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Media Alerts - Williams v. BASF Catalysts LLC--Third Circuit
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September 8, 2014
  Williams v. BASF Catalysts LLC--Third Circuit
Headline: Asbestos Cover-up Uncovered

Area of Law: Tort

Issues Presented: (1) Did the district court err in dismissing a fraud claim because the New Jersey litigation privilege immunized the defendants; (2) Did the district court err in dismissing the fraudulent concealment claim because the plaintiff did not prove that she would have prevailed in the merits of her asbestos-injury case; and (3) Did the district court err in concluding that it would be unable to order the relief requested because it would be deciding matters to be raised in other litigation.

Brief Summary: Plaintiffs brought suit alleging that Defendants covered up the existence of asbestos in a talc product that was marketed to the public as an asbestos substitute. According to the complaint, Defendants destroyed and hid evidence of asbestos in the product. They also fabricated evidence that asbestos did not exist in the product. Plaintiffs brought claims for fraud and fraudulent concealment. They claimed that because of the cover-up they were forced to settle or dismiss lawsuits for asbestos-injury that they otherwise would have pursued.

The Third Circuit held that the district court erred in dismissing the fraud claim and in determining that the New Jersey litigation privilege immunized the defendants. The Court also held that the district court erred in dismissing the fraudulent concealment claim. The Court explained that plaintiff did not need to prove that she would prevail on her asbestos-injury claim but only that Defendants' conduct affected the size or existence of the damages awarded at trial. Finally, the Court determined that the district court could grant relief, including declaratory and injunctive relief, for the fraud and fraudulent concealment claims but that to the extent the requested relief invited the district court to decide matters to be raised in other litigation, the issues were not ripe. Thus, declaratory and injunctive relief to enjoin Defendants from invoking res judicata, laches, statute of limitations doctrines, or other similar issues in future proceedings could not be granted. The Court reversed in part, affirmed in part, and remanded for further proceedings.

Extended Summary: This putative class action lawsuit is brought by survivors of original asbestos injury suits against Defendants Engelhard and its successor BASF Catalyst LLC based on the alleged actions of BASF and Cahill Gordon & Reindel to prevent asbestos injury victims from obtaining recoveries for their injuries. Plaintiffs alleged that Defendants destroyed and concealed documents that revealed that there was asbestos in their talc product. Plaintiffs alleged that Defendants' fraud caused them to settle or dismiss their initial claims that they would otherwise have pursued.

According to the complaint, Defendants mined talc and tests concluded that this talc contained asbestos. Defendants ignored those findings and represented to customers, the industry, and the government that the talc was free from asbestos. The survivors of a former employee of Defendant sued for asbestos-related injury and Defendant law firm represented the company in the suit. That litigation produced tests and results confirming that the talc had asbestos in it. One of Defendant's executives at the time gave a deposition in which he confirmed knowledge of asbestos in the talc. The case was settled and the agreement included a confidentiality clause which prohibited the parties from discussing the case or sharing the evidence. After that litigation ended, the company issued a memo to its employees that they should collect for disposal all documents relating to the talc because "it is the policy of Defendants Corporation to avoid undue accumulation of documents that are no longer likely to be needed in our business operations." These documents were either destroyed or hidden. Plaintiffs also alleged that the company, with the help of its counsel, manufactured favorable evidence, which was used to frustrate future asbestos injury claims and resulted in dismissal or smaller settlements of the cases.

The alleged cover up was discovered when a former research chemist for Defendants testified, in a New Jersey case, that he had discovered asbestos in the talc and was later instructed to turn over all his documents related to the talc. During discovery into what documents Defendants had destroyed or concealed during litigation, documents were found that showed tests from multiple years confirming that there was asbestos in the talc.

The Court determined that the district court erred in dismissing the fraud claim based on the New Jersey litigation privilege. The Court reasoned that the privilege has never been used to shield systematic fraud directed at the integrity of the judicial process and should not be used for that purpose. The privilege was intended to protect attorneys from civil liability arising from words used in the course of judicial proceedings, promote open communication, and provide the parties an opportunity to explore the truth without fear of recrimination. Defendants thwarted these goals by allowing deceit and deception and permitting false and misleading statements in the course of judicial proceedings. The Court analyzed decisions of the New Jersey Supreme Court on the issue and declined to extend the privilege to false statements and evidence given by Defendants to plaintiffs. Because the district court erred in extending the privilege, the district court's dismissal of the fraud claim was reversed.

The Court next turned to the issue of fraudulent concealment. The Court focused on the requirement that the plaintiff was "damaged in the underling action by having to rely on an evidential record that did not contain the evidence defendant concealed." Looking to New Jersey law, the Court rejected Defendants' argument that the plaintiffs would have to show they would have prevailed in the underlying action. Instead, the Court reasoned that under New Jersey law, it is enough to show that the conduct affected the size or existence of the damages awarded at trial and that the plaintiff can recover whether he was successful in the original litigation or not. The Court explained that it was sufficient that plaintiffs alleged that they received diminished recovery, the lawsuits were impaired, or that they expended time and money to attempt to litigate around the spoliated evidence.

The Court affirmed district court's determination that certain declaratory and injunctive relief requested by plaintiffs could not be granted because those issues were not ripe. The Court determined that plaintiffs could not seek determinations of legal issues anticipated in subsequent proceedings. It, thus, affirmed the district court's dismissal of Plaintiffs' claims that sought to enjoin Defendants from invoking res judicata, laches, statute of limitations doctrines or other similar issues in future state court proceedings.

To read the full opinion, please visit http://www2.ca3.uscourts.gov/opinarch/131089p.pdf

Panel (if known): McKee, Chief Judge, Ambro, Fuentes, Circuit Judges

Argument Date: March 13, 2014

Argument Location:

Date of Issued Opinion: September 3, 2014

Docket Number: 13-1089

Decided: Reversed in part, affirmed in part, and remanded for further proceedings

Case Alert Author: Cheri Snook

Counsel: Michael Coren, Esq., Harry M. Roth, Esq., Christopher M. Placitella, Esq., Jeffrey M. Pollock, Esq., for appellants; Stephen M. Orlofsky, David C. Kistler, Eugene F. Assaf, Esq., Daniel A Bress, Esq., Peter A. Farrell, Esq., Michael F. Williams, Esq., for appellee BASF Catalysts LLC, Robert E. Ryan, Esq., Marc D. Haefner, Esq., Craig S. Demareski, Esq., John K. Villa, Esq., David S. Blatt, Esq., Kannon K. Shanmugam, Esq., Matthew B. Nicholson, Esq., Richard A. Olderman, Esq., for appellees Cahill Gordon & Reindel LLP, Eric Tunis, Esw., Olivier Salvagno, Esq., for appellee Thomas D. Halket, Walter F. Timpone, Esq., Walter R. Krzastek, Jr., Esq., Michael B. Devins, Esq., for appellee Glen Hemstock, Kevin H. Marino, Esq., John A. Boyle, Esq., for appellee Arthus A. Dornbusch, II

Author of Opinion:Judge Fuentes

Circuit: 3rd Circuit

Case Alert Circuit Supervisor: Professor Mary E. Levy

    Posted By: Susan DeJarnatt @ 09/08/2014 12:48 PM     3rd Circuit  

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