UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY : : : : : : : : : : : : Plaintiffs, Defendants.

Transcription

1 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 1 of 85 PageID: 3392 UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY Kimberlee Williams, Nancy Pease, Marilyn L. Holley, Donna Ware, Donnette Wengerd and Rosanne Chernick, v. Plaintiffs, BASF CATALYSTS LLC, et al, Defendants. : : : : : : : : : : : : No (SRC) (MAS) PLAINTIFFS OMNIBUS RESPONSE TO DEFENDANTS MOTIONS TO DISMISS THE AMENDED COMPLAINT COHEN, PLACITELLA & ROTH, P.C. Christopher M. Placitella, Esq. Michael Coren. Esq. Matthew T. Stone, Esq. 127 Maple Ave Red Bank, New Jersey (732) FOX ROTHSCHILD, LLP. Jeffery M. Pollock, Esq. [email protected] 997 Lenox Drive, Building 3 Lawrenceville, NJ (609) Attorneys for Plaintiffs and the Proposed Class On the brief: Stewart L. Cohen, Esq. * Harry M. Roth, Esq. * (* Admitted Pro hac vice) DATED: November 30, 2011

2 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 2 of 85 PageID: 3393 Table of Contents I. Preface... 1 II. Statement of Facts... 4 III. Jurisdiction IV. Law and Argument A. Standard of Review B. The Amended Complaint alleges valid fraud and fraudulent concealment claims against all of the Defendants Plaintiffs fraudulent concealment claim is properly pled Defendants breached their duty to preserve evidence and to identify and produce the evidence they concealed or helped conceal Plaintiffs have alleged proximate cause Each named Plaintiff has alleged a prima facie case for fraud C. Defendants fraudulent conduct is not immunized by the litigation privilege The litigation privilege does not apply to illegitimate client representation The litigation privilege does not immunize fraud D. The Amended Complaint alleges valid common law conspiracy claims against each of the named Defendants The Amended Complaint pleads valid underlying tortious conduct Plaintiffs Amended Complaint asserts sufficient facts establishing that Defendants Dornbusch, Halket and Hemstock were part of the conspiracy Hemstock s role in the civil conspiracy has been adequately pled Halket s role in the civil conspiracy has been adequately pled Dornbusch s role in the civil conspiracy has been adequately pled Defendants motions to dismiss Plaintiffs civil conspiracy count must be denied as New Jersey law expressly authorizes a cause of action for civil conspiracy between an attorney and his client ii

3 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 3 of 85 PageID: Hemstock conspired with Cahill Defendants Halket and Hemstock s assertion that they are not liable for civil conspiracy because of withdrawal is contrary to both fact and law E. The Amended Complaint alleges valid and justiciable NJRICO claims against each of the named Defendants Plaintiffs have standing to bring a cause of action under NJRICO a. Business or Property b. Proximate Cause Equitable relief is available to private civil litigants Sufficiency of the pleadings a. Adequacy of pleadings as to NJRICO enterprise b. The individual Defendants NJRICO pleading arguments are meritless F. The Rooker-Feldman Doctrine is inapplicable to this case and does not divest this Court of jurisdiction G. Plaintiffs have sufficiently pled a claim under New York Judiciary Law H. Defendants miscellaneous arguments do not warrant dismissal as requested V. Conclusion iii

4 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 4 of 85 PageID: 3395 Cases Table of Authorities A. v. Nutter, 737 F. Supp. 2d 341 (E.D. Pa. 2010) Aetna Life & Cas. Co. v. Imet Mason Contractors, 309 N.J. Super. 358 (App. Div. 1998) Agacoili v. Gonzo, No , 2010 U.S. Dist. LEXIS (D.N.J. Feb. 18, 2010) Allah v. Ricci, No , 2011 U.S. Dist. LEXIS (D.N.J. Oct. 4, 2011) , 23 Allegheny Gen. Hosp. v. Philip Morris, Inc., 228 F.3d 429 (3d Cir. 2000) Amalfitano v. Rosenberg, 12 N.Y. 3d 8 (2009) Amato v. Amato, 180 N.J. Super. 210 (App. Div. 1981) Amer. Music Theater Festival, Inc. v. TD Bank, N.A., No , 2011 U.S. Dist. LEXIS (E.D. Pa. Feb. 18, 2011) Ashcroft v. Iqbal, 556 U.S. 662 (2010) Banco Popular N. Am. v. Gandi, 184 N.J. 161 (2005)... 31, 35, 40, 44 Beadling v. William Bowman Assoc., 355 N.J. Super. 70 (App. Div. 2002) Beck v. Prupis, 529 U.S. 494 (2000) Bell Atlantic Corp v. Twombly, 550 U.S. 544 (2007) Boyle v. United States, 129 S. Ct (2009) Brennan v. Palmieri, No , 2008 U.S. Dist. LEXIS (D.N.J. Dec. 12, 2008) Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008) Bumgarner v. Hart, Nos , , 2007 U.S. Dist. LEXIS (D.N.J. Jun. 7, 2007) Burger v. Brookhaven Med. Arts. Bldg., 516 N.Y.S. 2d 705 (N.Y. App. Div. 1987) Ciano v. Reers, 893 N.Y.S.2d 851 (Sup. Ct. Kings Cty. 2010)... 68, 69 iv

5 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 5 of 85 PageID: 3396 Clark v. Druckman, 218 W. Va. 427 (2005) Connolly v. Napoli Kaiser Bern & Assoc., LLP, No /05, 2009 N.Y. Misc. LEXIS 6302 (Sup. Ct. NY Cty. 2009) Cutler v. Dixon, 76 Eng. Rep. 886 (K.B. 1585) DeCarlo v. Ratner, 204 F.Supp. 2d 630 (S.D.N.Y. 2002) Disability Rights N.J., Inc. v. Velez, No , 2011 U.S. Dist. LEXIS (D.N.J. Jul. 19, 2011) Doherty v. Hertz Corp., No , 2010 U.S. Dist. LEXIS at *24 (D.N.J. Nov. 24, 2010) Eleuteri v. Eleuteri, No , 2011 U.S. Dist. LEXIS (D.N.J. Mar. 28, 2011) Exxon Mobil Corp. v. Saudi Basic Indus., Corp., 544 U.S. 280 (2005) 65, 66 Ford Motor Co. v. Edgewood Properties, Inc., Nos , , 2009 U.S. Dist. Lexis 4172 (D.N.J. Jan. 20, 2009)... 48, 60 Franklin Medical Assoc. v. Newark Pub. Schools, 362 N.J. Super. 494 (App. Div. 2003) General Stencils v. Chiappa, 272 N.Y.S. 2d 337 (N.Y. 1966) Gennari v. Weichert Co. Realtors, 148 N.J. 582 (1997) Great Western Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159 (3d Cir. 2010)... 65, 66 Green Leaf Nursery v. E.I. DuPont De Nemours & Co., 341 F.3d 1292 (11th Cir. 2003)... 37, 39 Herring v. United States, 424 F.3d 38 (3d Cir. 2005) Hirsch v. Gen. Motors Corp., 266 N.J. Super. 222 (Law Div. 1993) Hoar v. Wood, 44 Mass. (3 Met.) 193 (1841) Hodgson v. Scarlett, 117 Eng. Rep. 362 (C.P. 1817) Holtkamp v. Parklex Assoc., 926 N.Y.S. 2d 344 (Sup. Ct. Kings County 2011) In re E.I. du Pont de Nemours & Co., 918 F. Supp (M.D. Ga. 1995) v

6 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 6 of 85 PageID: 3397 In re: Knapper, 407 F.3d 573, 581 (3d Cir. 2005)..68 In re Madera, 586 F.3d 228, 232 (3d Cir. 2009).68 In re Sabertooth, LLC, 443 B.R. 671 (E.D.Pa. 2011) In re Spewack, 610 N.Y.S. 2d 243 (N.Y. App. Div. 1st Dep t 1994) Interchange State Bank v. Veglia, 286 N.J. Super. 164 (App. Div. 1995)... 54, 57 James v. Arms Tech., Inc., 359 N.J. Super. 291 (App. Div. 2003) Jerista v. Murray, 185 N.J. 175 (2005) Jones v. City of Chicago, 856 F.2d 985 (7th Cir. 1998)... 31, 40 Kaiser Found. Health Plan, Inc. v. Medquist, Inc., No , 2009 U.S. Dist. LEXIS (D.N.J. Apr. 8, 2009) Kawamata Farms v. United Agri. Prods, 86 Haw. 214 (1997) Kaye Scholer LLP v. CNA Holdings, Inc., No , 2010 U.S. Dist. LEXIS (S.D.N.Y. April 28, 2010) Kramer v. Midamco, Inc., No , 2009 U.S. Dist. LEXIS (N.D. Ohio, Oct. 20, 2009) Landwehr v. Landwehr, 111 N.J. 491 (1988) Living Designs, Inc. v. E.I. DuPont de Nemours & Co., 431 F.3d 353 (9th Cir 2005) Loigman v. Twp. Committee of Middleton, 185 N.J. 566 (2006)... 33, 39 Macke Laundry Serv. Ltd. P Ship v. Jetz Serv. Co., 931 S.W.2d 166 (Mo. Ct. App. 1996) Magnum v. Archdiocese of Phila., No , 2006 U.S. Dist. LEXIS (E.D. Pa. Nov. 17, 2006), affirmed, 253 Fed. App x 224 (3d Cir. Oct. 26, 2007)... 51, 53 Malley-Duff & Assoc., Inc. v. Crown Life Ins. Co., 792 F.2d 341 (3d Cir. 1986)... 49, 50, 52, 53 Maness v. Star-Kist Foods, Inc. 7 F.3d 704 (8th Cir. 1993) Marsellis-Warner Corp. v. Rabens, 51 F. Supp. 2d 508 (D.N.J. 1999) vi

7 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 7 of 85 PageID: 3398 Matsuura v. E.I. du Pont de Nemours & Co., 102 Haw. 149 (2003)... 37, 28 Moreira v. Peixoto, HNT-L , Unpub. Op. at 13 (Law. Div. Jun. 11, 2010) 35 Morgan v. Union County Bd. of Chosen Freeholders, 268 N.J. Super. 337 (App. Div. 1993), certif. denied, 135 N.J. 468 (1994)... 40, 48 Morganroth & Morganroth v. Norris, McLaughlin & Marcus, P.C., 331 F.3d 406 (3d Cir. 2003)... 31, 40, 44 Northeast Women s Center, Inc. v. McMonagle, 868 F.2d 1342 (3d Cir. 1989) NOW, Inc. v. Scheidler, 267 F.3d 687 (7th Cir. 2001), rev d on other grounds, 537 U.S. 393 (2003) Panko v. Flintkote Co., 7 N.J. 55 (1951) Perez v. Wyeth Lab. Inc., 161 N.J. 1 (1999)... 27, 57 Petrillo v. Bachenberg, 139 N.J. 472 (1995) Phillips v. County of Allegheny, 515 F.3d 224 (3d Cir. 2008) Prudential Ins. Co. of Am. v. U.S. Gypsum Co., 828 F.Supp 287 (D.N.J. 1993) Rainier s Dairies v. Raritan Valley Farms, Inc., 19 N.J 552 (1955) Raymark Indus., Inc. v. Stemple, No , 1990 U.S. Dist. LEXIS 6710 (D. Kan. May 30, 1990) Raymark Industries, Inc. v. Stemple, No , 1988 U.S. Dist. LEXIS (D. Kan. Dec. 21, 1988) Raymark Industries, Inc. v. Stemple, 714 F. Supp. 460 (D. Kan. 1988) Religious Tech. Center v. Wollersheim, 796 F.2d 1076 (9th Cir. 1986) Robertet Flavors, Inc. v. Tri-Form Const., Inc., 203 N.J. 252 (2010) Rolo v. City of Investing Co. Liquidating Trust, 155 F.3d 644 (3d Cir. 1998). 19, 21 Rose v. Bartle, 871 F.2d 331 (3d Cir. 1989) Rosenblit v. Zimmerman, 166 N.J. 391 (2001)... 21, 26 Rozier v. Ford Motor Co., 573 F.2d 1332 (5th Cir. 1978) Ruberton v. Gabage, 280 N.J. Super. 125 (App. Div. 1995) vii

8 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 8 of 85 PageID: 3399 Scarpone v. Dionisio, No , 2007 U.S. Dist. LEXIS (D.N.J. Mar. 20, 2007) Schertenleib v. Traum, 589 F.2d 1156 (2d Cir. 1978) Scott v. IBM Corp., 196 F.R.D. 233 (D.N.J. 2000) Simcuski v. Saeli, 44 N.Y. 2d 442 (NY Ct. App. 1978) Simms v. Seaman, 129 Conn. App. 651 (Conn. App. 2011) State v. Ball, 141 N.J. 142 (1995)... 60, 61, 62, 63 State v. Ball, 268 N.J. Super. 72 (App. Div. 1993)... 48, 49, 63 State v. Cagno, 409 N.J. Super. 552 (App. Div. 2009) State v. Farinella, 150 N.J. Super. 61 (App. Div. 1977) State v. Lavary, 152 N.J. Super. 413 (Law. Div. 1977) State v. Marshal, No T4, 2010 N.J. Super. Unpub. LEXIS 359 (App. Div. Feb. 23, 2010) Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, 171 F.3d 912 (3d Cir. 1999)... 20, 21 Struthers Patent Corp. v. Nestle Co., 558 F. Supp. 747 (D.N.J. 1981) Taliaferro v. Darby Township Zoning Board, 458 F.3d 181, 193 (3d Cir. 2006)...68 Tartaglia v. UBS Paine Webber, Inc., 197 N.J. 81 (2008) Taylor v. McNichols, 149 Idaho 826 (2010) Thompson v. Eva s Village & Sheltering Program, No , 2009 U.S. Dist. LEXIS (D.N.J. Oct. 28, 2009)... 35, 36 Thompson v. Paul, 657 F. Supp. 2d 1113 (D. Ariz. 2009) Treadaway v. Academy of Motion Picture Arts & Sciences, 783 F.2d 1418, 1421 (9th Cir. 1986).68 Unarco Material Handling, Inc. v. Liberato, 317 S.W.3d 227 (Tenn. App. 2010) United States v. Steel, 685 F.2d 793 (1982) viii

9 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 9 of 85 PageID: 3400 Vega v. Jones, Day, Reavis & Pogue, 121 Cal.App.4th 282 (Cal. Ct. App. 2004). 37 Virginia Sur. Co., Inc. v. Macedo, No , 2011 U.S. Dist. LEXIS (D.N.J. May 6, 2011) Viviano v. CBS, 251 N.J. Super. 113 (App. Div. 1991)... 23, 32 Wahlgren v. Bausch & Lomb Optical Co., 68 F.2d 660 (7th Cir. 1934), cert. denied, 292 U.S. 639 (1934) Warth v. Seldin, 422 U.S. 490 (1975) Statutes 12 U.S.C U.S.C , U.S.C N.J.S.A. 1: , 51 N.J.S.A. 2A: N.J.S.A. 2C: , 59, 60 N.J.S.A. 2C: N.Y. C.P.L.R. Law N.Y. C.P.L.R. Law N.Y. P'ship Law New York Judiciary Law passim Rules 3d Cir. R Fed. R. Civ. P. 9(b)... passim Fed. R. Civ. P. 12(b)... passim Fed. R. Civ. P. 41(a) Treatises 7 Am. Jur. 2d Attorneys at Law, ix

