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Thursday, November 21, 2019

Future could see more RICO cases like Garlock's, expert says

By Kyla Asbury | Sep 12, 2014


MINNEAPOLIS (Legal Newsline) – The future will see more racketeering lawsuits like those filed by Garlock Sealing Technologies against plaintiffs attorneys, an attorney/professor says.

In January, four lawsuits were filed by Garlock Sealing Technologies against asbestos firms in 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.

During its bankruptcy estimation trial, Garlock alleged that plaintiffs attorneys had a history of withholding their clients’ exposure evidence against bankrupt companies in order to maximize recovery against Garlock in civil courts.

Presumably, Garlock made the same allegations in its RICO suits.

"I think we'll see more cases like the Garlock RICO case," said Jeffrey Grell, a partner at Grell & Feist in Minneapolis and adjunct professor at University of Minnesota School of Law. "There was a lot of this type of litigation during the mortgage foreclosure era."

Those sued in the Garlock RICO cases are: 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

Grell also runs and explained that RICO was signed into law in 1970 to prosecute organized crime members, such as Mob bosses, but in recent years, it has been used more so for individuals or corporations to sue others for fraud and racketeering in different areas.

Notably, businesses that have suspected they were the targets of fraudulent acts by plaintiffs attorneys have responded with RICO suits against those attorneys.

Grell said RICO was not used much until the mid-1980s.

"It was used by attorneys for organized crime then," Grell said. "But it wasn't until about 1995 that it had a period of evolution."

Grell said in 1995 RICO started to become more in line with how it is used today.

"It's been a popular civil cause of action," Grell said. "It's hardly been used in criminal context. It's been used in everything, but almost never in context with organized crime."

Chevron filed a RICO suit against many parties, including plaintiffs attorney Steven R. Donziger, following a multibillion-dollar judgment against it over alleged pollution in the Ecuadorian Amazon.

In 2011, Chevron obtained an injunction in a U.S. District Court against the enforcement of the verdict and filed a RICO complaint against Donziger, claiming he committed extortion and criminal conspiracy under RICO.

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 ruling that said the judgment against Chevron was the product of fraud and racketeering.

Grell said what makes Chevron’s case different is its unique set of facts.

"This case involves extraterritorial application and issues as to what kind of conduct is not U.S.-related," Grell said. "It's a gray area in the law. It comes down to how close the alleged corruption needs to be the United States when it supposedly occurred in Ecuador when Chevron was doing business in that country."

Grell said he believes the issue involved in the Chevron RICO case will be a big issue in more court cases to come.

"What's criminal here is sometimes normal business practice in other countries," Grell said. "That can cause some trouble."

Grell said the United States is one of the few countries to have a racketeering law.

"It's a big issue right now," he said. "Eventually, this issue will probably go to the U.S. Supreme Court."

Grell believes cases like Garlock will be seen more often than cases like Chevron.

"Chevron has a unique set of facts and a unique strategy," Grell said. "Garlock is something we've seen in the past and are sure to see more of in the future."

From Legal Newsline: Kyla Asbury can be reached at

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