G-I Holdings, Inc. v. Baron & Budd

Decision Date17 July 2002
Docket NumberNo. 01 Civ. 0216(RWS).,01 Civ. 0216(RWS).
Citation238 F.Supp.2d 521
PartiesG-I HOLDINGS, INC., Plaintiff, v. BARON & BUDD; Frederick Baron; Russell Budd; Ness, Motley, Loadholt, Richardson & Poole; Ronald Motley; Joseph Rice; Weitz & Luxenberg; Perry Weitz and Robert Gordon, Defendants.
CourtU.S. District Court — Southern District of New York

Friedman, Wang & Bleiberg, New York, NY (Peter N. Wang, of counsel), Cahill Gordon & Reindel, New York, NY (Thomas J. Kavaler, of counsel), Washington Legal Foundation, Amicus Curiae, Washington, DC (Daniel J. Popeo, Richard A. Samp, of counsel), Robert J. Randell, Amicus Curiae, New York, NY, for Plaintiff.

Solomon, Zauderer, Ellenhorn, Frischer & Sharp, New York, NY (Mark C. Zauderer, Jonathan D. Lupkin, of counsel), Manatt, Phelps & Phillips, Washington, DC (Abbe David Lowell, Pamela J. Marple, of counsel), for Baron & Budd, Frederick Baron and Russell Budd.

Storch Amini & Munves, New York, NY, for Ness, Motley, Loadholt, Richardson & Poole, Ronald Motley and Joseph Rice.

Morvillo, Abramowitz, Grand, Iason & Silberberg, New York, NY (Elkan Abramowitz, Lawrence S. Bader, Robert M. Radick, of counsel), for Weitz & Luxenberg, Perry Weitz & Robert Gordon.

OPINION

SWEET, District Judge.

Defendant law firms Baron & Budd, Ness Motley, Loadholt, Richardson & Poole ("Ness Motley"), and Weitz & Luxenberg, and individual defendants Russell Budd ("Budd"), Frederick Baron ("Baron"), Ronald Motley ("Motley"), Joseph Rice ("Rice"), Perry Weitz ("Weitz") and Robert Gordon ("Gordon") (collectively, the "Defendants") have moved pursuant to Federal Rule of Civil Procedure 12(b)(6) for an order dismissing portions of the Third Amended Complaint of G-1 Holdings ("Holdings"). In addition, the Ness Motley defendants (the law firm and individual defendants Ness and Motley) have moved to strike certain allegations in the complaint.

For the following reasons, the Defendants' motion is granted in part and denied in part, and Ness Motley's motion is granted.

Parties

Holdings is a New Jersey corporation and is a holding company that includes certain former asbestos manufacturers and is the successor by merger to GAF Corporation ("GAF"). Plaintiffs have initiated many thousands of tort actions against GAF Corporation and Holdings arising out of the manufacture of a product known as Calsilite, an insulation product containing asbestos.

The Defendants are law firms and their principals. They have represented many of the plaintiffs in the asbestos litigation against Holdings.

Prior Proceedings

This action was initiated by the filing of an action by Holdings against the Defendants on January 10, 2001, alleging violations of the federal Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. ("RICO"). The First Amended Complaint (the "FAC") was filed on April 30, 2001 and alleged inter alia that the Defendants engaged in a scheme to inundate the judicial system, and Holdings, with hundreds of thousands of asbestos cases without regard to their merit, and in various illegal acts in connection with such litigation including suborning false testimony. The FAC contained ten counts and alleged that Defendants (1) maliciously interfered with GAF's right to petition Congress (prima facie tort) (Claim I); (2) tortiously interfered with GAF's contracts and economic advantage (Claim II); (3) violated federal antitrust law (Claim III); (4) violated the RICO statute (Claims IV-VII); (5) breached contracts with GAF (Counts VIII, IX); and (6) fraudulently induced GAF to enter into contracts they never intended to honor (Count X). That complaint was dismissed in part on December 11, 2001, but leave was granted to replead.

In a Second Amended Complaint, filed on January 25, 2002, Holdings repled certain of its state law claims, asserted a cause of action against Baron & Budd for common law fraud, and amended the allegations with regard to its witness tampering theory. Defendants moved to dismiss the Second Amended Complaint and Weitz & Luxenberg moved to strike certain allegations in the complaint.