10 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 10 of 85 PageID: A C.J.S. Attorney & Client, Gorelick, Destruction of Evidence 3.11 (1989 & Supp. 1998) Restatement (Third) of the Law Governing Lawyers 56 (2000) Other Authorities Blakey, G. R., et al., Equitable Relief Under RICO: Reflections on Religious Technology v. Wollersheim: Will Civil RICO Be Effective Only Against White Collar Crime?, 62 Notre Dame L. Rev. 526, 545 (1987) Kakalik, J., et al., Costs of Asbestos Litigation, Rand Institute for Civil Justice, R 3042 ICJ (1983), available on line at - /pubs documentedbriefings/db397.html (Accessed Nov. 14, 2011)... 8 Model Rules of Prof l Conduct, R (2000) x

11 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 11 of 85 PageID: 3402 I. Preface This is a class action against BASF Catalysts, LLC (BASF), its in-house lawyers, its chief scientist and its outside legal counsel Cahill Gordon & Reindel, LLP (Cahill), who over 27 years conspired to defraud thousands of individuals out of their right to fairly litigate claims arising from injury or death caused by BASF s asbestos-containing talc products. The Defendants executed this fraud by concealing evidence that BASF s talc contained asbestos and substituting in its place false evidence that the talc was asbestos free and that no evidence existed to the contrary. Plaintiffs assert claims for common law fraud, fraudulent concealment (spoliation), and conspiracy and for violating the New Jersey Racketeering Influenced and Corrupt Organizations Act (NJRICO). They charge that BASF and Cahill conspired to eliminate the company s financial liability for asbestos injury claims arising from individuals exposure to BASF s talc. The predicate acts giving rise to these claims were the same for each and every class member: BASF and Cahill systematically collected, and then destroyed or concealed, all evidence that BASF s talc contained asbestos. They selectively sanitized BASF s files of test results and analyses that showed asbestos contamination in the talc so that the only documents remaining reported BASF s products as asbestos free. They withheld deposition testimony of BASF Research and Development (R&D) employees, including Defendant Dr. Glenn Hemstock

12 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 12 of 85 PageID: 3403 (Hemstock), a company vice president and its laboratory director, who admitted BASF s talc contained asbestos. In letters, discovery responses and court filings, including dispositive motions, BASF and Cahill having expunged the evidence that BASF s talc contained asbestos denied the existence of asbestos in the talc, and failed to identify and produce evidence that BASF s talc was contaminated with asbestos to plaintiffs lawyers and to courts. BASF and Cahill replaced that evidence with affidavits they knew to be false, materially incomplete, and misleading. The Defendants objective was to gut any plaintiff s ability to successfully sue BASF for asbestos injuries by eliminating and falsifying evidence regarding the critical threshold issue in each and every asbestos case: was asbestos present in a subject defendant s product? Until recently, BASF and Cahill s plan worked. Plaintiffs, class members and their counsel relied upon the certified, but false, record fabricated by BASF and Cahill and acted to their detriment, all the while ignorant of critical material information that had been suppressed by the Defendants. Due to BASF and Cahill s fraud, thousands of cases against BASF were dismissed, settled for a pittance or not brought in circumstances where counsel would have otherwise sued BASF. With this fraud now unearthed, Plaintiffs have come to this Court where BASF is located and the fraudulent 2

13 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 13 of 85 PageID: 3404 scheme took root. Plaintiffs seek relief from Defendants spoliation, fraud, violations of NJRICO, and other violations of state law. Defendants shrug off Plaintiffs claims as nothing more than quibbling over the completeness of discovery, or inaccurate discovery responses or documents lost over time. Cahill Br. at 1-2. Defendants description of their misconduct belies the truth. This case does not arise from some trivial discovery dispute or shortcoming. This lawsuit arises from the Defendants widespread fraud, destruction and suppression of evidence and a pattern and practice of lies. Defendants also mischaracterize the relief sought to seek dismissal of Plaintiffs claims. Specifically, they argue that Plaintiffs claims are non-justiciable because they compel the Court to dictate to other courts, including to state courts about issues of state law. This too is untrue. Plaintiffs do not seek to open any judgment in BASF s favor or otherwise direct the remedy or judgment of a single state court. Rather, the Amended Complaint invokes this Court s jurisdiction to obtain other just remedies for Defendants extraordinary fraud and deceit. This Court is invested with the power to provide the relief Plaintiffs seek: (1) compel BASF and Cahill to notify their victims and acknowledge their deceit; (2) disgorge the revenues and gains they earned by the fraud; (3) enjoin the Defendants from further lying about the absence of asbestos in BASF s talc; and, (4) enjoin 3

14 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 14 of 85 PageID: 3405 Defendants from asserting any defense arising out of the fraud which would prevent claimants from pursuing remedies in courts of their own choosing. II. Statement of Facts The fraud and misconduct giving rise to this case are shocking to be sure. But BASF has already admitted it lied and the Defendants misconduct has been recognized in pre-trial rulings by New Jersey Superior Court Judge Ann G. McCormick and retired Appellate Division President Judge Jack Lintner in the New Jersey mesothelioma case where the Defendants fraud was uncovered. Paduano v. Ace Scientific Supply Co., Inc., et al, C.A. No. MID-L (N.J. Super.) (Paduano). Donna Paduano brought suit against BASF and other companies after contracting mesothelioma, a metastatic disease caused by exposure to asbestos fiber. She was exposed to asbestos during visits to her father s work place and from dust he brought home on his work clothing at days end. Ms. Paduano s father, David Swanson, is a research chemist who had worked for a time for BASF at its Menlo Park, New Jersey laboratory. 1 In June of 2009, Mr. Swanson was deposed and testified about experiments he performed on BASF s talc, and that BASF talc contained asbestos. 1 There were a number of corporate entities in the chain leading from Engelhard to BASF which, for purposes of this brief, will all be called BASF. These entities include Eastern Magnesia and Englehard Minerals, Ltd. 4

15 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 15 of 85 PageID: 3406 None of BASF s laboratory data was produced in the Paduano case and Swanson s testimony revealed the reason why: He explained that sometime during the mid-1980 s BASF s General Counsel, Vice President and Corporate Secretary, Defendant Arthur Dornbusch (Dornbusch), acting through laboratory director Hemstock, collected all of the R&D employees data, analyses, reports and other documents relating to BASF s talc. The scientists were directed to put the material in boxes which were then collected and spirited away. The boxes and all of their incriminating contents were never seen again. Immediately after Swanson s testimony Ms. Paduano s counsel pursued discovery to learn more about the document purge Swanson had described. BASF replaced Cahill and its new counsel produced several thousand pages of previously concealed documents, including a memorandum from Hemstock to all R&D personnel dated March 7, See Amended Complaint (AC) Ex. 3. Hemstock s memo directed all R&D employees to review their personal files and withdraw for discard notebooks, duplicate copies of notebooks, technical services requests and responses, memoranda and reports that pertained to discontinued operations including Engelhard Minerals, Ltd and Emtal. Id. The documents BASF s new counsel produced also included pleadings and deposition transcripts from a mesothelioma death case filed against the company in Rhode Island Federal Court by the Estate of Thomas Westfall. Westfall v. 5

16 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 16 of 85 PageID: 3407 Whittacker, Clark & Daniels, et.al, Civ. A. No (Westfall). The Westfall documents proved beyond doubt Defendants knowledge that BASF s talc contained asbestos. The production included two volumes of Hemstock s deposition, dated January 28, 1983 and March 16, Defendants Howard G. Sloane (Sloane), a Cahill partner, and Thomas D. Halket (Halket), an in-house lawyer at BASF, participated in Hemstock s deposition. Under oath Hemstock admitted BASF s talc contained asbestos. Although he initially qualified the findings as trace amounts of asbestos, he was shown and authenticated reports from BASF s files of analyses of BASF talc and talc ore conducted by BASF and by independent laboratories that showed the talc contained asbestos in some cases of high or extremely high levels of asbestos fibers. Hemstock also authenticated test results of air sampling taken at BASF facilities which showed asbestos fibers captured in air filters. One of the reports from BASF, which apparently was destroyed by Defendants but was quoted in Hemstock s deposition, stated: The results showed that although there was variability in the number of fibers counted from week to week, there were, nevertheless, fibers present in every sample of Emtal 42 [talc] tested. All told there were 51 exhibits during Hemstock s deposition that were identified and became a part of the record. None was produced in Paduano, to date they still have never been produced. 2 2 Defendant Halket rhetorically and self-righteously asks whether [he] knew or 6

17 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 17 of 85 PageID: 3408 Emil Triglia, one of Hemstock s R&D Department subordinates, also testified in the Westfall case. He testified that testing of BASF talc was conducted by its in-house laboratory, Georgia Institute of Technology and the McCrone Institute, and the results were positive for asbestos fiber. 3 Defendants responses to the Westfall discovery are described in the Amended Complaint which details how BASF and Cahill chose to defend BASF s treasury at the cost of their integrity. In summary, Sloane and Halket shared their fears about the damaging evidence and its impact on BASF s liability in future asbestos cases with Dornbusch. At that time Defendants knew Westfall was the tip of the asbestos litigation iceberg and a threat which if not contained would cripple BASF. BASF s lawyers and R&D vice-president (Hemstock) all knew asbestos was a carcinogen with a long latency period. They knew BASF talc was present in numerous products sold to unsuspecting users throughout the nation. By 1983, they had reason to know that Engelhard products contained asbestos. Halket Br. at 25. As Halket was present throughout Hemstock s deposition in the Westfall case and heard him testify BASF s talc contained asbestos, the answer to that preliminary question must be a resounding Yes, Halket knew. 3 Appendix I to the Brief is a list and summary of 13 documents authenticated by Hemstock and Triglia. These include internal memoranda describing tests conducted by BASF, reports from outside laboratories, and correspondence from BASF s insurer. Each report the presence of asbestos in the talc and talc ore and asbestos fibers found in filters used during air sampling at BASF s facilities. None of these documents were produced to plaintiffs counsel or courts in actions brought against BASF between the settlement of Westfall and the spoliation discovery in Paduano. 7

18 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 18 of 85 PageID: 3409 knew the scope and exposure of asbestos injury litigation. They also knew insurers were fighting their obligations to provide coverage for asbestos claims, further exposing manufacturers to grievous financial responsibilities. 4 Rather than squarely facing claims and litigating them on the merits, BASF and Cahill, through lies, built a wall around BASF s treasury. AC , 133. BASF and Cahill lawyers, with Hemstock and BASF s Board of Directors, devised and/or authorized a strategy to defend the company against this liability. The Westfall case was settled. As part of that settlement, BASF exacted the return of all materials regarding asbestos in BASF talc and bound the Westfall family and their lawyer to a secrecy agreement. Thereafter, as revealed in Paduano, the Defendants methodically eliminated this evidence because in the hands of other plaintiffs counsel this proof would have created significant financial exposure for BASF in asbestos cases for decades to come. At the same time they destroyed and concealed this proof, Defendants selectively kept reports and evidence that BASF s talc was asbestos free so they could produce a misleading picture of safety to persuade plaintiffs lawyers to drop claims against BASF, or use them in discovery responses and dispositive motions. That misleading portrait was painted with two 4 See generally, Kakalik, J., et al., Costs of Asbestos Litigation, Rand Institute for Civil Justice, R 3042 ICJ (1983), available on line at (Accessed Nov. 30, 2011). 8

19 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 19 of 85 PageID: 3410 material misrepresentations: (1) the only testing of BASF talc revealed it to be asbestos free; and (2) there was no contrary evidence that the talc contained any asbestos. After the Westfall case was settled, the Defendants implemented their scheme through a variety of subterfuges. With the R&D files purged of all data and documents except those reports that BASF s talc was asbestos free, Cahill provided plaintiffs counsel around the country with an expert affidavit by William H. Ashton (Ashton Affidavit), a retired chemist who purportedly had been involved in studying the talc industry and talc technology for 35 years. AC 146a. The Ashton Affidavit only references reports, analyses and depositions that support his assertion that BASF s Johnson Mine talc was asbestos free. Id. BASF and Cahill also crafted a series of affidavits by Charles D. Carter (Carter), a senior BASF employee, designed to shut the door on any further sampling of its talc. Carter averred that the Johnson Mine, which was operated by BASF from 1967 to 1983, had become flooded with water making it impossible to obtain samples. AC Exs He stated that BASF was not in possession of any samples of talc produced by the mine. AC Ex. 7. Carter s third affidavit also closed the loop on testing data by attesting that BASF did not possess any samples from the Johnson Mine or any testing data other than the data provided or referenced in the Ashton Affidavit. AC Ex. 8. 9

20 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 20 of 85 PageID: 3411 BASF in the Paduano case conceded that these affidavits were false, both because of what the Ashton Affidavit omits and what the Carter affidavits misstate. The Ashton Affidavit says nothing about the testing completed during the time that BASF operated the Johnson Mine (1967 to 1983); none of the testing he cites occurred after Neither the Ashton nor Carter affidavits mention that Hemstock and Triglia had admitted BASF talc contained asbestos in Westfall nor allude to the asbestos positive reports Hemstock and Triglia had authenticated. The Amended Complaint further details how BASF and Cahill systematically used this misinformation to influence plaintiffs and their lawyers to dismiss their cases against BASF. By way of example, Exhibits 11 through 15 to the Amended Complaint are a series of letters between Cahill and a Pennsylvania lawyer who represented 28 former tire workers with asbestos claims pending in federal court, as well as others in state court. Cahill s letters urged that lawyer to voluntarily dismiss BASF from those cases. Exhibit 11 illustrates how the Ashton Affidavit and first Carter affidavit were employed to demonstrate, according to Defendant Dembrow s statement, that no asbestos was present in BASF s talc and to urge that Engelhard be dismissed from the case. (Emphasis in original). In Exhibit 12 Cahill s lawyer sent the plaintiffs counsel Carter s second affidavit. Building upon the represented absence of any talc samples for independent analysis, Dembrow again references the Ashton Affidavit to urge the 10

21 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 21 of 85 PageID: 3412 lawyer to voluntarily dismiss BASF from the pending tire worker cases. Exhibit 14 is Cahill s tendering Carter s third affidavit where he swears BASF does not have any testing data other than that referred to in the Ashton Affidavit. Based on BASF and Cahill s representations, the Pennsylvania lawyer dismissed the cases. AC , Ex. 17. BASF and Cahill then used these dismissals to bolster their phony record that BASF s talc was asbestos free. Exhibit 17 is a letter dated October 2, 1989, written by local counsel for BASF, with a copy to Dembrow, to a plaintiffs lawyer in consolidated asbestos injury claims pending in Wichita, Kansas. The false statements that BASF s talc did not contain asbestos were repeated and supplemented with the correspondence between Cahill and the Pennsylvania tire workers counsel that led to his dismissal of cases as proof of the reliability of this false record. Although Defendants argue now that Plaintiffs cannot prove any reliance on their false conduct, BASF and Cahill took the precise opposite position when convincing plaintiffs lawyers to dismiss BASF from their cases. As BASF s lawyers wrote to the Kansas lawyer: Finally, I enclose the order of dismissal of defendants Englehard [sic] Corporation and Eastern Magnesia Talc Company entered September 8, 1989 for the tireworkers asbestos litigation pending in the United States District Court for the Eastern District of Pennsylvania. The dismissal was based on the information which I have enclosed in this letter. AC Ex. 17 (emphasis added). 11

