CSX claims racketeering in Pittsburgh law firm's legal tactics

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The quarry has turned on the hunter in a West Virginia courtroom, and now one of the nation's biggest transportation companies is locked in a bitter fight with one of Pittsburgh's most prominent trial law firms.

After years of feeling like they were being railroaded by asbestosis lawsuits, lawyers for CSX Transportation in 2005 sued Robert Peirce & Associates, accusing it of fraud and negligence in the massive cases it brought. The Jacksonville-based corporation lost a 2009 trial, but in court filings in recent weeks it detailed a new theory -- that the Peirce firm is a racketeering-influenced corrupt organization that has committed wire fraud and mail fraud in its pursuit of claimants and settlements.

Robert N. Peirce Jr. called CSX's theory "without legal merit" last week, and his firm fired back with a counterclaim that the transportation giant had withheld a key document.

Legal observers differed on whether CSX's unusual allegation was a stretch, likely to fizzle in court, or a potentially important development that could affect the health of the judicial system positively, or negatively.

The corporation is sending a bracing message to plaintiffs' lawyers, said Deborah R. Hensler, a professor of dispute resolution for Stanford Law School. "We're going to challenge you. We're going to make it more expensive for you. We're going to make it more risky for you."

Claims of corruption

CSX's lawsuit against the Peirce firm is rooted in the last days of the mass asbestos lawsuits, when plaintiffs' firms routinely rounded up hundreds or thousands of people who had been exposed to the cancer-causing flame retardant, and brought gargantuan claims against manufacturers and employers.

At the time, people didn't need to have lung cancer or mesothelioma -- a cancer almost always associated with asbestos -- to make a claim. Abnormalities on a lung x-ray and indications of exposure were enough to win a settlement. The resulting complex and high-volume litigation bankrupted scores of companies and threatened to swamp courts.

In 1999, West Virginia created an expedited system aimed at settling cases. At the same time, talk of either a government-administered claim system or a nationwide settlement of all claims drove plaintiff's lawyers to push vast numbers of cases into the system, said Ms. Hensler.

The Peirce firm, sometimes working with unions or railroad retirees, gathered thousands of current or former CSX workers from many states and filed a series of lawsuits in West Virginia court, the corporation's legal filings have said. But CSX sought to turn the tables after it found a case of misstated identity.

CSX alleged that in 1999, an employee named Danny Jayne went to an asbestosis screening set up by the Peirce firm or its affiliates. A doctor found abnormalities on his x-ray, and in 2002, the company agreed to settle his claim for $7,000.

Meanwhile, the company alleged, another CSX employee named Ricky May was screened and tested negative for asbestosis.

But at a subsequent screening in 2000, a contractor working for the Peirce firm helped arrange for Mr. Jayne to pretend to be Mr. May, CSX claimed. That resulting x-ray was used by the firm to justify a claim on behalf of Mr. May, which CSX settled for $8,000.

CSX said the law firm took advantage of an expedited court system that didn't allow for scrutiny of individual cases and pursued the cases with fraud and negligence. The Peirce firm didn't deny that Mr. May and Mr. Jayne had pulled a fast one, but argued that they had acted without the lawyers' knowledge or encouragement.

In August 2009, a federal jury in West Virginia found that the Peirce firm and its contractor weren't liable for fraud. That, however, didn't end the matter.

CSX has since pursued a broader theory, outlined in detail for the first time in a July 14 court filing: that the Peirce firm pursued "a calculated and deliberate strategy" of "unlawful conduct, including bribery, fraud, conspiracy and racketeering."

CSX said the firm used "intentionally unreliable mass screenings" by a radiologist who had a criminal history and a doctor who has been accused of tailoring diagnoses to fit lawsuits.

The company pointed to 11 cases in which Peirce-paid professionals found no signs of asbestosis in an employee, then later screened the employee again and found the disease. It settled just one of the cases, for $25,000.

CSX is going after the Peirce firm using the civil provisions of the 40-year-old Racketeering Influenced and Corrupt Organizations, or RICO, statute. RICO is a law more often used by law enforcement to prosecute organized crime.

The firm "repeatedly used or caused their agents to use the mails and wires," CSX said in a July 14 court filing, characterizing the communications as "mail fraud" and "wire fraud."

Neither CSX nor the Peirce firm would discuss details of the case, now before Senior District Judge Frederick P. Stamp Jr.

The Peirce firm fired back in court Thursday with a counterclaim saying that in one of the 11 cases, CSX deliberately withheld a document that would have revealed a prior asbestos settlement negotiated by another firm. Had CSX revealed that document, that claim would have been promptly dismissed, saving time and money, the Peirce firm argued.

Cause for concern?

Prominent advocates for both the plaintiffs' bar and defense bar said they could not think of another case in which a corporation that endured mass litigation retaliated by turning the RICO statute against its tormentor. They disagreed on the significance of the development.

"The requirements [to prove RICO] are significant and pretty hard to meet under most circumstances," said Christopher Placitella, a prominent litigator and writer on asbestosis law with the Philadelphia-based plaintiffs' firm Cohen Placitella & Roth. "You really have to have a unique set of facts" including a conspiracy, multiple criminal acts and a resulting loss of property.

As a result, other plaintiffs' firms aren't likely to be chilled by one RICO case, he said.

Attorney Mark Behrens of the Washington, D.C., defense firm Shook Hardy & Bacon, said that the CSX case is one of three instances in recent years in which a corporation took decisive action against a courtroom foe -- and in the other two, the corporations won. He viewed such moves as healthy developments.

A cigarette manufacturer that had included asbestos in filters persuaded a judge in Ohio to bar a California law firm from practicing in his Buckeye State court. A railroad tagged a Mississippi law firm with a fine for fraud. In both cases, the law firms were accused of filing asbestosis claims for people who had already settled similar cases with other companies, and failing to disclose the prior agreements.

"What these examples show is that there are some companies that want to be very aggressive in their litigation, and they're sending a powerful message to the plaintiff's lawyers: That if you want to sue us, you'd better be very careful and send legitimate claims, or we're going to make it costly for you."

Both Mr. Behrens and Mr. Placitella agreed that the legal landscape in asbestosis cases has changed in recent years. Most cases now involve claimants with full-blown cancer.

What if other corporations follow CSX's lead and wield the RICO statute against lawyers who sue them?

If such maneuvers discourage the filing of fraudulent claims, that could prove healthy, said Ms. Hensler.

Fraud "brings the whole plaintiff's bar into disrepute, and it makes it easier for corporate lobbyists to succeed in making political claims that the plaintiffs' bar is bad, that all plaintiffs' litigation is frivolous," she said.

But if the RICO law becomes a tool to scare off the plaintiffs' firms or punish them with endless and expensive court fights, "that would be a negative," she said. "I think this would be a reason for concern if it became some sort of strategic move."


Rich Lord: rlord@post-gazette.com or 412-263-1542.


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