Judge denies asbestos firms' motions to dismiss racketeering cases against them

By John O'Brien | Sep 9, 2015


CHARLOTTE, N.C. (Legal Newsline) – Racketeering lawsuits against asbestos plaintiffs firm will proceed, a federal judge has ruled without deciding if they were filed after the statute of limitations had expired.

Last week, U.S. District Judge Graham Mullen denied motions to dismiss two of the four Racketeer Influenced and Corrupt Organizations lawsuits filed by Garlock Sealing Technologies against asbestos firms.

The cases allege those firms – which are Simon Greenstone of Dallas and Shein Law Center of Philadelphia – manipulated the asbestos recovery system through the years in order to make Garlock pay more than it should have in verdicts and settlements.

Also sued by Garlock are Waters & Kraus and Stanley-Iola of Dallas and Belluck & Fox of New York.

“Garlock successfully alleges that Defendants engaged in a wide-ranging, systematic and well-concealed fraud designed to suppress evidence and inflate settlement values for mesothelioma claims,” Mullen wrote.

“Indeed, the bankruptcy court found as much when it reviewed a number of these cases.”

Garlock’s RICO cases were filed before a landmark ruling in 2014 in its bankruptcy case.

During a 2013 trial that determined how much money Garlock needed to put in a bankruptcy trust to compensate asbestos victims, the company was permitted full discovery into the cases of 15 plaintiffs.

What the company found showed that plaintiffs attorneys routinely delayed submitting claims to bankruptcy trusts while lawsuits against solvent defendants, like Garlock used to be, were pending.

This was done with the intention of pinning more blame on Garlock, the company said.

Judge George Hodges agreed. His January 2014 ruling agreed with the company’s assertions, and he ordered the company to put $125 million in the trust – more than $1 billion less than plaintiffs attorneys had requested.

“These fifteen cases are just a minute portion of the thousands that were resolved by Garlock in the tort system,” Hodges wrote.

“And they are not purported to be a random or representative sample. But the fact that each and every one of them contains such demonstrable misrepresentation is surprising and persuasive.

“More important is the fact that the pattern exposed in those cases appears to have been sufficiently widespread to have a significant impact on Garlock’s settlement practices and results… It appears certain that more extensive discovery would show more extensive abuse.”

The company also claimed victory in another dispute last week when Mullen ordered Belluck & Fox to turn over information on the cases of 157 clients.

At issue in the law firms’ motions to dismiss were the timeliness of Garlock’s claims and whether the company failed to state a claim.

The law firms argued Garlock was aware of the activity on which it based its RICO claims in 2009 and missed the statute of limitations by waiting until 2014 to file the lawsuits.

Garlock countered that it became aware of the activity in January 2013.

Mullen found this issue is clearly in dispute and that he does not have the necessary facts to resolve it, so he denied the motions as premature.

However, the company adequately stated claims for relief in its complaints, he ruled.

“Defendants broadly contend that actions in the litigation context cannot, as a matter of course, serve as predicate acts for RICO,” he wrote.

“The Court also notes that Defendants’ conduct as alleged in the Complaint goes well past the kind of routine litigation activities that these courts have found inadequate to state a claim under RICO.

“Defendants are accused of committing rampant fraud over the course of several years in various state court proceedings. These allegations suffice to state a claim for civil RICO.”

From Legal Newsline: Reach editor John O’Brien at jobrienwv@gmail.com.

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