22 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 22 of 85 PageID: 3413 Defendants scheme worked. Each dismissal was added to a tally that Defendants used to keep score internally, and as evidence to convince other plaintiffs lawyers of the validity of the bogus defense. BASF s national counsel gave its score card to local counsel to use as a basis to convince litigants to give up their rights. Defense counsel seeking BASF s dismissal in 2008 reported the tally in one letter to a plaintiffs lawyer: AC 227, Ex. 36. Arkansas: 4 plaintiffs voluntarily dismissed their cases Kansas: 191 plaintiffs voluntarily dismissed their cases Michigan: 40 plaintiffs voluntarily dismissed their cases Mississippi 31 plaintiffs voluntarily dismissed their cases Pennsylvania over 300 plaintiffs voluntarily dismissed their cases Florida: (then the most recent) 1 plaintiff s case was dismissed. When plaintiffs refused to voluntarily dismiss their cases, BASF and Cahill then simply carried their fraud on through the litigation process. Exhibits 18, 21, 22, 32 and 37 to the Amended Complaint are BASF s answers to interrogatories filed in cases by or at the direction of Cahill lawyers. In each, BASF and Cahill answered falsely and omitted material information they knew to exist by uniformly repeating the following lies: BASF talc did not contain asbestos fiber BASF never engaged in the mining, manufacturing, selling or distribution of asbestos-containing products 12

23 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 23 of 85 PageID: 3414 Talc ore mined at BASF s Johnson, Vermont mine did not contain asbestos No testing of BASF talc ore from the Johnson Mine was done that revealed the presence of asbestos The only testing done of BASF talc or talc ore from the Johnson, Vermont mine proved that it was asbestos free No employee or former employee of BASF ever testified in a claim arising from asbestos injury or asbestos exposure The Amended Complaint, through Plaintiff Wengerd s deceased mother s case, illustrates how BASF and Cahill lied to courts when a plaintiff did not voluntarily dismiss their claims. After BASF and Cahill served BASF s misleading discovery responses in this case and sent her lawyer a letter asking that she voluntarily dismiss the case, Ms. Wengerd refused. Cahill and BASF then filed a Motion for Summary Judgment. AC 31. Plaintiff Wengerd (who succeeded to the case) opposed the motion with evidence of her late mother s exposure to EMTAL talc. BASF then filed a reply brief stating that it had offered numerous materials in response to plaintiff s discovery request that indicate that the talc mind by EMT was asbestos-free. AC Ex. 38. BASF s motion ultimately was granted. AC Of course, none of the letters written to plaintiffs lawyers, discovery responses produced or dispositive motions filed made any mention of the Hemstock and Triglia admissions that BASF talc contained asbestos. None made 13

24 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 24 of 85 PageID: 3415 reference to the reports prepared by BASF s laboratory or outside laboratories that showed BASF s talc contained asbestos or that the asbestos fibers from its products would become airborne. Through this deceit Defendants successfully induced plaintiffs, their lawyers and courts to rely on what BASF and Cahill knew to be inaccurate and incomplete information. BASF and Cahill might have gotten away with this too, had not the daughter of one of BASF s chemists contracted mesothelioma. BASF s admission of its fraud occurred on May 25, Then, with the Paduano investigation in full swing, BASF designated Ms. Ellen Poole as its designated representative on its historical knowledge of the risks of asbestos. During her testimony Ms. Poole acknowledged a number of documents, reports and test results that demonstrated BASF s knowledge of the hazards of asbestos exposure dating back to at least AC ; Appendix II at She admitted BASF knew that its talc contained asbestos and conceded that, despite this knowledge, BASF falsely asserted to claimants and courts that it never sold asbestos-containing products and/or that its knowledge about the dangers of asbestos were irrelevant because it never sold asbestos-containing products. Appendix II at Ms. Poole also admitted BASF had tests that contradicted 5 Appendix II contains those pages of Poole s deposition attached as Exhibits 41and 42 to the Amended Complaint and additional deposition pages not included in Exhibits 41 and

25 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 25 of 85 PageID: 3416 its repeated assertion that there were tests that showed there was no [asbestos] contamination, id , that the Ashton Affidavit s statement that EMTAL contained no asbestos was false, id. at , and that the Ashton Affidavit was incomplete and inaccurate in failing to include the asbestos-positive tests that Hemstock and Triglia acknowledged under oath. Id. at 210. BASF s misconduct was brought to the attention of Judge McCormick in connection with motions to amend the pleadings and discovery motions filed in Paduano and three companion asbestos cases. Judge McCormick concluded that Ms. Paduano had established prima facie evidence that BASF and its counsel had fraudulently concealed material evidence of asbestos content in BASF s talc which resulted in the dismissal of many cases. She therefore permitted Ms. Paduano to amend her complaint to assert a claim against BASF for fraudulent concealment. Judge McCormick also appointed Judge Lintner to serve as special discovery master to review and make a recommendation on BASF s withheld documents it claimed were privileged from discovery. Following briefing and an in camera review of the withheld documents, Judge Lintner issued a report to BASF ex parte containing his determination that the crime-fraud exception applied to certain withheld documents. AC Paduano and the three companion cases against BASF promptly then settled. Under terms of the settlement Paduano s lawyer was allowed to review Judge Lintner s report and take notes, but the lawyer 15

26 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 26 of 85 PageID: 3417 was not permitted a copy; only BASF received the report. Judge Lintner was to hold his report and BASF s documents in escrow for seven years. AC 248. Defendants attempt to minimize the grievous nature of their conduct, excuse their deceit by questioning the ethics of tire worker lawyers 6 and claim that their conduct did no harm, fails in the face of this reality they cannot escape what BASF has already admitted, what two judges have concluded, and what the Amended Complaint properly alleged: BASF and Cahill used lies as a defense to asbestos injury claims. Even after the Fraudulent Asbestos Defense Scheme was uncovered in Paduano, the scheme continued to cause harm to other asbestos victims. In late December, 2010, BASF and its lawyers took advantage of Plaintiff Chernick for a second time. Years earlier, based on BASF s false discovery answers that its products were asbestos free, Chernick s lawyers agreed to dismiss BASF from her 6 Cahill tries to tar Plaintiffs by connecting them to the National Tire Workers Litigation Project (NTWLP). None of them, however, was associated with that project. The only connection here to the NTWLP is that five Plaintiffs were represented by Bevan & Economus, one of several local law firms retained by the national firms conducting the NTWLP to file claims for the project's clients. Cahill's narrative omits the fact the district court presiding over litigation arising out of the NTWLP quickly exonerated all of the project s local counsel, including the Bevan firm. Raymark Industries, Inc. v. Stemple, 714 F. Supp. 460, 474 (D. Kan. 1988) ( The court has serious doubts as to any possible liability on the part of the local counsel against whom no intentional wrongdoing has been alleged. ); Raymark Industries, Inc. v. Stemple, No , 1988 U.S. Dist. LEXIS (D. Kan. Dec. 21, 1988) (dismissing Raymark s claims against NTWLP s local counsel). 16

27 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 27 of 85 PageID: 3418 case. As described in the Amended Complaint, however, that order had not been timely submitted to the court and so BASF s lawyer obtained a second consent order. In doing so, neither BASF nor its counsel told Chernick s lawyer about the revelations since uncovered in Paduano, nor that the discovery she and her lawyers initially relied upon was false. Consequently her lawyers signed the consent and on January 18, 2011, BASF s local counsel filed the fraudulently obtained consent summary judgment order with the Supreme Court of New York City. The consent order was thereafter entered by the court on February 3, AC In summary, the Amended Complaint details a scheme to deceive and defraud litigants; to deprive them of fairly adjudicating their claims, which is their property right. The same two lawyers who attended Hemstock s deposition along with Hemstock and co-defendants BASF, Dornbusch, Cahill and Cahill lawyers Ira J. Dembrow and Scott A. Martin, claim that their false statements were not only immaterial in affecting the rights of their victims, but also that their fraud was permitted or at least is not actionable because they were made in the context of litigation. In the following pages, Plaintiffs demonstrate that the Defendants are wrong; the Court has jurisdiction and authority to remedy Defendants misconduct, whether under the claims arising under NJRICO, under New York Judiciary Law 487, and/or by virtue of its inherent broad equitable powers to address common law fraud. The Defendants misconduct was a calculated deception intended to 17

28 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 28 of 85 PageID: 3419 deprive asbestos victims and their families of their day in court and strikes at the heart of the integrity of the civil justice system. Plaintiffs ask that this Court allow this case to proceed and hold Defendants accountable for their misdeeds. III. Jurisdiction This Court has diversity jurisdiction pursuant to 28 U.S.C. 1332(a), as well as jurisdiction under the Class Action Fairness Act of U.S.C. 1332(d)(2)(A). Plaintiffs invoke this Court s jurisdiction to obtain remedies for the Defendants extraordinary fraud and fraudulent concealment of material evidence. Among the relief sought, Plaintiffs ask the Court to compel BASF and Cahill to notify their victims and acknowledge their deceit, disgorge the revenues and gains they earned by the fraud, enjoin the Defendants from further lying about the absence of asbestos in BASF s talc, and enjoin Defendants from asserting any defense gained or arising out of the fraud which would prevent claimants, should they elect, from pursuing remedies on their own behalf in a court they choose. To be clear, the Amended Complaint does not, as Defendants claim, seek the opening of any judgment entered in this or any federal or state court. The notions of federalism, constitutional law and jurisdiction raised by the Defendants to escape this Court s scrutiny are not implicated in this case, and their argument to the contrary, namely that this Court lacks jurisdiction under the Rooker-Feldman doctrine, should be rejected for the reasons outlined below. 18

29 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 29 of 85 PageID: 3420 IV. Law and Argument A. Standard of Review Plaintiffs claims should be allowed to proceed, unless, accepting all allegations in the Plaintiffs complaint as true, viewing them in a light most favorable to the pleaders, and drawing all reasonable inferences that can be drawn in a light most favorable to the Plaintiffs, the Court determines that no reasonable reading of the complaint would entitle the Plaintiffs to relief. See Warth v. Seldin, 422 U.S. 490, 501 (1975); Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008). In assessing whether plaintiffs have alleged a plausible basis for their claims, the court focuses on the complaint as pled, not as a defendant characterizes it. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Ashcroft v. Iqbal, 556 U.S. 662 (2010) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007)). As fraud is being asserted Rule 9(b) s heighted particularity pleading requirement applies. Fed. R. Civ. P. 9(b). The heightened requirement is satisfied where the allegations provide notice of the precise misconduct with which defendants are charged in order to give them an opportunity to respond meaningfully to the complaint, and to prevent false or unsubstantiated charges. Rolo v. City of Investing Co. Liquidating Trust, 155 F.3d 644, 658 (3d Cir. 1998). 19

30 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 30 of 85 PageID: 3421 Rule 9 additionally provides that [m]alice, intent, knowledge, and other conditions of a person's mind may be alleged generally. Fed. R. Civ. P. 9(b). In cases of corporate fraud where the information lies solely in the possession of the defendants and/or entails transactions that are numerous and take place over an extended period of time, less specificity in pleading fraud is required. Kaiser Found. Health Plan, Inc. v. Medquist, Inc., No , 2009 U.S. Dist. LEXIS 29124, at *17-18 (D.N.J. April 8, 2009). Moreover, where the fraud entails spoliation, courts apply Rule 9(b) with flexibility and do not require plaintiffs to plead facts that may have been concealed by the defendants. Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, 171 F.3d 912, 934 n. 17 (3d Cir. 1999). B. The Amended Complaint alleges valid fraud and fraudulent concealment claims against all of the Defendants The Amended Complaint meets the above pleading standards and details the Defendants fraudulent asbestos defense scheme. It identifies the participants, the victims, and the times involved in the fraud. It states Defendants motives and scienter. The pleading details the methods and means Defendants employed to implement their fraudulent scheme successfully over 27 years, and attaches documents supporting specific instances of the fraud over the years, including the events and documents relating specifically to the named Plaintiffs. The Amended Complaint meets even the most rigorous pleading requirements. 20

31 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 31 of 85 PageID: Plaintiffs fraudulent concealment claim is properly pled New Jersey recognizes claims for fraudulent concealment because [s]uch conduct cannot go undeterred and unpunished and those aggrieved by it should be made whole with compensatory damages and, if the elements of the Punitive Damages Act, N.J.S.A. [ ] 2A: , are met, punitive damages for intentional wrongdoing. Rosenblit v. Zimmerman, 166 N.J. 391, 407 (2001). Unless such an action is allowed, a belatedly discovered spoliation claim would be without a meaningful remedy. Id. at 408. In such cases, courts should apply [Rule 9(b)] with some flexibility and should not require plaintiffs to plead issues that may have been concealed by the defendants. Steamfitters Local, 171 F.3d at 934 n. 17 (quoting Rolo, 155 F.3d at 659). To establish a claim for fraud or fraudulent concealment, a plaintiff must plead that: (1) defendant had a legal obligation to disclose evidence in connection with an existing or pending litigation; (2) the evidence was material; (3) plaintiff could not reasonably have obtained access to the evidence from another source; (4) defendant intentionally withheld, altered or destroyed the evidence with purpose to disrupt the litigation; and, (5) plaintiff was damaged in the underlying action by having to rely on an evidentiary record that did not contain the evidence defendant concealed. Rosenblit, 166 N.J. at Because spoliation can occur in many ways and at differing litigation stages (e.g., before or during), and impacts parties 21

32 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 32 of 85 PageID: 3423 differently, courts do not rigidly apply these elements. Rather they are viewed liberally through the lens of the presented spoliation circumstances. Robertet Flavors, Inc. v. Tri-Form Const., Inc., 203 N.J. 252 (2010); Tartaglia v. UBS Paine Webber, Inc., 197 N.J. 81, 118 (2008); Jerista v. Murray, 185 N.J. 175 (2005); Allah v. Ricci, No , 2011 U.S. Dist. LEXIS , at *9 (D.N.J. Oct. 4, 2011). Plaintiffs allegations against Defendants satisfy these elements. The allegations fully set out Defendants destruction and concealment of material asbestos evidence after realizing in the Westfall case the potential this evidence had to establish BASF s civil liability to asbestos claimants for years to come. The pleading describes Defendants knowledge and concern about likely future asbestos litigation and its impact on BASF s profits. It relates how Plaintiffs and class members were repeatedly misinformed that BASF s talc did not contain any asbestos and there was not any evidence it did. It describes why, coming as representations in sworn affidavits, verified discovery responses and correspondence from lawyers presumed to adhere to rules of professional conduct, Plaintiffs counsel relied on those statements. It also relates how, without that evidence, Plaintiffs had no way of establishing the presence of asbestos in BASF s talc in response to Defendants representations and discovery answers and as a result dismissed or settled their claims for token amounts. AC

