CHARLESTON, W.Va. (Legal Newsline) - The Racketeer Influenced and Corrupt Organizations Act has recently been used as a claim against attorneys who allegedly committed fraud during the course of a lawsuit.
"RICO is really rare," West Virginia Association for Justice President-Elect Anthony Majestro said. "It's not a civil cause of action that is used very often."
Majestro said it is a very complex statute that attorneys don't deal with much.
"In my years of practice, I've only been involved in three RICO-related cases, and those cases were all related to the same dispute," Majestro said.
One recent West Virginia lawsuit involving RICO is CSX Transportation's lawsuit against a former Pittsburgh law firm known as Peirce, Raimond & Coulter PC.
From 2000 through 2006, two Pittsburgh attorneys, Robert N. Peirce Jr. and Louis A. Raimond, filed approximately 5,300 asbestosis claims against CSX.
Of those, at least 11 claims were false, according to a 2005 lawsuit filed against Peirce and Raimond by CSX.
Dr. Ray A. Harron, a radiologist who read the x-rays for Peirce and Raimond, was also named in the lawsuit by CSX for allegedly fabricating proof for the claims in question.
The lawsuit, which was filed in 2005, spent years going through U.S. District Court for the Northern District of West Virginia.
The three defendants were ordered to pay $429,240.47 in the beginning. However, that was eventually tripled to $1,287,721.41 under the RICO Act, which contains a provision for treble damages.
Peirce and Raimond have appealed.
On March 3, the American Association for Justice filed an amicus brief in the appeal.
"In the context of asbestos litigation, the use of mobile screening units and the filing of 'mass lawsuits' are neither unlawful nor unusual," the amicus brief states. "Plaintiffs in these lawsuits are victims of the largest occupational injury disaster in U.S. history.
"Although the reading of x-rays involves some subjective interpretation, they have long been accepted as the basis for filing claims for asbestos injury.
"Lawyers representing workers have long made use of x-ray screening and mass filings to make asbestos-exposed workers aware of their rights and provide access to the courts for their compensation claims."
Legitimate litigation activities by an attorney on behalf of his or her client generally are not deemed to be acts of mail fraud for purposes of subjecting the attorney to civil liability under RICO, according to the brief.
"Indeed, the overwhelming weight of authority holds that the filing of a lawsuit, even if baseless or fraudulent, does not come within the scope of RICO," the brief states.
"State counterparts to Federal Rule of Civil Procedure 11 and state tort remedies - including civil actions for fraud, malicious prosecution and abuse of process - provide state courts with the means to combat fraudulent claims and make whole the victims of such illicit activity."
These are appropriate tools designed precisely for this purpose, according to the brief. Private parties should not be permitted to drag their state court litigation into federal court to punish the attorneys who filed personal injury suits against them.
Attorneys for Peirce and Raimond moved to dismiss CSX's RICO claims, contending that the "11 allegedly false claims filed over the course of eight years did not amount to a 'pattern of racketeering,' but instead were merely 'sporadic and isolated' incidents lacking the requisite continuity and relatedness," the AAJ brief states.
What turned the 11 isolated false claims into a pattern, CSX alleged, was the filing of a large number of entirely legitimate cases as part of a system of fraud.
RICO liability should not be imposed on those who simply filed personal injury lawsuits, the AAJ brief claims.
"(E)xpanding RICO for use to combat baseless state court lawsuits is unnecessary in view of the more appropriate and effective tools available to state courts," the brief says.
The defendants had also requested that if the verdict was allowed to stand, then the amount should be reduced to $95,368.98 because CSX should not be able to recover any damages on RICO claims that post-dated July 5, 2007. U.S. District Judge Frederick Stamp denied that request.
Stamp did not make a ruling on the most expensive motion - CSX's request that the defendants pay its more than $10 million legal bill.
Stamp decided to postpone any decision on the motion until exhaustion of any appeal.
CSX argued at trial that Peirce should have known some of his claims were fraudulent since he would send potential plaintiffs back to Harron for subsequent x-rays if they were initially found negative for asbestosis.
In at least one case the form spelling out how a plaintiff was exposed to asbestos was written by two different people, and the plaintiff later testified under oath neither he nor his wife had written in the bits describing how he'd handled "asbestos cement and valve packing."
Elsewhere, other companies have filed RICO claims against plaintiffs attorneys who previously targeted them with lawsuits.
Chevron sued attorney Steven R. Donziger for extortion and criminal conspiracy under RICO after an eight-year trial came to an end in 2011. The result of the trial was an Ecuadorian court issuing a $19 billion judgment against Chevron for allegedly causing pollution to the Amazon from 1964 until 1992.
Chevron was also able to obtain an injunction from U.S. District Court against the enforcement of the Ecuadorian verdict.
The RICO suit, which was filed in the U.S. District Court for the Southern District of New York with District Judge Lewis Kaplan, spent three years in court before Kaplan issued a judgment that the judgment against Chevron was the product of fraud and racketeering.
In March, Chevron asked for $32.3 million in attorneys fees in the RICO case, reflecting 36,837 hours billed by Chevron's outside counsel at Gibson, Dunn & Crutcher LLP, and 139,747 hours billed to Chevron by attorneys at Huron Consulting Group and Merrill Communications LLC.
Donziger is seeking a stay pending appeal. If the court is not inclined to grant a stay pending appeal, he is requesting that the court enter an administrative stay of the court's judgment pending resolution by the U.S. Court of Appeals for the Second Circuit.
In January, four lawsuits were filed by Garlock Sealing Technologies against Shein Law Center Ltd., Benjamin P. Shein, BethAnn Schaffzin Kagan, Belluck & Fox LLP, Joseph W. Belluck, Jordan Fox, Simon Greenstone Panatier Bartlett, Jeffrey B. Simon, David C. Greenstone, the Estate of Ronald C. Eddins, Jennifer L. Bartlett, Waters & Kraus LLP, Michael L. Armitage, C. Andrew Waters, Peter A. Kraus, Stanley-Iola LLP and Mark H. Iola in the U.S. Bankruptcy Court for the Western District of North Carolina-Charlotte Division.
Garlock alleged conspiracy, fraud and violations of RICO. Garlock filed only the first page of each complaint, plus summonses, against the defendants. The rest of the complaints were filed under seal.
A LexisNexis report shows that Garlock disclosed the RICO claims on cover sheets for the lawsuits.
Garlock has convinced a federal bankruptcy judge that previous asbestos awards and settlements have been more valuable than they should have been because asbestos attorneys intentionally withheld their clients' exposure evidence until after they recovered from Garlock.
From Legal Newsline: Kyla Asbury can be reached at firstname.lastname@example.org.