RICHMOND, Va. - The U.S. Court of Appeals for the Fourth Circuit has reinstated a fraud case filed by CSX Transportation against a Pittsburgh law firm.
In an opinion released Thursday, the Fourth Circuit overturned an order dismissing the company's claims. A district judge ruled CSX had missed the statute of limitations when it filed the lawsuit, which alleges Peirce Raimond & Coulter conspired with a radiologist to fabricate asbestos claims.
CSX called the decision "thoughtful."
"We thank the Court for its thoughtful decision, which will allow us to have the merits of these important matters thoroughly reviewed by a trial court," the company said.
CSX argued the statute of limitations did not begin running until the lawsuits it used as examples were found to be meritless.
"The district court, however, conflated the filing of the various underlying suits as, in and of themselves, putting CSX on notice of the fraudulent scheme underlying the RICO counts," the opinion says.
"However, nothing 'clearly appears' on the face of the complaint to show that the filing of these suits by the lawyer defendants, as well as the settlements, establish that CSX knew or ought to have known by July 2003 that the alleged fraud was afoot.
"Additional factual development may or may not prove that premise, but it is not plainly apparent on the face of the complaint."
CSX's complaint said Peirce hid nine fraudulent claims among other lawsuits filed by the law firm in West Virginia.
The complaint noted that radiologist Ray Harron, who was found by a Texas federal judge in 2005 to have created fradulent silica claims, lost his license in 2007. Many of the Peirce firm's diagnoses were made by Harron.
The nine lawsuits were filed and settled from 2000-2006. U.S. District Judge Frederick Stamp ruled the four-year statute began when the Peirce firm began targeting CSX.
CSX pointed at a U.S. Supreme Court decision in a lawsuit involving Merck & Co.
"Merck supports CSX's position," a notice filed by the company says. "That case holds that a federal securities-fraud claim does not accrue until the plaintiff knows or should know both that the defendant made a false statement and that the defendant did so with the requisite mental state.
"So too here, a meritless lawsuit, by itself, does not automatically tell us whether the lawyers who filed it did so in good faith or bad faith."
Allegations arising out of Peirce's representation of Earl Baylor were found to have been timely made. One of the lawsuits CSX tried to include in its second amended complaint was filed with the Baylor claim.
"(V)iewing the evidence in the light most favorable to CSX, a reasonable jury could find that the lawyer defendants at worst fraudulently manufactured the claimed exposures, or at least lacked a good faith basis to file an asbestos injury claim because they knew it lacked the necessary element of occupational exposure," the opinion says.
"Consequently, a jury could find that the lawyer defendants committed fraud by filing the lawsuit because there was no evidence upon which they could have believed that Baylor was exposed to asbestos-containing products in the course of his employment with CSX.
"Consequently, a reasonable jury could find CSX relied to its detriment on the defendants' alleged fraud as the basis of the Baylor claim."
The Fourth Circuit also ruled Stamp should have allowed CSX to amend its complaint to include 11 other asbestos lawsuits.
CSX notified the Fourth Circuit in July of the dismissal of 1,400 asbestos lawsuits by a West Virginia judge who had implemented new rules requiring plaintiffs to certify they were aware of their lawsuits, that their claims were "well-founded in fact" and that they wished to continue pursuing litigation.
"That order also required the production of 'all materials... relating to Plaintiff's alleged exposure to asbestos,' including 'medical records' and 'materials relating to occupational illness screenings sponsored by the Peirce firm and attended by Plaintiff,'" Dan Himmelfarb of Mayer Brown in Washington, D.C., wrote.
"Rather than making the necessary representations on behalf of the remaining plaintiffs, the Peirce firm moved to voluntarily dismiss the 1,400-plus claims --except for 62 malignant cancer claims and two non-malignant claims -- and ultimately stipulated that the claims should be dismissed with prejudice."
All the dismissed cases alleged asbestos disease but not malignancy. The Peirce firm continues to pursue 62 malignancy claims in Recht's court and claims the dismissal of the 1,400 claims had nothing to do with the fraud lawsuit.
"The dismissal order contained no findings that the dismissed claims lacked merit and no findings as to whether the dismissed plaintiffs may have recovered amounts from third-party defendants," wrote Walter DeForest, of DeForest Koscelnik Yokitis Kaplan & Berardinelli.
"This is simply factual information that is not in the record, which CSX is improperly trying to place before the court, without context, for the apparent purpose of attempting to influence the court's review of rulings of the district court that were made before the events recited in CSX's letter."
Earlier this year, two Mississippi attorneys were found to have defrauded Illinois Central Railroad. A federal judge ruled they filed asbestos lawsuits against the company even though their clients had already recovered a combined $210,000 from an earlier suit.
The attorneys, the judge said, withheld that information on a questionnaire.