LEGAL NEWSLINE

PHILADELPHIA (Legal Newsline) - A federal court case will examine whether New Jersey law was properly executed in a case alleging a catalyst company and its attorneys fraudulently destroyed evidence proving asbestos was present in the company's talc products.

Defendants BASF Catalysts LLC and Cahill Gordon & Reindell LLP are accused of fraudulently destroying evidence pertaining to asbestos-containing talc products, allegedly ruining thousands of product liability suits.

The complaint was brought on behalf of six individuals who died from asbestos-related, five of which reside in Ohio, alleging they were exposed to talc products manufactured and sold by BASF predecessor Englehard Corporation and its related entities while in the workplace.

They allege the defendants destroyed the evidence that would have proven that the talc products contained asbestos and lied about there being any documents revealing the truth.

"The plaintiffs' amended complaint alleges that the defendants collectively undertook as the central focus and mechanics of BASF's asbestos defense an unprecedented, highly organized, decades-long fraud upon courts and litigants that by design and intent egregiously violated the rights of individuals and compromised the integrity of the judicial process," the plaintiffs wrote in a letter to the appeals court filed March 20.

"Of significance in this assessment are that the development of the scheme, the gathering, destruction and concealment of evidence and the retention of exculpatory evidence necessary to support the defednants' lies that there was no evidence Emtal talc contained any asbestos occurred in and emanated from BASF's headquarters in New Jersey," they added.

In their case, the plaintiffs requested the court to judge the claims using New Jersey law.

"Plaintiffs likely perceived certain benefits in New Jersey's law - most notably New Jersey's relatively unique tort of fraudulent concealment - and they also needed a single State's law to govern this case in order to increase the likelihood of class certification," BASF wrote in a letter to the appeals court.

BASF also argues the claimants also chose New Jersey's law based on its overwhelming significant contacts and government interest to the matter, the company argues.

The plaintiffs claim they chose New Jersey law because the alleged fraudulent conduct occurred there, acts of spoliation and conspiracy were uncovered in New Jersey State Court proceedings and BASF's headquarters is located there.

"New Jersey's interest in reining in and disciplining a rogue company and its co-conspirators who operated a nationwide scheme from within its borders and under the protection and imprimatur of its corporate laws are undoubtedly compelling and outweigh the interests other states may have in mere compensatory damages."

BASF filed a motion to dismiss in Sep. 2011 stating that "'it is not clear that New Jersey law properly applies to the claims in this putative nationwide class action brought by Ohio and New York plaintiffs' estates.'"

Then in Dec. 2012, US District Court Judge Stanley Chester dismissed the fraud claims after stating that the claims were barred by the New Jersey litigation privilege provision.

As a result, the plaintiffs appealed the case.

Following a hearing on March 13, Judges Thomas Ambro, Theodore McKee and Julio Fuentes issued an order requiring all counsels to file their arguments regarding whether choice of law has been waived, New Jersey's approach to resolving conflicts of law and which state's litigation privilege should apply.

In their letters, both defendants argued that the plaintiffs affirmatively alleged that New Jersey law was proper in their case and requested the district court to apply that state's statutory and common law.

The defendants agreed that the district court properly and consistently applied New Jersey law as the plaintiffs had requested.

"In New Jersey, when a plaintiff does not raise a choice-of-law issue, the court may apply the local laws of the forum, which it did here," Cahill wrote. "The plaintiffs had elected to present their claims solely under the laws of New Jersey, so it was appropriately applied, including its litigation privilege."

In other words, according to New Jersey law, the Restatement (Second) of Conflict of Laws applies. Under this rule, a court applies the law of the state with the "most significant relationship" to the case and the parties. However, when a plaintiff does not raise a choice-of-law issue, the Second Restatement recognizes that a court may apply the local law of the forum, which is what the district court proceeded to do.

The district court made it clear that it was "far from apparent" that New Jersey law was proper, but because the plaintiffs did not raise a conflict of law issue, the court proceeded to test their claims under New Jersey law.

"Under the New Jersey litigation privilege, plaintiffs' fraud claims are barred in their entirety because they are based solely on statements made in the course of litigation, and plaintiffs' remaining claims likewise are barred to the extent they are based on such statements," Cahill stated.

BASF argues the district court's approach was justified by the procedural posture of this case and by the claimants "intentional invocation" of New Jersey law.

However, the plaintiffs argue that there is no conflict with the laws of New Jersey when properly applied because no state court would apply the litigation privilege regarding claims of fraud.

"[B]ecause no state would extend the litigation privilege to immunize the magnitude, nature and scope of the fraud alleged here, there is no conflict of law and thus no need for a choice-of-law analysis," the plaintiffs state.

Following the district court's dismissal of their amended complaint, the plaintiffs failed to seek leave to file a second amended complaint under a different state's law or raise objection to choice-of-law.

And then, when appealing, the plaintiffs failed to allege error to the district court's determination to apply New Jersey law; therefore waiving any choice-of-law objection "twice over," Cahill stated in its letter filed March 20.

Thus, the defendants argued that that plaintiffs cannot now challenge the district court's decision to apply New Jersey law because they failed to raise the issue on appeal, BASF explains.

"'It is well settled that an appellant's failure to identify or argue an issue in his opening brief constitutes waiver of that issue on appeal,'" BASF stated.

"In this case, plaintiffs not only failed to raise any choice-of-law objection, but also affirmatively asserted that New Jersey law should apply," Cahill added. "In their amended complaint, plaintiffs specifically pleaded their fraud and fraudulent-concealment claims under New Jersey common law. And when defendants moved to dismiss based on the litigation privilege, plaintiffs expressly argued that their claims survived under New Jersey law."

Cahill also applied the invited-error doctrine, which prohibits a party from complaining on appeal when it invited the district court to apply a particular state law to begin with.

BSAF also wrote that the court has discretion to consider waived issues only in 'exceptional circumstances,' which would not apply in this case.

"The plaintiffs did not simply forfeit choice of law. They strategically elected to plead their claims under New Jersey law to increase their chances of class certification, while at the same time seeking what they may regard as favorable features of New Jersey law," BASF wrote. "Under these circumstances, there is no real reason to rescue plaintiffs from their own decision-making."

"Indeed, to do so would be to sanction 'gamemanship' - a plaintiff 'is not entitled to get a free peek at how his dispute will shake out under [his chosen] law and, when things don't go his way, ask for a mulligan under the laws of a different jurisdiction,'" it added.

"Having successfully urged the district court to apply their preferred law, plaintiffs cannot now complain about that decision," Cahill added. "To hold otherwise would encourage gamesmanship: a plaintiff could invite a district court to apply the law of its favored state and then, if the case does not come out his way on the merits, ask the appellate court for a second bite at the apple under the laws of another state."

However, the plaintiffs argue the issues is whether or not the district court properly applied New Jersey law.

"The issue is did the District Court err in how it applied New Jersey law regarding the litigation privilege, which the plaintiffs believe is the case, and therefore request that the District Court order be reversed and the case remanded for further proceedings," they stated.

From Legal Newsline: Reach Heather Isringhausen Gvillo at asbestos@legalnewsline.com