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. jmpollock@foxrothschild.com 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