33 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 33 of 85 PageID: 3424 Assuming these facts to be true and accepting all reasonable inferences that can be drawn, the pleading sufficiently asserts a claim of fraudulent concealment against all Defendants. 2. Defendants breached their duty to preserve evidence and to identify and produce the evidence they concealed or helped conceal Defendants deny any duty to preserve the documents at issue in this case. 7 A party s duty to preserve evidence is a question of law to be determined by the Court. Aetna Life & Cas. Co. v. Imet Mason Contractors, 309 N.J. Super. 358, 365 (App. Div. 1998). While a litigant is under no duty [to] keep or retain every document in its possession, even in advance of litigation, it is under a duty to preserve what it knows, or reasonably should know, will likely be requested in reasonably foreseeable litigation. Scott v. IBM Corp., 196 F.R.D. 233, 249 (D.N.J. 2000) (emphasis added) (citing Gorelick, Destruction of Evidence 3.11 (1989 & Supp. 1998)); Disability Rights N.J., Inc. v. Velez, No , 2011 U.S. Dist. LEXIS 78333, at *17 n.3 (D.N.J. Jul. 19, 2011) (duty arises when a party reasonably should know that the evidence may be relevant to anticipated litigation ) (internal citations omitted); Allah v. Ricci, 2011 U.S. Dist. LEXIS 7 Cahill also suggests that Plaintiffs claim is also barred because such conduct is covered by the litigation privilege. Cahill Br. at 40, n.33 (quoting Green Leaf Nursery v. E.I. DuPont Nemours & Co., 341 F.3d 1292 (11th Cir. 2003)). New Jersey courts however have rejected the application of the litigation privilege to spoliation conduct. Viviano v. CBS, 251 N.J. Super. 113, 127 (App. Div. 1991). 23

34 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 34 of 85 PageID: at *9; see also Aetna Life, 309 N.J. Super. at 366 (foreseeable that the opposing party would be prejudiced by the destruction or disposal of this evidence gives rise to a duty to preserve). Cahill s contention that foreseeability is legally irrelevant is wrong. 8 To the contrary, [t]he duty to preserve evidence arises when a party reasonably believes that litigation is foreseeable and, as such, may arise many years before litigation commences. Allah v. Ricci, supra at *9. Even if it were accepted that Defendants did not have a duty to preserve evidence, certainly during litigation they had a duty to respond truthfully to discovery requests by identifying and producing the evidence that they had not destroyed. AC Defendants essentially ask the Court to take their word that notwithstanding the allegations, the evidence will really show that at the time they made the decision to destroy and conceal the documents no defendant could have reasonably anticipated litigation. Cahill Br. at 44. The Amended Complaint alleges all Defendants in 1984 had ample information, knowledge and concern that BASF would be involved in asbestos litigation given the amount and nationwide 8 Cahill suggests that its duty to preserve must be determined by the standards prevailing at the time of the alleged spoliation. Cahill Br. at 41. Plaintiffs counsel did not find, and Cahill does not cite, a single case suggesting that the standard for determining the existence of a duty is anything other than foreseeability. Cahill concedes that the only New Jersey spoliation case it cites close to the date of the spoliation establishes a foreseeability standard. Cahill Br. at n. 37 (citing Struthers Patent Corp. v. Nestle Co., 558 F. Supp. 747, 758 (D.N.J. 1981) (stating New Jersey s foreseeability approach to duty)). 24

35 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 35 of 85 PageID: 3426 breath of its talc sales to many industries. AC Defendants argument is completely undermined by their decision to selectively keep only that evidence that, without the rest, exonerated BASF. In light of these alleged facts, the resolution of whether further asbestos litigation was known or foreseeable is a question of fact not amenable to resolution on Defendants Rule 12 motions. 3. Plaintiffs have alleged proximate cause The Defendants scheme worked. Injured victims and courts targeted by the fraud relied on their false statements about the asbestos content in BASF s talc and the absence of any contrary evidence. BASF and the other Defendants cannot credibly contend that plaintiffs cannot plead proximate cause because the injuries pled by plaintiffs are too indirect, remote, and many steps away from the alleged cause. BASF Br. at (citing Allegheny Gen. Hosp. v. Philip Morris, Inc., 228 F.3d 429, 445 (3d Cir. 2000)). The Amended Complaint details: (1) the Plaintiffs reliance on the Defendants fraudulent statements given to their attorneys, including BASF s false and misleading discovery responses; (2) BASF and Cahill s use of the reliance on the false statements to induce even more targeted plaintiffs to forego their lawful day in court and voluntarily dismiss their claims; and, (3) the relationship between (a) the Defendants suppressing evidence, and (b) the injuries suffered. AC 12, 19, 22, 25, 28, 31, 34, 181 et seq.,196 et seq. 25

36 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 36 of 85 PageID: 3427 BASF contends that Plaintiffs simply cannot prove that possessing additional information would have changed the results of thousands of asbestos cases nationwide, BASF Br. at 18, or similarly, that because asbestos plaintiffs may face causation impediments, the Defendants are entitled to a presumption that Plaintiffs will be unable to prove causation if this case were to proceed to trial. The evidence at issue here goes directly to the merit of the Plaintiffs claims: did the Defendant s product contain asbestos? It thus defies logic and experience to conclude that asbestos-positive test results and the admissions of BASF s scientists that the talc contained asbestos would have had no impact on the Plaintiffs litigation decisions. Certainly, the selective and false information the Defendants provided that BASF talc was asbestos free impacted Plaintiffs cases. Whether the Plaintiffs have sufficiently alleged a claim for fraud to proceed is presently before the Court in this motion; whether this action will ultimately be certified as part of a class is not. In spoliation cases, New Jersey and other jurisdictions have long followed the principle omnia praesumuntur contra spoliatorem, meaning all things are presumed against the destroyer. Rosenblit, 166 N.J. at 401. Thus with regard to causation, a plaintiff enjoys a relaxed burden, needing only [to] prove that there was a reasonable probability that she would have recovered compensation but for defendant[ s]... conduct. Hirsch v. Gen. Motors Corp., 266 N.J. Super. 222,

37 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 37 of 85 PageID: 3428 (Law Div. 1993). Furthermore, to sustain a fraudulent concealment claim, a complaint need only plead sufficient factual allegations showing that the defendant s conduct was at least a substantial contributing cause of the plaintiffs injuries. See Perez v. Wyeth Lab. Inc., 161 N.J. 1, (1999). The plaintiff is not held to a burden of excluding all other possible factors or causes that could have prevented a successful suit. Indeed, [a] proximate cause need not be the sole cause of harm. It suffices if it is a substantial contributing factor to the harm suffered. Id. Moreover, under New Jersey law [t]he test is not whether the irregular matter actually influenced the result, but whether it had the capacity of doing so. The stringency of this rule is grounded upon the necessity of keeping the administration of justice pure and free from all suspicion of corrupting practices. Panko v. Flintkote Co., 7 N.J. 55, (1951) (discussing causation in instance of juror misconduct). Any suggestion that Defendants conduct did not proximately cause Plaintiffs injuries therefore should be summarily rejected. Besides ignoring the Amended Complaint s contrary allegations, AC 19, 22, 25, 28, 31, 34, BASF s argument blinks at reality. Defendants are not entitled to a presumption that Plaintiffs will be unable to prove causation if this case were to proceed to trial. Indeed any presumption on causation as a matter of law lies in Plaintiffs favor. 27

38 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 38 of 85 PageID: Each named Plaintiff has alleged a prima facie case for fraud Common law fraud consists of four elements: (1) a material misrepresentation of a presently existing or past fact; (2) knowledge or belief on the part of the defendant of its falsity; (3) an intention that the other party relies on it; (4) reasonable reliance on the material misrepresentation by the other party; and (5) resulting damages. Gennari v. Weichert Co. Realtors, 148 N.J. 582 (1997). All five elements are well pled in the Amended Complaint. Commencing with paragraph 196, the Amended Complaint details how Defendants defrauded thousands of asbestos claimants throughout the 1990s and the 2000s, including five of the six named Plaintiffs. In short, Cahill, on behalf of BASF, sent letter upon letter to the Bevan firm insisting that BASF s products were asbestos free, there was no evidence they contained asbestos, and that plaintiffs should accordingly drop their claims. AC Exs. 19, 26, 27, 28, 29, 30, and 31. In addition, BASF s filed sworn answers to discovery requests falsely repeated BASF and Cahill s two stock lies about EMTAL Talc. Plaintiffs state that as a result of the Defendants misrepresentations and material omissions to the Bevan firm, and others, they or their decedent were misled; that each detrimentally changed his or her position in response and voluntarily dismissed BASF for either no or token consideration (or in Wengerd s mother s case was obstructed in 28

39 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 39 of 85 PageID: 3430 proving her case and suffered summary judgment); and that each was proximately harmed. Id. While each Defendant argues that the named Plaintiffs common law fraud pleading is generally deficient, Cahill Plaintiff specific defects. Cahill first argues that Plaintiffs Pease, Holley and Ware cannot identify a misrepresentation made to them. Cahill is wrong. These Plaintiffs brought personal injury actions against BASF s predecessor, Eastern Magnesia, in connection with the death of family members who were exposed to EMTAL asbestos products. AC Upon Eastern Magnesia s (BASF) representation to counsel for these three Plaintiffs that EMTAL talc was asbestos free and no contrary evidence existed, each voluntarily dismissed their claims against BASF for token sums. AC 22, 25 and 28. With respect to all three, the Amended Complaint states: Had Plaintiff s counsel and Plaintiff known about the existence of the spoliation described more particularly herein and/or the existence of evidence that BASF s talc and talc products contained asbestos, the settlement demand would have been higher and/or Plaintiff would have taken her case to trial. Id. These allegations satisfy these three Plaintiffs pleading obligations. Next, Cahill argues that Plaintiffs Williams and Chernick cannot claim reasonable reliance in support of their fraud claims. As an initial point, both Plaintiffs adequately plead the time, place, content and their reliance upon Cahill s misrepresentations. AC 19, 34. However, Cahill attempts to reframe Plaintiffs 29

40 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 40 of 85 PageID: 3431 allegations claiming in this instance that Plaintiffs essentially must be able to plead detrimental reliance at the time they initially filed their asbestos claims against BASF. Plaintiffs have no such obligation. This Court s task is to determine whether these two Plaintiffs have pled allegations sufficient to establish that when the decision was made to voluntarily dismiss their claims, they and their attorney relied on Defendants misrepresentation that BASF s talc was asbestos-free and there was no evidence to the contrary. Plaintiffs have done precisely that. Plaintiff Wengerd s fraud claim also satisfies the requirements of Rule 9(b). Wengerd alleges her mother filed an asbestos action in Ohio state court which became part of that court s asbestos case management program. In those proceedings BASF and Cahill served their no asbestos/no evidence discovery responses. They also had BASF s local counsel send the Ashton Affidavit and other related misleading materials asking, as they had before, that the plaintiff voluntarily dismiss her claim. When Wengerd s mother refused, BASF moved for summary judgment. AC 31. Wengerd filed an opposition to BASF s motion. In response, BASF filed a reply brief articulating its jugular points: there was no asbestos or any evidence of asbestos in EMTAL talc. Its reply brief in support represented to the presiding court that it had offered Plaintiff numerous materials in support of its position that EMTAL talc was asbestos free. AC Ex. 38. As pled on behalf of Wengerd and others in the Amended Complaint: 30

41 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 41 of 85 PageID: 3432 Plaintiffs and members of the Class, as did their counsel, naturally, reasonably and detrimentally relied upon the above misrepresentations and omissions causing Plaintiffs and Class Members to either: (a) suffer an involuntary dismissal of their lawsuit because they could not produce evidence contradicting BASF and its predecessor companies assertions and averments that its talc and talc ore did not contain any asbestos and/or there was no evidence that it did. AC 353. In sum, Plaintiff Wengerd has alleged facts which state the substance of the misrepresentations, the vehicles by which they were communicated to her, her predictable reliance and that of the presiding court on the misrepresentations, and the resulting harm. Plaintiff Wengerd, thus, has adequately alleged a claim for fraud. Plaintiffs claims against the individual Defendants also meet the 9(b) pleading requirements, establishing their complicity in the gathering and destruction/concealment of BASF s material asbestos documents in Plaintiffs have alleged the involvement of each individual Defendant in the execution of the fraudulent scheme, thereby articulating a viable claim for conspiring or aiding and abetting. See infra. Having done so, Plaintiffs need not show that all actors engaged in the underlying tortious conduct. See Morganroth & Morganroth v. Norris, McLaughlin & Marcus, P.C., 331 F.3d 406, 415 (3d Cir. 2003) (citing Beck v. Prupis, 529 U.S. 494, 503 (2000)); Banco Popular N. Am. v. Gandi, 184 N.J. 161, 177 (2005) (quoting Jones v. City of Chicago, 856 F.2d 985, 992 (7th Cir. 1998)). Thus, the individual Defendants are liable for the acts of their 31

42 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 42 of 85 PageID: 3433 co-conspirators, including any and all misrepresentations made to advance the goals of the conspiracy. C. Defendants fraudulent conduct is not immunized by the litigation privilege Defendants maintain their conduct falls comfortably within the litigation privilege and is immune from all of plaintiffs tort claims. Cahill Br. at 17. The litigation privilege, however, does not immunize fraud nor does it license lawyers to lie. The litigation privilege does not shield deceit towards adversaries, courts or the judicial process. The Defendants statements were elements of a scheme to defraud asbestos claimants and courts into concluding that BASF could not bear any liability for asbestos injuries because it talc did not contain asbestos. These statements were inextricably woven to Defendants decision to destroy or hide all but exculpatory test results and transcripts. 9 No New Jersey court has or would apply the litigation privilege to immunize such a gross deviation from the basic tenets of legitimate advocacy or conduct so far outside the bounds of the law. Any 9 Defendants do not argue, nor can they, that the privilege applies to spoliation conduct, thus leaving plaintiffs conduct based claims (i.e., fraudulent concealment) unchallenged by the litigation privilege. New Jersey Courts have in fact rejected the application of the privilege to spoliation conduct as opposed to statements. Scarpone v. Dionisio, No , 2007 U.S. Dist. LEXIS (D.N.J. Mar. 20, 2007) ( Moreover, the litigation privilege covers only communications; it does not protect [attorney defendant] from liability for his acts. ). Viviano v. CBS, 251 N.J. Super. 113, 127 (App. Div. 1991) ( Immunizing the willful destruction or concealment of evidence would not further the policy of encouraging testimonial candor. ); Eleuteri v. Eleuteri, No , 2011 U.S. Dist. LEXIS 32377, at *7 (D.N.J. Mar. 28, 2011). 32

43 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 43 of 85 PageID: 3434 contention or purported authority to the contrary simply cannot withstand legal analysis and public scrutiny. Although born out of a desire to protect attorneys, judges and witnesses from defamation actions, the privilege has been extended to other tort-based actions so as to maintain the force of the privilege against novel pleading or claims of defamation under a different label. Loigman v. Twp. Committee of Middleton, 185 N.J. 566 (2006); Rainier s Dairies v. Raritan Valley Farms, Inc., 19 N.J 552, 564 (1955). None of this defeats Plaintiffs fraud claims here which are immediately distinguishable from claims of defamation and similar tort actions. 1. The litigation privilege does not apply to illegitimate client representation The litigation privilege is rooted in the objective of assuring counsel the freedom to zealously represent their client unhampered by the fear of civil recriminations from that zealous advocacy. See, e.g., Loigman, 185 N.J. at 579 (recounting the common law origins of the privilege in England and the United States). The privilege presumes statements made by counsel are spoken in the course of judicial proceedings, not in committing a fraud. Id. (citing Cutler v. Dixon, 76 Eng. Rep. 886, (K.B. 1585)); Hodgson v. Scarlett, 117 Eng. Rep. 362, 363 (C.P. 1817); Hoar v. Wood, 44 Mass. (3 Met.) 193, 194 (1841). Consequently, where a party is charged with conduct that is the antithesis of his duties as an attorney, such conduct is viewed as beyond the scope of the privilege. 33

