Illinois judges: Racketeering lawsuits against asbestos lawyers belong elsewhere

By Jessica Karmasek | Mar 31, 2017

CHICAGO (Legal Newsline) - Last week, two Illinois federal judges dismissed lawsuits filed by John Crane Inc., an Illinois-based industrial manufacturer, against two out-of-state asbestos law firms, concluding both firms’ ties to the state were “insufficient.”

Judges Amy St. Eve and John J. Tharp Jr., both of whom sit on the U.S. District Court for the Northern District of Illinois, Eastern Division, each filed orders March 23 in JCI’s lawsuits against Dallas asbestos firm Simon Greenstone Panatier Bartlett PC and Philadelphia-based Shein Law Center.

St. Eve, in her 30-page opinion and order, granted Simon Greenstone’s motion to dismiss for lack of personal jurisdiction without prejudice, thus allowing JCI to “refile in a district that has personal jurisdiction over Defendants.”

“Here, Plaintiff has not demonstrated that venue in this district is proper,” she wrote. “Assuming Plaintiff’s allegations as true, a substantial portion of the activities giving rise to Plaintiff’s claim did not occur in this district. The only activities giving rise to the claim that occurred in this district were Plaintiff’s receipt of discovery responses and communications with Defendants about the litigation.

“All the other activities giving rise to Plaintiff’s claim -- the drafting of Defendants’ discovery responses, Defendants’ clients’ depositions, Defendants’ clients’ in-court testimony, Defendants’ interactions with and counseling of their clients, Defendants’ filing of lawsuits, trials resulting in verdicts against Plaintiff, Defendants’ in-court false assertions, Defendants’ alleged collaboration with other law firms -- occurred in other districts.”

St. Eve explained that while the firm directed litigation-related documents that furthered the alleged intentional torts at plaintiffs in the forum state, the “focal point” of the intentional tort remained in the state where the underlying litigation was based.

“Here, the only suit-related contacts with Illinois were ‘legal papers served’ in Illinois, but, to use Plaintiff’s words, ‘the bulk of the alleged’ tort occurred in the California, Texas, and Pennsylvania courts where Defendants were litigating their asbestos claims against Plaintiff,” the judge wrote.

Simply put, just because the firm occasionally does business in Illinois, doesn’t mean it is “at home” in the state, she wrote.

The judge also denied JCI’s request -- made in one sentence in a footnote -- for jurisdictional discovery. The company made the request to look at the full scope of Simon Greenstone’s personal jurisdiction contacts with Illinois.

“Plaintiff cites no case law and provides no factual support for its request for jurisdictional discovery,” St. Eve wrote.

Tharp issued a somewhat similar order, granting Shein’s motion to dismiss for lack of personal jurisdiction, also without prejudice.

The judge explained in his 20-page opinion and order that while JCI is an Illinois company, Shein did not “make or exploit its own contacts with Illinois” in order to defraud JCI.

“JCI is the sole link between Shein and Illinois,” he wrote. “Shein has no contacts with the state of Illinois that are independent of JCI. Shein has no business in Illinois, no offices or homes in Illinois, no clients in Illinois, no referrals from Illinois, no solicitation to clients in Illinois, and has never practiced (and is not licensed to practice) in state or federal court in Illinois.

“And while it is true that a defendant’s relationship with a forum plaintiff ‘may be significant in evaluating [its] ties to the forum,’ Shein had no relationship with JCI. Shein did not seek out JCI’s services and attempt to develop a relationship with the company or in any other way involve itself with the company or with the state of Illinois. Shein made no effort to direct its activities at Illinois, either in the sense of pursuing clients here or in the sense of making an effort to routinely sue Illinois defendants.”

In early June, JCI, which frequently finds itself targeted by asbestos attorneys, filed lawsuits against Simon Greenstone and Shein under the Racketeer Influenced and Corrupt Organizations Act. The basis of the claims is evidence uncovered by Garlock Sealing Technologies three years ago during its bankruptcy proceeding.

“The defendants devised and implemented a scheme to defraud JCI and others, and to obstruct justice,” the JCI complaints stated.