On March 18, 2002, however, Holdings filed a Third Amended Complaint (the "TAC" or the "Complaint") in which it added a common law fraud claim against Weitz & Luxenberg and amended two paragraphs of its mail and wire fraud allegations against the Baron & Budd defendants to identify five cases and asserted on information and belief that "the Baron & Budd Memorandum was used to create false product identification and testimony in the deposition of each of the plaintiffs who were deposed in these actions." Holdings also sought the Court's permission to file the Third Amended Complaint after it had already filed it.

At a hearing on April 17, 2002, leave to file the Third Amended Complaint was granted, and the Defendants' motions to dismiss the Second Amended Complaint and strike certain allegations were denied inasmuch as they no longer targeted the current complaint. The Defendants were then given leave to renew their motions with regard to the TAC.

On April 26, 2002, the Defendants moved to dismiss certain of the counts, and Weitz & Luxenberg moved to strike certain allegations in the Complaint.

The Complaint consists of thirteen counts. However, not all the Counts are at issue, as demonstrated below:

Count I (prima facie tort against all Defendants): not in contention; Holdings included it for the purposes of appeal.

Count II (tortious interference with economic advantage against all Defendants): in contention.

Count III (tortious interference with contract against all Defendants): not in contention; the Defendants did not move against it.1

Count IV (antitrust violations against all Defendants): not in contention; Holdings included it for the purposes of appeal.

Count V (RICO mail and wire fraud against Baron & Budd): in contention.

Count VI (RICO mail and wire fraud against individual defendants Baron and Budd): in contention.

Count VII (RICO substantive violation of witness tampering against all Defendants): not in contention except as to the grounds for dismissal.

Count VIII (RICO conspiracy against all Defendants): not in contention; Holdings included it for the purposes of appeal.

Count IX (breach of contract against Weitz & Luxenberg): not in contention defendants did not move against it.

Count X (breach of contract against Ness Motley): not in contention; defendants did not move against it.

Count XI (fraudulent inducement against Weitz & Luxenberg and Ness Motley): in contention.

Count XII (common law fraud against Baron & Budd): in contention.

Count XIII (common law fraud against Weitz & Luxenberg): in contention.

In sum, of the thirteen Counts, only Counts II, V, VI, XI, XII, and XIII are in contention. In addition, Holdings seeks clarification for the grounds for dismissal of Count VII.

The motions were considered fully submitted on May 15, 2002, at which time oral argument was heard.

The Factual Allegations of the Complaint

The Complaint adopts in great measure the factual allegations of the First Amended Complaint. These facts were described in greater detail in G-I Holdings v. Baron & Budd, 179 F.Supp.2d 233 (S.D.N.Y. 2001), familiarity with which is presumed. Therefore, this section will only detail the additions or alterations from the First Amended Complaint.

None of the facts set forth below represent findings by the Court. As befits a motion to dismiss under Rule 12(b)(6), the facts are assumed to be as alleged in the complaint for purposes of the instant motion.

Specific Instances of Falsifications of Affidavits

Holdings alleges that Baron & Budd filed false affidavits in connection with asbestos litigation. In December 1995, paralegals at Baron & Budd working under the supervision of Melanie Oliver, a Baron & Budd supervisor ("Oliver"), were instructed to gather hundreds of affidavits from Baron & Budd clients for use against GAF and other asbestos defendants for trial and/or settlement purposes. Such affidavits were critical to establish liability against a particular defendant whether they were to be used for trial or settlement purposes.

Under Oliver's supervision, the paralegals gathered the affidavits and began to compile the results in a conference room at Baron & Budd. With their deadline looming, the paralegals realized that approximately 200 of the affidavits were missing necessary information, including: (1) the asbestos product to which the affiant had been exposed; (2) the work site(s) at which the affiant had been exposed/employed; and/or (3) the client's signature.

The paralegals reported these omissions to Oliver, who instructed that the affidavits be "fixed." None of the affidavits was returned to the affiant for completion, correction, review or signature. Instead, at Oliver's direction, the paralegals "filled in" the missing information themselves.

Missing product identification was added without reference to or knowledge of whether the client could truthfully testify that he had been exposed to a particular asbestos product. For example, where a client had failed to identify a particular asbestos product to which he had been exposed, the paralegals would attempt to research which of the manufacturer's products "might" have been used at the identified work site and then simply add that product to the affidavit. Where a client had failed to identify a work site, the paralegals would create that information using the client's social security printout (to identify employment history) and then would deduce an appropriate work site that would match the particular product and the particular asbestos manufacturer. The paralegals also signed clients' names on the unsigned affidavits.

In each case, after a deficient affidavit was "fixed" by Baron & Budd's paralegals, it was filed with the court in...

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