44 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 44 of 85 PageID: 3435 Morganroth, 331 F.3d at 414 (holding a plaintiff may bring a claim for in-court statements if he alleges that an attorney has knowingly and intentionally participated in a client s unlawful conduct to... fraudulently obstruct the enforcement of a judgment of a court ); Bumgarner v. Hart, Nos , , 2007 U.S. Dist. LEXIS (D.N.J. Jun. 7, 2007). Decisions such as Morganroth, supra, align New Jersey with the majority of courts that conclude the litigation privilege is inapplicable when an attorney exceeds the bounds of zealous advocacy and engages in conduct outside what is acceptable by law. See, e.g., Clark v. Druckman, 218 W. Va. 427, 433 (2005); Taylor v. McNichols, 149 Idaho 826, (2010) (suggesting only legitimate representation is protected, and an attorney engaging in fraud is likewise acting in a manner foreign to his duties ); Maness v. Star-Kist Foods, Inc. 7 F.3d 704, 709 (8th Cir. 1993). In short, an affirmative misrepresentation is not a part of proper representation. Thompson v. Paul, 657 F. Supp. 2d 1113, 1122 (D. Ariz. 2009) (rejecting the application of the litigation privilege) (quoting Restatement (Third) of the Law Governing Lawyers 56 (2000)). Defendants conduct goes far beyond aggressive litigation tactics. As pled in the Amended Complaint, they engaged in a calculated scheme to eliminate BASF s liability for asbestos injury lawsuits through deceiving plaintiffs counsel and courts. It is inconceivable that the civil justice system leaves victims of such a 34

45 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 45 of 85 PageID: 3436 scheme without recourse, especially where the scheme involves the destruction and concealment of material evidence, lying in discovery responses, fraudulent correspondence, and filing legal pleadings containing statements known to be false. 2. The litigation privilege does not immunize fraud In New Jersey fraud is not protected by the litigation privilege. 10 While defamatory statements may be protected on free speech grounds, the extension of that protection to allegations of outright fraud designed to in effect steal from an insurance company would be breathtaking. Virginia Sur. Co., Inc. v. Macedo, No , 2011 U.S. Dist. LEXIS 49077, at *17 (D.N.J. May 6, 2011) (quoting Moreira v. Peixoto, HNT-L , Unpub. Op. at 13 (Law. Div. Jun. 11, 2010) (denying motion to dismiss on litigation privilege and free speech grounds)); see also Brennan v. Palmieri, No , 2008 U.S. Dist. LEXIS (D.N.J. Dec. 12, 2008) (suggesting the privilege would be inapplicable against a properly pled fraud claim). Defendants rely on two unpublished opinions involving vexatious pro se litigants appearing in forma pauperis: Thompson v. Eva s Village & Sheltering 10 Indeed, when a party engages in fraud, liability tends to expand. 7A C.J.S. Attorney & Client, Am. Jur. 2d Attorneys at Law, 233. See also Petrillo v. Bachenberg, 139 N.J. 472 (1995) (attorney owes no duty to third-parties save to refrain from fraud); Banco Popular, 184 N.J. at 161 (attorney liable for conspiracy to commit fraud). 35

46 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 46 of 85 PageID: 3437 Program, No , 2009 U.S. Dist. LEXIS (D.N.J. Oct. 28, 2009) and Agacoili v. Gonzo, No , 2010 U.S. Dist. LEXIS (D.N.J. Feb. 18, 2010). These decisions are facially distinguishable from the facts at hand, 11 and predicated on the Appellate Division s decision in Ruberton v. Gabage, 280 N.J. Super. 125 (App. Div. 1995). However, Ruberton was not a fraud case. Ruberton involved a counsel s threat of criminal prosecution to induce settlement. We recognize that the Ruberton court dismissed all of the plaintiff s claims under the privilege, including one for fraud, but given the facts with which it was presented the court was certainly not contemplating application of the litigation privilege to a fraudulent scheme such as pled by Plaintiffs here and nothing in the opinion remotely suggests the court intended the litigation privilege to immunize any cause of action and all misconduct. Indeed, compared to the weight of the misconduct alleged in this case, the Ruberton claim for fraud was simply a make weight, clearly insufficient to pass Rule 9 muster. In contrast, the Amended Complaint describes fraudulent conduct, including abundant evidence attached to the pleading, of the sort that was never intended to be immunized by application of a litigation privilege in New Jersey courts. 11 The claims brought by Agacoili and Thompson plaintiffs were frivolous claims... that have no basis in fact or law, Agacoil, 2010 U.S. Dist. LEXIS at * 7, and were wholly unsupported and without merit. Thompson, 2009 U.S. Dist. LEXIS at *28. While the Agacoili Court granted defendant s motion dismiss on litigation privilege grounds, it suggested that the privilege would not apply to willfully malicious conduct. Agacoili, 2010 U.S. Dist. LEXIS at *8. 36

47 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 47 of 85 PageID: 3438 The level of misconduct charged against the Defendants here is rare. However, when such unconscionable behavior occurs, other courts have not hesitated to reject the defendants claim that the litigation privilege immunizes them from civil liability. The leading case on point is Matsuura v. E.I. DuPont de Nemours & Co., 102 Haw. 149, 155 (2003). 12 In Matsuura, after settling their suit and releasing their property damage claims against DuPont, the Matsuuras first learned that a fraud had been perpetrated against them by DuPont with the aid of its attorneys. DuPont and its lawyers had withheld test results that proved DuPont s Benlate fungicide was harmful, as well as all of the reports of the hazard, on the basis of privilege. DuPont s conduct has been characterized as egregious and a unique example of unprecedented discovery fraud perpetrated against the court. Kawamata Farms v. United Agri. Prods, 86 Haw. 214, 257 (1997); see also In re E.I. du Pont de 12 To be sure, the majority of courts around the country specifically preclude parties from invoking the privilege to protect themselves from claims of fraud. Kramer v. Midamco, Inc., No , 2009 U.S. Dist. LEXIS 96898, at *4-5, (N.D. Ohio, Oct. 20, 2009); Simms v. Seaman, 129 Conn. App. 651, at *47 (Conn. App. 2011); Unarco Material Handling, Inc. v. Liberato, 317 S.W.3d 227, 238 (Tenn. App. 2010); Raymark Indus., Inc. v. Stemple, No , 1990 U.S. Dist. LEXIS 6710, at *49 (D. Kan. May 30, 1990); Macke Laundry Serv. Ltd. P Ship v. Jetz Serv. Co., 931 S.W.2d 166, 182 (Mo. Ct. App. 1996); Burger v. Brookhaven Med. Arts. Bldg., 516 N.Y.S. 2d 705, 708 (N.Y. App. Div. 1987); Vega v. Jones, Day, Reavis & Pogue, 121 Cal.App.4th 282, 291 (Cal. Ct. App. 2004). Contra, Green Leaf Nursery v. E.I. DuPont De Nemours & Co., 341 F.3d 1292 (11th Cir. 2003) (affirming application of privilege to claims for fraud seeking money damages). 37

48 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 48 of 85 PageID: 3439 Nemours & Co., 918 F. Supp. 1524, (M.D. Ga. 1995) (finding DuPont s conduct the most serious abuse reflected in legal precedents ). After learning of DuPont s deception, the Matsuuras brought claims of fraud, racketeering, spoliation of evidence, and punitive damages. Matsuura v. DuPont, 102 Haw. at 153. On certified appeal to it from federal court, the Matsuura court rejected DuPont s and its lawyer s defense that the litigation privilege compelled dismissal of the plaintiffs claims. Id. at 162. The court s meticulous review of the conflicting policies giving rise to the privilege and those inherent in the justice system is instructive and compels rejection of BASF and Cahill s argument that their conduct is privileged. 13 The same policy considerations identified in Matsuura, namely balancing zealous advocacy and candor toward litigants and tribunals, dictate that the litigation privilege cannot shield the Defendant s fraud. As the New Jersey Supreme Court has never before been confronted with circumstances of party and lawyer litigation fraud remotely like that presented here, the question remains open whether that court would extend the litigation privilege to such misconduct. However, there is every reason 13 The Matsuura court considered and weighed the following eight policy considerations: (1) promoting the candid, objective, and undistorted disclosure of evidence; (2) placing the burden of testing the evidence upon the litigants during trial; (3) avoiding the chilling effect resulting from the threat of subsequent litigation; (4) reinforcing the finality of judgments; (5) limiting collateral attacks upon judgments; (6) promoting zealous advocacy; (7) discouraging abusive litigation practices; and (8) encouraging settlement. 102 Haw. at

49 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 49 of 85 PageID: 3440 to conclude that the New Jersey Supreme Court, as numerous other courts have in recent times, would follow the majority view as elucidated by the Matsuura court, and not the minority view as exemplified in Green Leaf Nursery v. E.I. DuPont De Nemours & Co., 341 F.3d 1292 (11th Cir. 2003) (applying Florida law), and not immunize litigation fraud. 13 D. The Amended Complaint alleges valid common law conspiracy claims against each of the named Defendants 1. The Amended Complaint pleads valid underlying tortious conduct The Amended Complaint properly pleads viable underlying tort claims that support corollary conspiracy claims. Defendants motion to dismiss Plaintiffs civil conspiracy claim based upon the argument that Plaintiffs have failed to establish underlying tortious conduct should be denied. 2. Plaintiffs Amended Complaint asserts sufficient facts establishing that Defendants Dornbusch, Halket and Hemstock were part of the conspiracy A civil conspiracy is a combination of two or more persons acting in concert to commit an unlawful act, or to commit a lawful act by unlawful means, the principal element of which is an agreement between the parties to inflict a wrong against or injury upon another, and an overt act that results in damage. 13 In a parallel situation, the New Jersey Supreme Court refused to immunize malicious prosecution claims of plaintiffs who brought groundless suits. Loigman, 185 N.J. at 184 n.4 (malicious prosecution not protected by privilege). It stands to reason that the court would similarly reject the application of the privilege to immunize fraudulent defenses to spoliation. See discussion supra. 39

50 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 50 of 85 PageID: 3441 Morgan v. Union County Bd. of Chosen Freeholders, 268 N.J. Super. 337, 364 (App. Div. 1993), certif. denied, 135 N.J. 468 (1994). To survive a Rule 12 motion to dismiss for failure to state a claim, a plaintiff s allegations need only be sufficient to describe the general composition of the conspiracy, some or all of its broad objectives, and the defendant s general role in that conspiracy. Rose v. Bartle, 871 F.2d 331, 366 (3d Cir. 1989) (internal quotations omitted). Additionally, the plaintiff need not provide direct evidence of the conspirators agreement; it is enough that it could be circumstantially inferred from the facts that the conspirators had reached an understanding. Doherty v. Hertz Corp., No , 2010 U.S. Dist. LEXIS , at *24 (D.N.J. Nov. 24, 2010) (citing Morgan, 268 N.J. Super. at ). Additionally, when pleading civil conspiracy a plaintiff need not show that all actors engaged in the underlying tortious conduct. See Morganroth, 331 F.3d at 415 ( Not every conspirator must commit an overt act in furtherance of the conspiracy, so long as at least one does. ). Rather, a defendant can be held liable for a conspiracy if it understands the general objectives of the scheme, accepts them, and agrees, either explicitly or implicitly, to do some part to further them. Jones, 856 F.2d at 992; Banco Popular, 184 N.J. at 177. Defendants Dornbusch, Hemstock and Halket s blanket assertions that Plaintiffs fail to plead sufficient particular facts of their involvement in the 40

51 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 51 of 85 PageID: 3442 conspiracy are unfounded. They spring from a stubborn refusal to fairly read and accept the allegations and the inferences arising from them. The Amended Complaint alleges that after becoming aware of mounting evidence that BASF s talc contained asbestos, Dornbusch, Hemstock, Halket and [Cahill], devised and agreed to a strategy, plan and scheme to control and even possibly eliminate BASF s (then Engelhard s) future asbestos injury claim liability and asbestos risk management exposure. AC 120. The scheme and its execution are set out in detail. Pertinent here, once the scheme was conceived, Dornbusch, Hemstock and Halket are alleged to have obtained consent from BASF s management to implement the scheme. AC 121. They executed, aided or abetted the spoliation of evidence. AC 7, 133 et. seq. At no point did any of them ever withdraw from the conspiracy as provided by law to cut off their liability for the continuing harm and damage inflicted by the acts in further of the conspiracy. AC Hemstock s role in the civil conspiracy has been adequately pled Far from conclusory, the allegations in the Amended Complaint specifically set out Hemstock s conscious participation in the conspiracy. The pleadings allege Hemstock knew BASF s talc contained asbestos. AC 92. Indeed he testified 14 Plaintiffs Amended Complaint is based on documents produced in Paduano. From Paduano discovery it is known there are thousands of boxes of relevant documents that have not been produced to Paduano s counsel at the time her case settled. Thus, dates and manner of other misrepresentations remain unknown to Plaintiffs as no discovery has taken place in this case. 41

52 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 52 of 85 PageID: 3443 under oath in the Westfall case that it did. After the Westfall case was settled, Hemstock signed and issued the March 1984 memorandum directing BASF s R&D employees to gather up for discard all documentation and lab notebooks regarding BASF s talc. AC 2, 109, 141. Once the documents were collected, the data that BASF s talc had asbestos were destroyed or secreted away while those exonerating its talc were kept available. With the inculpatory evidence secured, BASF and Cahill systematically and repeatedly represented to claimants and courts over the next 27 years that BASF s talc did not contain any asbestos and there was no evidence it did. AC 2, 10, 138, 145, 148, 151, These allegations suffice to establish Hemstock laid the groundwork for the entire fraudulent scheme and did nothing to arrest its harmful impact on victims. He is thus liable for it. 4. Halket s role in the civil conspiracy has been adequately pled Halket, likewise, contends Plaintiffs failed to sufficiently plead facts establishing his role in the conspiracy. Yet, Halket s contentions are directly contradicted by Plaintiffs pleading. The Amended Complaint alleges that Halket knew BASF s talc contained asbestos and with such knowledge participated in hatching the Fraudulent Asbestos Defense Scheme and in organizing and implementing the conspiracy and racketeering enterprise giving rise to the Plaintiffs claims. AC 101, 102, 141. He was part of the BASF team securing the approval of BASF s management to implement the scheme. AC 121. He also 42

53 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 53 of 85 PageID: 3444 did nothing to stop the scheme continuing to harm its intended victims. This suffices to establish his conspiracy as well as NJRICO liability. 5. Dornbusch s role in the civil conspiracy has been adequately pled Dornbusch likewise argues Plaintiffs have not pled sufficient facts establishing that he knowingly agreed to participate or conspired to participate in the scheme to defraud asbestos victims (the BCAD Enterprise). His argument too is meritless in the face of the Amended Complaint s allegations. Dornbusch dismissively argues that the case against him rests on the fact he was BASF s General Counsel and therefore must have known and been involved in the conspiracy. But that is precisely the point. It may be fairly inferred that a Fortune 500 General Counsel, Executive Vice President and Corporate Secretary knew what was going on if he was doing his job responsibly. The Amended Complaint, however, goes beyond this. It alleges that Dornbusch actively participated in creating the BCAD Enterprise, agreed with other Defendants to devise a plan to settle Westfall under a confidentiality agreement, then collect and expunged all of BASF s harmful documents, and preserved helpful documents so that for decades the BCAD Enterprise could mislead asbestos claimants and courts in future lawsuits. AC 43, 44, 120. Accordingly, Dornbusch s motion to dismiss Plaintiffs civil conspiracy count for failure to plead sufficient facts should be denied. 43

