PHILADELPHIA (Legal Newsline) - After having its lawsuit dismissed by an Illinois federal judge in March, Illinois-based industrial manufacturer John Crane Inc. has filed another lawsuit against a Philadelphia asbestos law firm -- this time, in a Pennsylvania federal court.
JCI filed its 59-page complaint in the U.S. District Court for the Eastern District of Pennsylvania May 12, claiming the firm “devised and implemented a scheme” to defraud JCI and others.
The named defendants are Shein Law Center and attorney Benjamin P. Shein.
JCI, which was in the business of manufacturing and distributing industrial sealing products, claims Shein violated federal mail and wire fraud statutes, the federal Racketeer Influenced and Corrupt Organizations, or RICO, Act.
“The Defendants devised and implemented a scheme to defraud JCI and others, and to obstruct justice,” JCI wrote in its complaint. “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 particular, Defendants used this scheme to systematically conceal their clients’ exposures to highly friable, amphibole asbestos found in thermal insulation, which is much more dangerous than the non-friable, chrysotile asbestos contained and encapsulated in JCI’s products.”
Basically, JCI, which frequently finds itself targeted by asbestos attorneys, alleges Shein denied that their clients were exposed to numerous other asbestos containing products in litigation against JCI, “and then once that litigation was complete, filed claims with asbestos bankruptcy trusts set up by bankrupt companies.”
The claims filed with those trusts were based on claimed exposures that were “explicitly denied” and “fraudulently concealed” in the litigation against JCI, according to the company’s complaint.
“This case arises from what the United States District Court for the Western District of North Carolina has characterized as a ‘startling pattern of misrepresentation,’ involving ‘withholding,’ and ‘manipulation of exposure evidence’ in asbestos litigation carried out by the Defendants against JCI and others,” JCI wrote.
In January 2014, U.S. Bankruptcy Judge George Hodges ruled in a landmark decision that plaintiffs’ attorneys had been withholding evidence that could have been submitted to trusts while pursuing lawsuits against Garlock Sealing Technologies.
They did so in order to maximize recovery in both systems, he ruled.
Garlock had been permitted full discovery into the claims of 15 individuals and eventually filed racketeering lawsuits against the law firms that represented them.
“It appears certain that more extensive discovery would show more extensive abuse,” Hodges wrote. “But that is not necessary because the startling pattern of misrepresentation that has been shown is sufficiently persuasive.”
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.
Despite the settlement, JCI has gone on to file lawsuits against various asbestos law firms under the RICO Act, including Shein and Dallas asbestos firm Simon Greenstone Panatier Bartlett PC.
The company, in its racketeering claims, has pointed to the evidence uncovered by Garlock during its bankruptcy proceeding.
Two Illinois federal judges recently dismissed lawsuits filed by JCI against Shein and Simon Greenstone in June, concluding both firms’ ties to the state of Illinois were “insufficient.”
Judge John J. Tharp Jr., who sits on the U.S. District Court for the Northern District of Illinois, explained in his March 23 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 in his 20-page ruling. “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.”
From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.