In January 2014, U.S. Bankruptcy Judge George Hodges, presiding over the asbestos-related bankruptcy of Garlock Sealing Technologies, LLC, a manufacturer of gaskets containing asbestos, issued an order estimating Garlock’s liability for pending and future mesothelioma cases.1 Judge Hodges, after hearing evidence discovered by Garlock in a sampling of settled cases, rejected using the usual bankruptcy court recourse to the debtor’s historic settlement values as a valid basis for estimating Garlock’s total future liability for asbestos-related injuries. He found that Garlock’s prior mesothelioma settlements were not a reliable predictor of Garlock’s liability because those settlements had been infected by misrepresentations by the plaintiffs’ counsel and plaintiffs.2
In Garlock, the evidence showed that, in responding to Garlock’s interrogatories and in depositions and trial testimony, the plaintiffs falsely denied exposures to the more highly toxic asbestos-containing insulation and refractory products of ten of the leading asbestos defendants, referred to as the “big dusties,” which had gone bankrupt in the early 2000s.3 The great majority of asbestos plaintiffs, prior to these bankruptcies, claimed exposures to the products of these companies. Admitting exposure to these products by the Garlock plaintiffs after the bankruptcies would likely have significantly diminished the settlement values of their suits and increased the chances of a defense verdict, or at least a much-diminished allocation of responsibility to Garlock. Despite their clients denying these exposures under oath, plaintiffs’ counsel, either prior to, during, or shortly and even immediately after the conclusion of the personal injury suits against Garlock, submitted claims to the asbestos bankruptcy trusts funded with assets of the bankrupted companies4 created under the Bankruptcy Act.5 In these “proofs of claim,” the plaintiffs’ counsel stated “under penalty of perjury” that their clients had “meaningful and credible exposure” to the products of the companies that they and their clients had specifically denied having been exposed to.6
Judge Hodges concluded:
[T]he fact that each and every one of the . . . [fifteen settled cases] 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.7
Judge Hodges described the plaintiffs’ counsel’s conduct in these fifteen cases as forming a “startling pattern of misrepresentation”8 and stated that “more extensive discovery would show more extensive abuse.”9
The day before Judge Hodges issued his Estimation Order, Garlock filed Racketeer Influenced and Corrupt Organizations Act (RICO) suits against four law firms that had brought mesothelioma claims against Garlock which generated substantial settlements and judgments.10 U.S. District Judge Graham C. Mullen, presiding over the RICO cases, stated that the complaints alleged “that Defendants knowingly and intentionally concealed evidence of their clients’ exposure to other asbestos manufacturers’ products for the purpose of inflating the settlement value of their tort cases against Garlock while simultaneously pursuing or planning to pursue claims in the bankruptcy tort system against these other manufacturers.”11 He then stated that “[t]hese allegations echo findings made by . . . [J]udge . . . Hodges, in conjunction with his estimation order . . . .”12 In rejecting a defendant’s motion to dismiss the RICO action because Garlock failed to plead sufficient facts to support a claim for fraud, Judge Mullen noted that “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. Indeed, the bankruptcy court found as much when it reviewed a number of these cases.”13 In so stating, Judge Mullen characterized Judge Hodges’ findings as concluding that the plaintiffs’ counsel in the fifteen cases committed fraud.
Earlier, in 2005, U.S. District Court Judge Janis Graham Jack of the Southern District of Texas, presided over a multidistrict litigation (MDL) consisting of approximately 10,000 silicosis cases, virtually all of which were fraudulent.14 Despite concluding that the court lacked jurisdiction over the claims, Judge Jack was so offended by the practices of the diagnosing doctors and plaintiffs’ counsel that she issued a 110-page opinion dissecting the fraud as a guide to state court judges to whom the cases were ultimately remanded.15 A majority of the 10,000 silicosis claims, approximately 70%, were simply asbestosis claims that lawyers took from their files and retreaded as silicosis claims; doctors who had previously read the x-rays as “consistent with asbestosis” in many cases reread the same x-rays and found they were instead “consistent with silicosis”—a blatant fraud.16 Judge Jack concluded that “it is apparent that truth and justice had very little to do with these diagnoses . . . . [Indeed,] it is clear that the lawyers, doctors and screening companies were all willing participants” in a scheme “to manufacture . . . [diagnoses] for money.”17 Moreover, Judge Jack found that this massively fraudulent scheme, orchestrated by the same lawyers and screening companies who had brought hundreds of thousands of asbestos claims, replicated what was occurring in asbestos litigation.18
Except for an insignificant sum,19 no sanctions have ever been issued against the lawyers who orchestrated the fraudulent scheme to create a silicosis pandemic which prevalence was to be found not in hospitals but only in courtrooms in Mississippi and Texas. Indeed, despite the overwhelming evidence in asbestos litigation of massive numbers of fraudulent medical diagnoses of nonmalignant injury, mostly asbestosis, and perjurious testimony denying exposure to the “big dusties” in mesothelioma filings, law enforcement has been notable only by its near complete absence.
In recent years, several asbestos defendants and debtors in asbestos-related bankruptcies have responded to massively fraudulent asbestos litigation practices by filing civil RICO claims.20 These filings have provoked intense criticism from the American Association for Justice21 and two scholars, Professors Briana Lynn Rosenbaum and Nora Freeman Engstrom.22 Rosenbaum decries the use of civil RICO to combat fraudulent claiming on a mass basis, such as that endemic in asbestos litigation, as a threat to plaintiffs’ counsel and the civil justice system. Engstrom acknowledges that civil RICO is appropriately invoked in such circumstances but presents a litany of reasons why judges should restrain its application. In this Article, I critique these scholars’ arguments and rebut the factual bases they advance in support. I conclude that although civil RICO is only modestly effective, it is nonetheless an essential tool for combating fraudulent asbestos litigation and other mass tort fraud.
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