54 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 54 of 85 PageID: Defendants motions to dismiss Plaintiffs civil conspiracy count must be denied as New Jersey law expressly authorizes a cause of action for civil conspiracy between an attorney and his client In Banco Popular, the New Jersey Supreme Court held that an attorney who participated in a civil conspiracy with his client to assist and enable the client s making a fraudulent transfer of assets that defrauded a lender could be held liable in civil conspiracy. 184 N.J. at 178. The fact that the lawyer was representing the client during that transaction does not insulate him from liability." Id. (citing Wahlgren v. Bausch & Lomb Optical Co., 68 F.2d 660, 664 (7th Cir. 1934), cert. denied, 292 U.S. 639 (1934)); accord, Morganroth, supra. While BASF cites a myriad of inapplicable cases attempting to establish that a civil conspiracy is not cognizable between a corporation and its lawyers, the law of New Jersey is opposite. 7. Hemstock conspired with Cahill Hemstock argues Plaintiffs civil conspiracy claim is not sustainable against him because of the intracorporate conspiracy doctrine. That is, an employee of a corporation cannot conspire with the corporation for which he works. Putting aside whether this case falls within the exceptions to the intracorporate conspiracy doctrine, Hemstock s contention has a fatal flaw. He fails to consider the fact that Plaintiffs have pled that he entered into a conspiracy with individuals outside the corporation he was an employee of, namely, Cahill. As set forth above, New Jersey 44

55 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 55 of 85 PageID: 3446 law holds an attorney and his client can conspire and be found liable for civil conspiracy. A fortiori, a corporation s outside attorney can conspire with a corporation s employees who, under legal ethic codes, are not the corporate s attorney s client. Model Rules of Prof l Conduct, R (2000). 8. Defendants Halket and Hemstock s assertion that they are not liable for civil conspiracy because of withdrawal is contrary to both fact and law Conspiracies under New Jersey law are presumed to continue until there is proof of abandonment of the conspiracy in general or a specified affirmative act of withdrawal as to one or more members of the conspiracy. State v. Cagno, 409 N.J. Super. 552, 585 (App. Div. 2009) (holding conspiracy may be deemed to continue as long as its purposes have neither been abandoned nor accomplished ); State v. Farinella, 150 N.J. Super. 61 (App. Div. 1977); State v. Lavary, 152 N.J. Super. 413, 423 (Law. Div. 1977). New Jersey law is specific on how a conspirator legally withdraws from a conspiracy: If an individual abandons the agreement, the conspiracy is terminated as to him only if and when he advises those with whom he conspired of his abandonment or he informs the law enforcement authorities of the existence of the conspiracy and of his participation therein. N.J.S.A. 2C:5-2(f)(3). Furthermore, even where there is a valid withdrawal, a conspirator s culpability still exists for the original conspiracy and ends culpability as to 45

56 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 56 of 85 PageID: 3447 additional actions performed in furtherance of the conspiracy post the withdrawal. Lavary, supra. The Amended Complaint alleges that Fraudulent Defense Scheme and the BCAD Enterprise created to execute it would continue in perpetual existence so long as asbestos actions were being brought against BASF. AC 141. The Complaint also alleges that both Halket and Hemstock following the creation of conspiracy never expressly or affirmatively advised his co-conspirators or anyone outside of the conspiracy, such the affected courts, claimant counsel or claimants, that he withdrew from the conspiracy, AC Therefore, consistent with Plaintiffs well-pled facts and because there is no evidence of the abandonment of the conspiracy, the conspiracy remained ongoing for over 27 years and Halket and Hemstock remain liable for all acts committed by their co-conspirators in furtherance of the conspiracy s goals. Hemstock and Halket both cite United States v. Steel, 685 F.2d 793 (1982), for the proposition that their termination of employment with BASF in 1986 is prima facie evidence they withdrew from the conspiracy. Defendants reliance on Steel is misplaced as New Jersey law is specific about the steps a conspirator must take to withdraw from a conspiracy. New Jersey does not accept leaving one s employment with a company to take another job as adequate to withdraw from a conspiracy. The law that an actual verbalized statement of withdraw is required. 46

57 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 57 of 85 PageID: 3448 Moreover, issues of timing and abandonment of conspiracy are factual issues not amenable to resolution on motion to dismiss and warrant a full development at trial. State v. Marshal, No T4, 2010 N.J. Super. Unpub. LEXIS 359, at *19-20 (App. Div. Feb. 23, 2010). Finally, even assuming arguendo that both Hemstock and Halket sufficiently withdrew from the conspiracy in 1986, it is without question that both Defendants remain liable for their acts in initiating and forming the BCAD Enterprise, as well as their actions in fostering the initial, essential act of the BCAD Enterprise, namely, the gathering up and suppression of evidence that would establish BASF s asbestos liability. Therefore, Plaintiffs civil conspiracy count against Hemstock and Halket must remain. E. The Amended Complaint alleges valid and justiciable NJRICO claims against each of the named Defendants. The Plaintiffs Amended Complaint satisfies all pleading requirements for a claim under NJRICO. It spells out the enterprise, the predicate acts, the injuries suffered by the Plaintiffs as a result of the Defendants misconduct and how that misconduct proximately caused their harm. Defendants argument that the Plaintiffs lack standing because they pled neither injury nor causation ignores the expansive scope of NJRICO, side-steps binding federal case law (if federal law were to apply), and mischaracterizes the Amended Complaint. Pushing past Defendants selective citation to non-binding and non-applicable federal precedent, 47

58 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 58 of 85 PageID: 3449 it is clear Defendants standing analysis is inaccurate, incomplete and incorrect. For the following reasons Plaintiffs do have standing to assert their NJRICO claims. 1. Plaintiffs have standing to bring a cause of action under NJRICO To have standing to bring suit under NJRICO, two showings are required: (1) that plaintiff suffered an injury to business or property, Franklin Medical Assoc. v. Newark Pub. Schools, 362 N.J. Super. 494, 514 (App. Div. 2003); and (2) that the injury was proximately caused by the defendant s conduct. Id. a. Business or Property All Defendants rely on inapplicable federal case law to argue that the Amended Complaint has not alleged an injury to business or property. Their arguments fail to take into account the principle that NJRICO is broader in scope than its federal counterpart. Ford Motor Co. v. Edgewood Properties, Inc., Nos , , 2009 U.S. Dist. Lexis 4172, at *38 (D.N.J. Jan. 20, 2009); State v. Ball, 268 N.J. Super. 72, (App. Div. 1993) ( Ball I ). Although modeled after federal RICO and courts can seek guidance from federal decisions in interpreting NJRICO, Ford, supra at *38, legally the federal and state laws are not identical. New Jersey courts take a liberal stance in permitting plaintiffs to plead NJRICO violations, rejecting the narrow construction of the federal statute that 48

59 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 59 of 85 PageID: 3450 many circuits, including [the Third Circuit] have adopted. Id. (citing Ball I, 268 N.J. Super. at ). While no New Jersey court decision has interpreted the meaning of injury to business or property as used in the text of NJRICO, the issue is easily resolved by turning to the New Jersey Legislature s definition of property. N.J.S.A. 1:1-2 defines property for purposes of statutory interpretation to include a chose in action. New Jersey s legislative scheme thus makes clear that a plaintiff has a property right in legal damages claims of all kind, as well as to the correlative right to a fair and honest day in court to adjudicate that claim. Any wrongful deprivation of these property rights is a cognizable injury to the plaintiff s property. If the Court were to look to case law interpreting federal RICO to evaluate this standing issue, the only controlling case is Malley-Duff & Assoc., Inc. v. Crown Life Ins. Co., 792 F.2d 341 (3d Cir. 1986). That decision makes clear that Plaintiffs have standing. In Malley-Duff, the plaintiff brought a federal RICO action against Crown Life Insurance Company alleging that it interfered with an earlier lawsuit between the parties. The district court dismissed Malley-Duff s RICO claims, holding Crown Life s interference with the earlier lawsuit did not constitute an injury to business or property. The Third Circuit disagreed and overturned the district court s decision, concluding that it had construed RICO s reference to business or property too narrowly. Id. at 354. According to the Third 49

60 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 60 of 85 PageID: 3451 Circuit, [i]f RICO s reference to injury to business or property is to be given meaning, RICO standing cannot be limited to business injuries only. Id. (emphasis in original). The Third Circuit ruled that a cause of action... is a form of property, and when it arises out of termination of a business... is not unfair to characterize conduct tending to impair it as business injury. Id. Thus, the Third Circuit made two distinct, critical legal rulings: (1) that a cause of action is property within RICO s business or property requirement; and (2) that conduct interfering with a business qualifies as a business injury. Id. Applying the Third Circuit s reasoning in Malley-Duff to the facts here establishes Plaintiffs standing to assert NJRICO claims. Each alleges that she or her decedent has suffered a deprivation or outright theft of the right to bring their asbestos lawsuits against BASF, as well as correlative rights to an honest and fair day in court. New Jersey s definition statute declares a chose in action to be a property right and draws no distinction between personal injury and other claims. 15 Therefore, as did the Malley-Duff plaintiff, the Plaintiffs have pled an injury to business or property within NJRICO. 15 Defendants reliance on Amato v. Amato, 180 N.J. Super. 210 (App. Div. 1981), to claim inchoate personal injury claims are not property under New Jersey law, is misplaced. Amato s holding is contrary to numerous New Jersey precedents holding a personal injury claim is property subject to equitable distribution. Notably, its conclusion about the property status of personal injury claims was not adopted or endorsed by the New Jersey Supreme Court when it resolved a split between Amato and a subsequent Appellate Division decision which refused to follow Amato. See Landwehr v. Landwehr, 111 N.J. 491 (1988). 50

61 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 61 of 85 PageID: 3452 In an attempt to distinguish this case from Malley-Duff and divert attention from New Jersey s definitional statute of property which includes legal claims, Defendants cite a non-precedential Third Circuit authority. In Magnum v. Archdiocese of Phila., No , 2006 U.S. Dist. LEXIS (E.D. Pa. Nov. 17, 2006), affirmed, 253 Fed. App x 224 (3d Cir. Oct. 26, 2007), the Third Circuit acknowledged that while a cause of action may be a form of property, a personal injury claim does not qualify as an injury to business or property. 253 Fed. App x at The Magnum opinion is non-precedential. 3d Cir. R Moreover, the case is inapplicable as it dealt with federal RICO and was heavily influenced by the fact that Pennsylvania, unlike New Jersey, does not recognize personal injury causes of action as property. See, N.J.S.A. 1:1-2. Additionally, the Magnum opinion misconstrues Malley-Duff. The Magnum court incorrectly combined Malley-Duff s two rulings. Instead of recognizing that a plaintiff s cause of action is property and that an allegation that an unlawful termination of a business is a business injury, it conflated the two conclusions and reasoned that a cause of action is property only if the underlying claim involves a business dispute. This conclusion is inconsistent with 51

62 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 62 of 85 PageID: 3453 Malley-Duff and with the statute that includes losses to business or property in the disjunctive. 16 Defendants also argue that Plaintiffs have not pled they have suffered a concrete financial harm because there is no guarantee that they would have been victorious in their underlying law suits. This argument too has no merit. There is no requirement that an injury be concrete under NJRICO; nor is there any binding interpretive case law requiring the injury be concrete whatever that means. Additionally, under Third Circuit precedent a plaintiff can plead a cognizable RICO injury for a lost chose in action by alleging it was harmed or impeded in some way, such as it sustained great expenses, delays and inconvenience in its prosecution of the First Lawsuit. Malley-Duff, 792 F.2d at (internal citations omitted). Plaintiffs have met this burden. Each alleges that the Defendants caused their respective decedents to relinquish or lose their asbestos claims or settle them for a substantially inadequate and unjust amount. AC All Plaintiffs further allege they were materially hampered, impaired and prevented from proving their claims. AC 337. They also allege that as a result of the Defendants concealment of evidence, they have incurred or will incur expenses and costs of proceeding without this evidence, and/or the expenses and 16 That the Malley-Duff Court intended two separate holdings is logical considering that the phrase business or property is disjunctive. It would make no sense for RICO s drafters to include an or between business and property if it meant to restrict standing to individuals who were injured in their business property. 52

63 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 63 of 85 PageID: 3454 costs incurred in the effort to replace, locate, or identify evidence, any and all of which Plaintiffs and the members of the Class would not otherwise have suffered or incurred. AC 340. This satisfies Plaintiffs pleading obligations. Despite the allegations Plaintiffs were deprived of the just and fair value of their legal claims, Defendants, relying on Magnum, contend Plaintiffs injuries are too speculative to be an injury under NJRICO. They point to dicta from the Magnum opinion which stated that the plaintiff s claims were too speculative to confer RICO standing Fed. App x at 229. This argument is unpersuasive. The only binding Third Circuit authority, Malley-Duff, specifically held that great expenses, delays and inconvenience in prosecuting a lawsuit are a sufficient pleading of injury to confer RICO standing. Malley-Duff, 792 F.2d at 354. b. Proximate Cause The second prong of the Defendants standing argument is that the Plaintiffs cannot show that the racketeering activity was the proximate cause of their injuries. Again, in light of the success of the Defendants scheme to induce reliance on their false representations, it is disingenuous at best to suggest that Plaintiffs have failed 17 Judge Hardiman s statement that the plaintiffs claims were too speculative to confer RICO standing did not form the basis of the Court s ultimate holding and accordingly is dicta. Indeed, Judge Hardiman stated that it is unclear if an unliquidated personal injury claim is a cognizable RICO claim. Magnum, 254 Fed. App x at

64 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 64 of 85 PageID: 3455 to plead causation. In any event, Plaintiffs have shown a direct causal nexus between the Defendants conduct and their injury. AC In order to establish standing under NJRICO, a plaintiff only need show that her injury was proximately caused by the defendant s violation of the statute. Interchange State Bank v. Veglia, 286 N.J. Super. 164, 178 (App. Div. 1995). In other words, there must be a direct relationship between the plaintiff s injury and defendant s conduct. Id. As a threshold matter, issues of proximate causation involve factual determination and are ordinarily left to the jury to decide. Beadling v. William Bowman Assoc., 355 N.J. Super. 70, 87 (App. Div. 2002). Assuming it is appropriate for the Court to delve into the proximate causation issue, the Plaintiffs have met their pleading burden. BASF and Hemstock s proximate cause arguments miss the mark because they misapprehend the Plaintiffs injuries. They contend Plaintiffs cannot show a direct link between their conduct and the alleged injuries because it is not clear that Plaintiffs would ultimately succeed in their underlying asbestos cases. 18 Because the alleged injuries here are for lost (stolen) causes of action (choses in action), not the underlying personal injuries, this argument is of no moment. It is the theft of 18 See, e.g., BASF Br. at 20-23; Hemstock Br. at 14 (Plaintiffs would need to demonstrate the alleged concealment of information directly and negatively impaired their recovery in the underlying asbestos suit. ). 54