“The defendants fabricated false asbestos ‘exposure histories’ for their clients in asbestos litigation against JCI and others and systematically concealed evidence of their clients’ exposure to other sources of asbestos.”

In September, Simon Greenstone asked that JCI’s complaint against it be dismissed for lack of subject matter jurisdiction and failure to state a claim.

In a reply later filed in the Illinois federal court, the firm argued that JCI cannot combine insufficient allegations of general jurisdiction with insufficient allegations of specific jurisdiction and “create personal jurisdiction over the defendant from the mixture.”

“JCI abandons any argument that general jurisdiction exists, and instead argues that this Court can exercise specific jurisdiction over this case -- which is premised on seven specific asbestos cases litigated in California, Texas and Pennsylvania -- based on entirely unrelated suits filed by Simon Greenstone against JCI,” the firm wrote in its Dec. 2 reply.

JCI, in a sur-reply, described Simon Greenstone’s arguments as an “erroneous characterization of facts and law.”

“The Defendants withheld evidence of exposure to bankrupt companies’ products in litigation with JCI. The Defendants then received payment from bankruptcy trusts for the same injuries involved in litigation with JCI,” the company wrote in its Dec. 13 filing. “But JCI and others had already compensated the plaintiffs for those same injuries, and JCI had a right to seek contribution from these bankruptcy trusts, which claims the Defendants prevented by hiding evidence of their clients’ exposure.

“JCI’s claims do not require undoing state judgments -- in fact, those judgments are taken as a given for purposes of JCI’s contribution claims. Instead, Defendants’ fraud, not the judgments, foreclosed JCI’s contribution claims.”

Shein made similar jurisdictional arguments to the Illinois federal court.

“JCI’s claims are both factually unsupported and legally unsupportable and, more critically, Defendants Benjamin P. Shein and Shein Law Center Ltd. have no contacts with Illinois to justify the exercise of personal jurisdiction over them by this Court,” the firm wrote in a Dec. 16 filing.

“This case should be dismissed forthwith due to lack of jurisdiction or, alternatively, due to failure to state a claim upon which relief can be granted.”

JCI contends both of its lawsuits -- against Simon Greenstone and Shein -- seek “redress” for what the U.S. Bankruptcy Judge George Hodges, of the U.S. District Court for the Western District of North Carolina, has referred to as “wide-ranging, systematic and well-concealed fraud” against asbestos defendants such as itself.

In 2014, Garlock used the evidence from its 2013 bankruptcy estimation trial to file lawsuits against five firms -- Simon Greenstone, Shein, Belluck & Fox of New York City, and Dallas firms Waters & Kraus and Stanley-Iola.

The Garlock lawsuits alleged the five firms told different stories about their clients’ exposures to asbestos in civil lawsuits than they did in the bankruptcy trust system.

Hodges agreed in a landmark 2014 decision.

The firms delayed the submission of their clients’ claims to trusts that were established by bankrupt former asbestos defendants. This was done so Garlock could not assign blame for the plaintiff’s disease to the companies in the trust system, the judge ruled.

The bankrupt companies were forced to establish trusts because they could not afford to pay their asbestos liabilities. Asbestos victims submit claims to trusts in a process separate from the victims’ civil lawsuits against companies that are not bankrupt.

Garlock had submitted evidence in 15 cases during a trial to determine how much it would need to place in its trust.

“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.”

Garlock’s evidence, which was originally sealed but eventually uncovered by a successful legal challenge from Legal Newsline, showed that after several dozen asbestos defendants established bankruptcy trusts, its own liabilities increased. The company’s average mesothelioma settlement rose from almost $10,000 in 1999 to nearly $80,000 by 2010.

Garlock’s allegations were part of a strategy to limit the amount it would need to put in the trust it is establishing to resolve its asbestos liabilities. Hodges ruled Garlock needed to only put $125 million in its trust, more than $1 billion less than plaintiffs attorneys had requested.

Garlock eventually agreed to put more than $350 million in its trust.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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Organizations in this Story

John Crane Inc. Shein Law Center Simon Greenstone Panatier Bartlett PC U.S. District Court for the Northern District of Illinois Chicago Division

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