Companies find a new way to fight fraudulent lawsuits

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A federal judge in Wheeling, W.Va., last month stiffened the punishment for two prominent Pittsburgh personal injury lawyers and a discredited radiologist who, a jury found last December, had promulgated fraudulent asbestos lawsuits against CSX Transportation, the freight railroad company that employs nearly 1,000 Pennsylvanians and more than another 31,000 Americans.

The federal Racketeer Influenced and Corrupt Organizations Act under which CSX brought its table-turning landmark lawsuit against the fraudsters allowed U.S. District Judge Frederick Stamp to triple the jury's original award for damages to nearly $1.3 million. Judge Stamp also may yet require former law partners Robert N. Peirce Jr. and Louis Raimond and creative X-ray reader Ray Harron to pay all or much of the $10 million CSX says it has spent on legal fees and court costs.

Meanwhile, smaller businesses and larger companies that are frequently targeted by meritless or fraudulent lawsuits have begun to look to CSX's aggressive RICO lawsuit as a new model for punishing those who audaciously perpetrate this kind of costly fraud on our courts.

I say "costly" because every dollar companies spend defending themselves against bogus lawsuits is a dollar they will not spend creating jobs and investing in new technologies and growth opportunities. In addition to inflating prices for goods and services, as litigation costs are inevitably passed on to consumers, such lawsuits also clog court dockets, waste precious, taxpayer-provided court resources and delay court cases for those who have suffered real injuries.

In a more perfect world, self-policing bar associations, state attorneys general and the federal Department of Justice would show greater interest in investigating and prosecuting litigation fraud. After all, government prosecutors rarely hesitate to investigate and sue politically unpopular companies or whole industries over lesser allegations of fraud.

Similarly, congressional investigators almost never miss a chance to round up the usual corporate suspects for the "perp walks" they politely call televised committee hearings. But with few laudable exceptions, these authorities largely seem to ignore fraud perpetrated by the lawsuit industry.

Logically then, many personal injury lawyers have come to believe there is minimal risk in promulgating fraudulent lawsuits. In fact, earlier this year, author and attorney Matthew L. Lifflander reported in a Wall Street Journal op-ed, "The Economic Truth About Lying," that his interviews over "several years" with "personal-injury trial lawyers about their actual experience with perjury or fraudulent documents in litigation" suggest that "[a]t least 25 percent of cases" may include elements of perjury or fraud. Some interviewees insisted the rate is closer to 50 percent.

"The immediate victims of the crime are other litigants, but the economic consequences of successful false testimony and other kinds of misrepresentation are [ultimately] passed on to the public directly," Mr. Lifflander added, before proposing some forward-looking reforms that include a statutory civil tort for litigants damaged by liars.

But all of his proposals would require action by politicians or judges. And since many of these policy makers depend on generous campaign contributions from personal injury lawyers, including those engaged in and benefiting from fraud, such proposals have limited prospects.

The RICO statute, however, is already on the books. Originally enacted in 1970 as a powerful tool for prosecutors to go after organized crime, it could become increasingly useful in the hands of courageous companies that are tired of being victimized by shakedown artists with law degrees.

In addition to CSX's successful case against Messrs. Peirce, Raimond and Herron, another long anticipated RICO trial got underway this week in New York, where a federal trial judge has thus far allowed Chevron to proceed with its claim that renowned plaintiffs' attorney Steven Donziger orchestrated a massive fraud in an earlier $19 billion environmental lawsuit against the energy giant in Ecuador.

Admittedly, two headline-grabbing RICO lawsuits by private-sector employers against personal injury lawyers, clients and witnesses accused of lying and cheating do not exactly constitute a robust new trend. And it's a sad commentary that fraud victims seeking justice have to turn to a statute designed to combat organized crime.

But if bar associations, government prosecutors and key policy makers who are beholden to plaintiffs' bar campaign contributions won't act to investigate and punish the obvious corruption and fraud in our civil courts, then companies with the means to do so must begin making examples of at least a few of the many perpetrators. Only when fraudsters face significant risk and multimillion-dollar consequences for their actions will their costly abuse of our civil justice system diminish.


Tiger Joyce is president of the American Tort Reform Association, based in Wash-ington, D.C. First Published October 16, 2013 8:00 PM


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