65 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 65 of 85 PageID: 3456 the claim, in whole or in part, that is at issue. Trials regarding the value of property or business interests tortiously lost are commonplace and the fact a trial may be needed to determine a property s value is not an impediment to finding a party has an injury bestowing standing under NJRICO. Cahill s proximate cause argument is frankly just dead wrong as it contends that the Plaintiffs cannot show that their cases were terminated, either voluntarily or involuntarily, as a result of its fraud. Defendants spoliation of evidence while Plaintiffs cases were pending, including concealing admissions by BASF s chief science officer and reports that BASF s talc contained asbestos, are unquestionably facts that preclude a finding on a motion to dismiss that Plaintiffs cases would have turned out the same way had they known the truth. Beyond the fact Plaintiffs have plead this suppressed information was material and would have impacted their courses of action or the results of their case, AC 17-34, any argument that the suppressed facts would not have influenced a reasonable asbestos claimants litigation is untenable. The contention is belied by the sheer number of dismissals Defendants obtained through their falsified record, including hundreds of dismissals BASF and Cahill touted they had obtained in letters to asbestos counsel asking them to likewise dismiss their clients claims against BASF. While perhaps there are some plaintiffs who may have refrained from filing suit against BASF or discontinued their suit because there was a lack of likelihood of success on the 55

66 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 66 of 85 PageID: 3457 merits, as Cahill contends, Cahill Br. at 37, it is far more likely, reasonable and fair to conclude that the suppressed evidence of asbestos content in the talc and the fact BASF engaged in spoliation of evidence would have been factored into every litigant s evaluation of her claim against BASF and surely weighed heavily against BASF. Moreover, for purposes of this motion, Plaintiffs are not required to prove causation. Nor are they required to address standing for potential absent class members. 19 What matters presently is whether the named Plaintiffs have properly pled the elements of their NJRICO claim and it is apparent that they have. With respect to the directness of the injury, where a plaintiff s standing is in issue, the court must examine the chain of events to determine who was directly injured by the predicate RICO acts. Interchange State Bank, 286 N.J. Super. 164, 180 (App. Div. 1995) (internal citation omitted). There is no question that a direct causal link exists between the Defendants conduct as described in the Amended Complaint and the dismissal of lawsuits filed against BASF. For example, with respect to Ms. Williams, the Amended Complaint alleges that she dismissed her 19 Cahill argues that those plaintiffs who did not file suit against BASF or those who did not receive false information regarding BASF s talc cannot prove causation by citing to false information supplied to other plaintiffs. As all named Plaintiffs have alleged that they filed suit against BASF and relied on misrepresentations made as to its talc to their detriment and harm, that suffices for purposes of the instant motion to dismiss. AC There is no reason or need for Plaintiffs to respond further to Cahill s argument regarding potential future class members. 56

67 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 67 of 85 PageID: 3458 lawsuit without receiving full, fair and adequate compensation after relying and acting upon the misrepresentations and material omissions of Defendants regarding. the absence of any evidence indicating Engelhard s talc contained asbestos fibers. AC 19. This allegation, which is substantially similar to the allegations of the other named five Plaintiffs, establishes a direct link between the Defendants conduct and their respective injuries. 20 Cahill, in its argument, attempts to transform the Plaintiffs burden from pleading a direct causal link between conduct and injury, Interchange State Bank, 286 N.J. at 178, to proving an exclusive causal link. 21 But under New Jersey law, there is no such burden, [a] proximate cause need not be the sole cause of harm. It suffices if it is a substantial contributing factor to the harm suffered. Perez, 161 N.J. at In RICO cases involving mail fraud a plaintiff is not required to show that he directly relied on the defendant s fraudulent misrepresentations. Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008); Prudential Ins. Co. of Am. v. U.S. Gypsum Co., 828 F.Supp 287, 295 (D.N.J. 1993). Although under mail /wire fraud claims there is no requirement that the Plaintiffs show that they relied on BASF and Cahill s misrepresentations, the Amended Complaint here clearly articulates such reliance. Moreover, lying to a party s lawyer (their learned intermediary) is the same as lying to the party directly. 21 Cahill s argument is also inconsistent with the State s overarching policy that wronged persons should be compensated for their injuries and that those responsible for the wrong should bear the costs of their tortious conduct. James v. Arms Tech., Inc., 359 N.J. Super. 291, 310 (App. Div. 2003) (internal citation omitted). 57

68 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 68 of 85 PageID: Equitable relief is available to private civil litigants Defendants ask that the NJRICO counts be dismissed because private plaintiffs cannot pursue equitable relief under the act. That is not so. Although the New Jersey Supreme Court has not determined whether private litigants are entitled to seek injunctive relief under NJRICO, where circumstances warrant, they may obtain the equitable remedies set out in N.J.S.A. 2C:41-4(a), including injunctions and disgorgement. Although NJRICO is broader than the federal version, courts may look to interpretations under federal RICO provisions for guidance. While there are decisions both for and against allowing private causes of action for equitable relief, the better reasoned case law as well as respected academic commentary regarding RICO support finding NJRICO permits private parties as well as the Attorney General to sue for equitable relief. In NOW, Inc. v. Scheidler, 267 F.3d 687 (7th Cir. 2001), rev d on other grounds, 537 U.S. 393 (2003), for example, the Seventh Circuit upheld the availability of private equity relief under RICO, finding that the plain language of 1964 provides private plaintiffs with the right to seek equity relief. Id. at Private parties may obtain equitable remedies for RICO 22 In Religious Tech. Center v. Wollersheim, 796 F.2d 1076, 1084, 1088 (9th Cir. 1986), the Ninth Circuit held that no private equitable relief is authorized under federal RICO. The Ninth Circuit s reasoning is not as persuasive as the Seventh Circuit s because it relies in large part on the RICO statutes ambiguous legislative history instead of its unambiguous text. Moreover, the Wollersheim court conceded 58

69 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 69 of 85 PageID: 3460 violations. Blakey, G. R., et al., Equitable Relief Under RICO: Reflections on Religious Technology v. Wollersheim: Will Civil RICO Be Effective Only Against White Collar Crime?, 62 Notre Dame L. Rev. 526, 545 (1987). 23 In sum, for the reasons set forth in Scheidler, a court may in appropriate circumstances order equitable remedies, under N.J.S.A. 2C: that allowing private parties to sue for equitable relief would be a plausible reading of the statute, and recognized that strong policy arguments [could] be made to support a right to injunctive relief for private RICO plaintiffs. Id at [B]ecause section 1964 was intended to provide broad remedies, does not distinguish between governmental or private claimants, and is not limited by the express powers granted the Attorney General [the statute] ought to be held to be a grant of jurisdiction to allow complete equitable relief to a private party. 62 Notre Dame L. Rev. at In view of the novelty and importance of this state substantive law issue and the fact there are also meritorious fraud and fraudulent concealment claims pled in this case, the Court may elect to defer determining this particular issue until the record is developed. Indisputably this Court may exercise its equitable authority to assure appropriate relief. Irrespective of any statutory grant of authority, a Federal court may, in the exercise of its inherent equity powers, enjoin actionable conduct. Marsellis-Warner Corp. v. Rabens, 51 F. Supp. 2d 508, 519 (D.N.J. 1999) (citing Northeast Women s Center, Inc. v. McMonagle, 868 F.2d 1342, 1335 (3d Cir. 1989)). The equitable relief sought by Plaintiffs herein, even that responsive to the NJRICO violations, can be granted as well under the pending claims for common law fraudulent concealment. See, e.g., Marsellis-Warner, 51 F.Supp. 2d at ( Grounds for an injunction may rest independently on meritorious non-rico Federal claims or pendent State law claims. ) (internal citations omitted); Northeast Women s, 868 F.2d at 1355 ( [A]ll the injunctive relief [plaintiff] seeks could be granted under its state law claim of interference with contractual relations, and therefore we will not reach to decide the RICO issue. ) 59

70 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 70 of 85 PageID: Sufficiency of the pleadings In order to state a claim under NJRICO, a plaintiff must plead the following five elements: (1) the existence of an enterprise; (2) that the enterprise engaged in or its activities affected trade or commerce; (3) that [the] defendant was employed by, or associated with the enterprise; (4) that he or she participated in the conduct of the affairs of the enterprise; and (5) that he or she participated through a pattern of racketeering activities. Ford Motor Co., 2009 U.S. Dist. LEXIS 4172, at * 38. a. Adequacy of pleadings as to NJRICO enterprise Cahill asks that the NJRICO claims be dismissed because they fail to sufficiently plead Defendants engaged in a NJRICO enterprise. It argues Plaintiffs did not plead a NJRICO enterprise that distinct and apart from its predicate acts, and the enterprise is indistinguishable from what it was formed to do. Cahill Br. at 39. These contentions are neither factually or legally correct. In State v. Ball, 141 N.J. 142 (1995) ( Ball II ), the New Jersey Supreme Court directly addressed the requirements for a pleading an enterprise under NJRICO. It held that the existence of an enterprise is a separate element distinct from its predicate acts, and thus to assert a claim under NJRICO a plaintiff must prove the existence of an enterprise distinct from the incidents constituting a pattern of racketeering activity. Id. at However, while a plaintiff must separately prove both an enterprise and pattern of racketeering activity, the 60

71 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 71 of 85 PageID: 3462 Supreme Court further held that evidence that serves to establish such an enterprise need not be distinct or different from the proof that establishes the pattern of racketeering activity. Id. at 162. Accord, Boyle v. United States, 129 S. Ct (2009). Plaintiffs have pled the existence of an enterprise that is separate and distinct from the alleged pattern of racketeering behavior by Defendants. Over and above the allegations concerning Defendants lengthy pattern of predicate racketeering acts, the Amended Complaint includes specific facts relating to the formation of the BCAD Enterprise, the reasons it was formed, and the separate, distinct duties and tasks Defendants performed relating to operation of the BCAD Enterprise s affairs. AC 123, The Amended Complaint describes how the BCAD Enterprise had two purposes: one lawful, to manage and defend asbestos injury lawsuits, and the other unlawful, to conduct its operations through the suppression and spoliation of inculpatory evidence and otherwise implement Defendants Fraudulent Asbestos Defense Scheme. AC , , The allegations of division of labor and separation of functions legally 25 Defendants NJRICO arguments reprise their common law conspiracy argument that BASF cannot conspire or form an enterprise with its own agents and officers, and that agent embraces BASF s outside counsel, Cahill. Courts that have considered whether attorney s and clients can form a RICO enterprise and conspiracy reject finding outside attorneys are shielded by agency or so called intra-corporate liability rules. Living Designs, Inc. v. E.I. DuPont de Nemours & 61

72 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 72 of 85 PageID: 3463 suffice to establish the requirement that the enterprise had organization and existed separate and distinct from its racketeering activity. See Ball II, 141 N.J. at In summary, these allegations distinguish the BCAD Enterprise from its Racketeering predicate acts. b. The individual Defendants NJRICO pleading arguments are meritless Similar to arguments relating to the common law fraud and conspiracy counts, the individual Defendants offer up a host of reasons why they should be dismissed from the case at the pleadings stage which, when boiled down, amount to an argument that the Amended Complaint does not sufficiently plead that they knowingly made any fraudulent misrepresentation or that they were not personally involved in forming, conducting or controlling the Fraudulent Asbestos Defense Scheme or the BCAD Enterprise. In the end, none of individual Defendants reasons warrant their dismissal given their respective connections to the fraudulent scheme and enterprise. Co., 431 F.3d 353 (9th Cir 2005) (law firm and client are distinctive entities for purposes of RICO) See also discussion supra at IV, Part D. 26 This argument also refutes Cahill s contention that in order to make out a RICO claim, a RICO person must have committed the alleged fraud while conducting the business affairs of the enterprise, not his own affairs. Cahill Br. at 39, n.2. Cahill argues that the alleged enterprise here is simply the alleged RICO person conducting their business affairs. Id. This argument is baseless. As noted above, the Amended Complaint establishes that Cahill, BASF, Halket, Hemstock and Dornbusch were acting in concert to advance the BCAD Enterprise a purpose clearly distinct from their individual business affairs. 62

73 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 73 of 85 PageID: 3464 Hemstock, Dornbusch and Halket argue that Amended Complaint does not allege that they made any false statements to Plaintiffs or that they knew about and participated in the BCAD Enterprise. These arguments are contradicted by the allegations against them and thus cannot serve as grounds for dismissal under Rule 12. Their contentions also ignore black letter law regarding NJRICO and NJRICO conspiracy claims. A participant in a scheme or enterprise need not know all the details of the enterprise, but only some minimal knowledge of the extent of [its activities]. Ball II, 141 N.J. at 176 (internal citations omitted). Furthermore, there is no requirement each individual member of a NJRICO enterprise commit a predicate act as each member of an enterprise is liable for the predicate acts committed by the other members and its members are jointly and severally responsible for all acts and resulting injuries done in furtherance of the conspiracy until the member properly withdraws from the conspiracy. Id. (citing Ball I, 268 N.J. Super. at 132). The Amended Complaint establishes that Hemstock, Halket and Dornbusch not only knew about the scheme, but participated in the formation of the BCAD Enterprise to implement the Fraudulent Asbestos Defense Scheme for the years necessary to accomplish its purpose and goals. At a minimum, each of these individuals had a hand in the gathering and sanitizing BASF s asbestos records and evidence on which both the scheme and the NJRIO racketeering acts 63

74 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 74 of 85 PageID: 3465 were based. These allegations suffice to hold these defendants liable under NJRICO. 27 F. The Rooker-Feldman Doctrine is inapplicable to this case and does not divest this Court of jurisdiction Viewed in its proper form, the Rooker-Feldman doctrine does not come into play to bar the relief Plaintiffs seek. Because the relief sought arises from the Defendants conduct, and not the actions of any court, and because the remedies imposed will be against the Defendants, and do not compel this Court to review or open any state court judgment, Rooker-Feldman is not implicated by Plaintiffs claims. The Rooker-Feldman doctrine is premised upon 12 U.S.C. 1257, which reserves original jurisdiction for the United States Supreme Court when a plaintiff alleges an injury to her constitutional rights caused by a state court judgment. The 27 Hemstock and Halket alternatively raise with respect to NJRICO their same common law conspiracy withdrawal argument; i.e. because they left BASF in 1986 to retire or take a different position, they are not responsible for anything happening after the time of their departure from BASF. For the same reasons Halket s and Hemstock s departures from BASF in 1986 did not terminate their liability for common law conspiracy, those departures did not terminated their NJRICO liability; neither Defendant ever properly withdrew from the NJRICO conspiracy or enterprise. Indeed, one of the reasons for forming the BCAD Enterprise in the first place was Defendants need to keep the Fraudulent Asbestos Defense Scheme and enterprise secret and unknown due to the grave economic and professional consequences that were possible if the scheme became exposed. AC 270, 301. Moreover, as described supra in n. 14, because discovery has not begun, the full extent and timing of misrepresentations and participation of each Defendant beyond what has been pled is not fully developed. 64

75 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 75 of 85 PageID: 3466 Rooker-Feldman doctrine divests district courts of subject matter jurisdiction in limited circumstances where a district court is asked by a losing party in a state court proceeding to review that judgment. Since its inception, the doctrine has been construed to extend far beyond the contours of the Rooker and Feldman cases. Exxon Mobil Corp. v. Saudi Basic Indus., Corp., 544 U.S. 280, 283 (2005). The doctrine does not apply, and federal jurisdiction is not terminated, automatically on the entry of judgment in the state court. Id. Rather, [i]f a federal plaintiff present[s] some independent claim, albeit one that denies a legal conclusion that a state court has reached in a case to which he was a party, Rooker-Feldman does not apply and federal jurisdiction not defeated. Id. at 293 (emphasis added) (internal citation and quotation omitted). Here, Plaintiffs assert independent claims for injunctive relief against Defendants that do not seek or require this Court s review of any state court proceeding or challenge the finality of any state court judgment. The doctrine does not therefore apply. Following the United Supreme Court s clarification of the Rooker-Feldman doctrine in Exxon Mobil, the Third Circuit examined the doctrine s application in Great Western Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159 (3d Cir. 2010). The Third Circuit explained the doctrine requires satisfaction of all of these four elements: (1) the federal plaintiff lost in state court; (2) the plaintiff complain[s] of injuries caused by [the] state-court judgments; (3) those 65

