863 F. Supp. 247 (W.D. Pa. 1994). The district court in

Northwestern National Casualty held that an insurance policy's

coverage for claims of malicious prosecution included claims

under a Pennsylvania statute for wrongful use of civil

proceedings because the statute replaced the common law cause of

action for malicious prosecution. Northwestern National

Casualty, 863 F. Supp. at 248. In addition, the court reasoned

that any ambiguity in the policy language regarding the scope of

coverage should be construed against the insurance company.

Northwestern National Casualty, 863 F. Supp. at 248. In

comparing the common law tort of malicious prosecution with the

statute for wrongful use of civil proceedings, the court

acknowledged that the two causes of action contained some

different elements but the difference was "superficial" and

ignored the purpose and effect of the statute. Northwestern

National Casualty, 863 F. Supp. at 249-50. Unlike the

Pennsylvania law applied in Northwestern National Casualty,

Illinois has not replaced the common law tort of malicious

prosecution with a statute.

Applying Wisconsin and Mississippi law, a district court in

Wisconsin held that the term "malicious prosecution" in an

insurance policy included "abuse of process" in Koehring Co. v.

American Mutual Liability Insurance Co., 564 F. Supp. 303 (E.D.

Wis. 1983). However, the same Wisconsin court subsequently

applied Wisconsin law and held that a claim for abuse of process

did not come within the coverage of a personal liability policy

that specifically covered "malicious prosecution" in Heil Co. v.

Hartford Accident & Indemnity Co., 937 F. Supp. 1355 (E.D. Wis.

1996).

Moreover, the seventh circuit has recognized a distinction

between the two causes of action in Smart v. Board of Trustees of

University of Illinois, 34 F.3d 432 (7th Cir. 1994). "Malicious

prosecution" is the bringing of a suit known to be groundless;

"abuse of process" is the bringing of a suit that may have solid

grounding in law but that the plaintiff has filed not in order to

vindicate his legal rights and obtain judgment but in order to

harass defendant. Smart, 34 F.3d at 434.

Illinois law also recognizes and upholds the distinction

between the torts of malicious prosecution and abuse of process.

Arora v. Chui, 279 Ill. App. 3d 321 (1996). In Arora, the court

enunciated the distinct elements of each tort and separately

addressed each tort. The Arora court held that the plaintiffs

failed to establish a prima facie case for malicious prosecution

based on their failure to prove that the underlying suit was

terminated in their favor (Arora, 279 Ill. App. 3d at 330) and

failed to assert a cause of action for abuse of process because

the filing of a lis pendens notice did not involve the misuse of

the process of the court (Arora, 279 Ill. App. 3d at 332).

In addition, Illinois law recognizes and upholds the

distinction between the tort of malicious prosecution and the

remedy of pleading-related sanctions available under Illinois

Supreme Court Rule 137 (134 Ill. 2d R. 137). Levin v. King, 271

Ill. App. 3d 728, 737 (1995). The underlying facts in Levin

reveal that the plaintiff initially threatened to pursue

litigation to protest a proposed development project in which the

defendant land developer had sought financing. In turn, the

defendant then filed an action against the plaintiff for tortious

interference with advantageous business relationship. After a

trial, the circuit court directed a verdict against the

defendant. Next, the plaintiff filed a malicious prosecution

action against the defendant based on the defendant's tortious

interference suit. The trial court granted judgment on the

pleadings for the defendant, finding that, as a matter of law,

the plaintiff failed to allege the element of special injury

necessary to establish a malicious prosecution case. In

affirming the trial court's decision, the appellate court

specifically declined to depart from the special injury rule in a

malicious prosecution action and reasoned, in pertinent part,

that Rule 137 was created by our supreme court as a remedy for

suits that are not well grounded in fact or law. Levin, 271 Ill.

App. 3d at 737.

The federal and state courts have clearly adhered to the

distinctions between the torts of malicious prosecution and abuse

of process. No cases have been advanced by the parties or found

in research that equate malicious prosecution and court-imposed

sanctions. Moreover, plaintiff does not argue, or even suggest,

that the term "malicious prosecution" as stated and used in the

insurance policies is ambiguous. Instead, plaintiff seeks to

expand the term to graft Rule 38 sanctions onto insurance

policies to fit an event that is not mentioned or considered in

the policies.

We find that judicially imposed sanctions are not within the

ambit of the term "malicious prosecution" in the subject

insurance policies. The common law tort of malicious prosecution

contains significant strictures and rules. The most recent

pronouncement on this tort by the Illinois Supreme Court in Cult

Awareness Network does not change the cause of action or its

elements. Cult Awareness Network, No. 80868 (September 18,

1997).

For the foregoing reasons, we find that a claim of malicious

prosecution is not equivalent to sanctions imposed by a court for

purposes of insurance coverage, as a matter of law. Accordingly,

we affirm the trial court's order of summary judgment in favor of

defendants.

Affirmed.

ZWICK and QUINN, JJ., concur.