76 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 76 of 85 PageID: 3467 judgments were rendered before the federal suit was filed; and (4) the plaintiff is inviting the district court to review and reject the state judgments. Id. at 166 (citing Exxon Mobil, 544 U.S. at 284). The second and fourth elements are the key to determining whether a federal suit presents an independent, non-barred claim. Id. 28 In examining the second element, the timing of the injury is critical: that is, whether the injury complained of in federal court existed prior to the state-court proceedings and thus could not have been caused by those proceedings. Id. at 167 (internal citations omitted). Great Western did not implicate Rooker-Feldman because the plaintiffs did not contend that state decisions were incorrect; the holding is instructive: Great Western claims that people involved in the decision violated some independent right, that is, the right to an impartial forum. Id. at 173 (internal citation omitted) (emphasis added). The violation of an independent right by Defendants as alleged here, distinct from harm caused by the judgment itself, thus is not a claim precluded by Rooker-Feldman. 28 The first element (that plaintiff lost in state court) also does not apply to many, if not most class members. Even if plaintiffs brought a state court claim, most dismissals were voluntary or consent dismissals, see, e.g., AC Ex. 31, implemented under Fed. R. Civ. P. 41(a) or a state equivalent. These dismissals are generally without prejudice and not judgments on the merits unless expressly stated by in the notice, stipulation or order as applicable. Accordingly Rooker- Feldman is not applicable in these cases. 66

77 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 77 of 85 PageID: 3468 The fact is, fraudulent activity of a party, including litigation decisions and tactics, presents an independent ground for recovery not barred by Rooker- Feldman. Amer. Music Theater Festival, Inc. v. TD Bank, N.A., No , 2011 U.S. Dist. LEXIS 16468, at *12 (E.D. Pa. Feb. 18, 2011) ( Plaintiff s claims appear to identify defendant s litigation decisions and tactics as opposed to the resulting state-court judgments as the sources of Plaintiff s injuries. ). Indeed, a claim that a judgment was procured by fraud is independent of the judgment and therefore, does not fall within the doctrine, while a claim that the judgment itself is illegal does. In re Sabertooth, LLC, 443 B.R. 671, 681 (E.D.Pa. 2011) (emphasis added). To be clear, the relief Plaintiffs seek includes, among other things, a permanent injunction barring the Defendants from further suppressing and misrepresenting evidence related to BASF s liability; the establishment of a trust for the purpose of collecting and archiving documentary evidence of BASF s asbestos containing products; disgorgement of the illegal profits earned through the Defendants fraud; and, punitive damages for the Defendants spoliation of evidence under New Jersey common law. AC Demand at (c), (f), (g), (i), (k). As Plaintiffs seek declaratory and injunctive relief to remedy the injuries they have suffered as a result of a Defendants longstanding and systemic fraudulent concealment, and Rooker-Feldman not does apply. See, A. v. Nutter, 737 F. Supp. 67

78 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 78 of 85 PageID: d 341, 360 (E.D. Pa. 2010) (Plaintiffs were not calling into question the underlying judgments, but rather, asking the court to consider a much broader question: whether the defendants dangerous and reckless policies violated their constitutional rights). Because the second element of Rooker-Feldman is not met, the Defendant s argument must be rejected in its entirety. 29 Great Western, 615 F.3d at 173 ( The fact that Defendants' actions, rather than the state-court judgments, were the source of Great Western's injuries is alone sufficient to make Rooker-Feldman inapplicable here. ). The requested relief is premised upon Plaintiffs independent legal theories, which seek a remedy for the Defendants malfeasance, independent of and without requiring a review of any state court proceeding and does not preclude this Court from retaining jurisdiction BASF relies on dated authority in support of an overbroad articulation of Rooker-Feldman, of the sort warned against by the Supreme Court in Exxon Mobil, supra., and since by the Third Circuit. Great Western rejected use of the phrase inextricably intertwined as an element of the Rooker-Feldman doctrine, and noted that cases utilizing this phrase should be cited with caution. Great Western, 615 F.3d at 170 n.4. Not surprisingly, the defendant relies on these very cases in support of its position. See, e.g., In re: Knapper, 407 F.3d 573, 581 (3d Cir. 2005); In re Madera, 586 F.3d 228, 232 (3d Cir. 2009); Taliaferro v. Darby Township Zoning Board, 458 F.3d 181, 193 (3d Cir. 2006). 30 BASF s objections to Ms. Williams claims fail. Ms. Williams originally litigated her suit in federal court; thus Rooker-Feldman does not apply, and further BASF s comity claim is not supported by the case law it cites. Comity provides that a nonrendering court should decline jurisdiction if a plaintiff seeks to void a judgment so long as it is apparent that a remedy is available there. Treadaway 68

79 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 79 of 85 PageID: 3470 G. Plaintiffs have sufficiently pled a claim under New York Judiciary Law 487 Cahill contends that the Plaintiffs have failed to state a claim against it under New York Judiciary Law Its argument has three prongs. First, that 487 only applies to misconduct by New York lawyers in New York courts. Second, that the statute of limitations bars the Plaintiffs claims. Third, since 487 only provides compensatory damages, the Plaintiffs claims for equitable relief are outside the scope of the statute. None of these arguments has merit. Cahill premises the first prong of its argument on two federal opinions from the Second Circuit holding that 487 only applies to conduct of litigants before New York courts. 32 Cahill contends that because its alleged deceit took place in suits filed outside of New York, 487 does not apply. Cahill, however, does not v. Academy of Motion Picture Arts & Sciences, 783 F.2d 1418, 1421 (9th Cir. 1986) (emphasis added). This is not the case - Ms. Williams is not seeking to relitigate any previously decided issue or void a judgment. This claim presents entirely new facts and theories of relief. Further, if this Court were to decline to exercise jurisdiction, she will be left with no adequate forum to seek redress for the Defendants longstanding and systemic fraud. The argument has no merit. 31 Under New York Judiciary Law 487, an attorney who acts with an intent to deceive the court or any party is guilty of misdemeanor and subject to treble damages. N.Y. Judiciary Law 487(1). A violation of 487 may be established by either the defendant s alleged deceit or by an alleged chronic extreme pattern of legal delinquency by the defendant. Ciano v. Reers, 893 N.Y.S.2d 851, 854 (Sup. Ct. Kings Cty. 2010) (internal citations and quotations omitted). 32 Schertenleib v. Traum, 589 F.2d 1156, 1166 (2d Cir. 1978); Kaye Scholer LLP v. CNA Holdings, Inc., No , 2010 U.S. Dist. LEXIS (S.D.N.Y. April 28, 2010). 69

80 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 80 of 85 PageID: 3471 cite a recent New York Supreme Court opinion which reached the opposite conclusion. In Ciano v. Reers, 893 N.Y.S.2d 851 (Sup. Ct. Kings Cty. 2010), the New York Supreme Court for Kings County specifically disagreed with the Second Circuit restrictive application of 487. The court tracked the origins of 487 to the Statute of Westminster adopted by England s Parliament in 1275, and held that [i]n light of the statutory language and purposes, this Court sees no basis for limiting the applicability of Judiciary Law 487 to judicial proceedings pending in New York courts. Id. at 859. The court reasoned that [a] New York court has sufficient interest in supervising the conduct of attorneys admitted before its bar, and protecting resident clients who have been harmed by the deceit of an admitted attorney no matter where the action is pending. Id. This Court is not bound by the Second Circuit or the New York Supreme Court s conflicting decisions on 487. However, considering the statute is a state enactment the holding in Ciano provides a more persuasive interpretation of 487. The statute itself does not limit its application to actions before New York courts, and, as noted by the Ciano opinion, there is no reason to believe that New York courts would have a greater interest in supervising its attorneys when they are acting inside the State than it would when they are acting outside the State. Id. Cahill next argues that the Plaintiffs are barred from bringing 487 claims because the three year statute of limitations has run. This argument is deficient for 70

81 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 81 of 85 PageID: 3472 several reasons. First, although 487 has a three year statute of limitations, as alleged in the Amended Complaint, the Plaintiffs did not discover Cahill s deceit until Thus, the statute of limitations should not have started running until sometime in 2009 at the earliest. Section 487 does not state whether the discovery rule applies to claims brought under it, and the case law governing the statute and its limitation period is inconsistent to say the least. See, e.g., Connolly v. Napoli Kaiser Bern & Assoc., LLP, No /05, 2009 N.Y. Misc. LEXIS 6302, at * 9 n.5 (Sup. Ct. NY Cty. 2009) ( 487 is governed by N.Y. C.P.L.R. Law 214(2) for actions created by statute imposing a penalty or forfeiture) contra Ciano, 893 N.Y.S.2d at 855 ( 487 is governed by N.Y. Law. 214(6) for malpractice claims). 33 Although the case law is unclear, it is helpful to remember that in applying a New York statute of limitations, courts should look for the reality, and the essence of the action and not its mere name. DeCarlo v. Ratner, 204 F.Supp. 2d 630, (S.D.N.Y. 2002) (internal citations omitted). Here, despite its origin as a criminal statute dating back to 13th Century England, and not a codification of common law fraud, nonetheless specifically covers fraudulent activity by lawyers. While 33 Legal malpractice and claims under 487 have nothing in common other than a three year statute of limitations. Malpractice is a claim of negligence. Section 487 is a claim for purposeful deceit. 34 See, e.g., Amalfitano v. Rosenberg, 12 N.Y. 3d 8, (2009). 71

82 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 82 of 85 PageID: 3473 its origins are different, 487 is more analogous (for statute of limitations purposes) to claims for common law fraud which in New York are governed by a six year statute and the discovery rule. N.Y. C.P.L.R. Law 213(8) (a plaintiff has two years from the date of discovery of the fraud to bring a claim). Thus, although 487 has been held not to be a codification of common law fraud and not subject to the statute of limitations for fraud, it would be anomalous to hold that the statute is not subject to the discovery rule. To hold otherwise would allow Defendants to shield themselves from liability by concealing their misconduct, which is exactly the type of conduct 487 is meant to punish. Regardless of whether the discovery rule applies, the claims asserted against Cahill by Chernick fall within the three year statute of limitations. As alleged in the Amended Complaint, on December 22, 2010, counsel for BASF sent Chernick s counsel an requesting that she re-execute a consent form by which she agreed not to oppose summary judgment in her underlying claim against BASF. AC In requesting her signature, BASF did not disclose that it had withheld evidence of asbestos in its talc and on January 18, 2011, BASF s counsel filed the consent order in the Supreme Court of New York City. Thus, the BCAD Enterprise, of which Cahill was a continuing member, committed an act of deceit in violation of 487 less than one year ago. An alternative to the discovery rule fraudulent concealment is available 72

83 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 83 of 85 PageID: 3474 and applies in this case. It is well settled New York law that a defendant may be estopped [from pleading] the Statute of Limitations where plaintiff was induced by fraud, misrepresentations or deception to refrain from filing a timely action. Simcuski v. Saeli, 44 N.Y. 2d 442, 448 (NY Ct. App. 1978). The principle that a wrongdoer should not be able to take refuge behind the shield of his own wrong is a truism. In re Spewack, 610 N.Y.S. 2d 243, 245 (N.Y. App. Div. 1st Dep t 1994) (quoting General Stencils v. Chiappa, 272 N.Y.S. 2d 337 (N.Y. 1966)). Here, the only reason some of the Plaintiffs 487 claims were not brought within three years of Cahill s fraudulent action is because Cahill, through deception, and with BASF, actively concealed its participation in the Fraudulent Asbestos Defense Scheme. AC 319. Therefore, Cahill should be estopped from pleading the statute of limitations as a defense to the Plaintiffs 487 claims. 35 Finally, Cahill claims that 487 cannot provide relief to the Plaintiffs because they are seeking an injunction, not compensatory damages. This argument fails for several reasons. First, a plaintiff is permitted to bring a plenary action under 487 if the alleged perjury or fraud in the underlying action was merely a means to the accomplishment of a larger fraudulent scheme. Holtkamp v. Parklex 35 In light of the extreme pattern of fraud alleged in the Amended Complaint, whether Cahill should be equitably estopped from pleading the statute of limitations under 487 is a question of fact to be determined on the trial of the proceeding. Spewack, 610 N.Y.S. 2d at 244. Thus, a decision on Cahill s statute of limitations argument should not be decided on this motion. 73

84 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 84 of 85 PageID: 3475 Assoc., 926 N.Y.S. 2d 344 (Sup. Ct. Kings County 2011) (internal citations and quotations omitted). Here, the Amended Complaint clearly pleads that Cahill s actions were part of a widespread fraudulent scheme and enterprise and thus, the Plaintiffs can bring a 487 action. Second, Cahill s categorization of the Plaintiffs requested relief is inaccurate. In addition to equitable relief, the Plaintiffs are also seeking that Cahill pay for a notice program whereby potential Class members are given notice of their rights, AC 16(c), and that it disgorge revenue, profits and money unjustly earned from the commission of the frauds upon the courts. Id. at 16(e). Thus, because the Plaintiffs are seeking more than just equitable relief, the Plaintiffs are not barred from bringing a plenary action against Cahill under 487. H. Defendants miscellaneous arguments do not warrant dismissal as requested Defendant Cahill raises an additional argument which may be disposed of summarily. To the extent Cahill argues that Plaintiffs erred in bringing claims against both Cahill Gordon & Reindel LLP and Cahill Gordon & Reindel, A Partnership including a Professional Corporation, it is premature to dismiss the latter. While it is clear that dissolution does not extinguish liability, N.Y. P ship Law 67, it is unknown at this time whether the two entities are in fact one entity. Cahill Br. at 53. There are no facts concerning the dissolution of the former, nor with regard to the formation of the latter. As such, Cahill s argument should be rejected. 74

85 Case 2:11-cv SRC -MAS Document 98 Filed 11/30/11 Page 85 of 85 PageID: 3476 Additionally, it is clear from the above that regardless of the survival of Plaintiffs specific claim for fraud upon the Court, the conduct of the Defendants did in fact defraud this Court and other courts over the last two decades, tantamount to the fabrication of evidence. Herring v. United States, 424 F.3d 38 (3d Cir. 2005) ( fabrication of evidence by a party in which an attorney is implicated, will constitute a fraud on the court") (quoting Rozier v. Ford Motor Co., 573 F.2d 1332, 1338 (5th Cir. 1978)); Pumphrey v. K.W. Thompson Tool Co., 62 F.3d 1128 (9th Cir. 1995). V. Conclusion For all of the forgoing reasons Defendants Motions to Dismiss should be denied. To the extent the Court finds any pleading deficiency, Plaintiffs respectfully request an opportunity to re-plead in an effort to cure same. DATED: November 30, 2011 Respectfully Submitted, COHEN, PLACITELLA & ROTH A Professional Corporation FOX ROTHSCHILD, LLC /s/ Christopher M. Placitella Christopher M. Placitella, Esq. Counsel for Plaintiffs 75