G-I Holdings, Inc. v. Baron & Budd, No. 01 CIV. 0216(RWS).

CourtUnited States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
Writing for the CourtSweet
Citation179 F.Supp.2d 233
Docket NumberNo. 01 CIV. 0216(RWS).
Decision Date11 December 2001
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.
179 F.Supp.2d 233
G-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.
No. 01 CIV. 0216(RWS).
United States District Court, S.D. New York.
December 11, 2001.

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

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

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

Morvillo, Abramowitz, Grand, Iason & Silberberg, New York City, by 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 the First Amended Complaint of G-1 Holdings ("Holdings") in its entirety.

This promises to be a hard fought battle between the successor to an asbestos manufacturer and the defendant law firms and their partners. Holdings seeks retribution against the Defendants for prosecuting fraudulent claims against its predecessor manufacturer which resulted in its bankruptcy and improperly thwarting legislation to deal with the asbestos litigation crisis. To contain and categorize this fight in terms of prima facie tort, antitrust, racketeering and contract concepts is a complex and challenging undertaking in which skilled counsel for both sides have been diligent and helpful. For the reasons set forth below, the prima facie tort claim (Claim I) is dismissed, the tortious interference with contract claim (Claim II) is dismissed, the tortious interference with economic advantage (Claim II) survives, the antitrust claim (Claim III) is dismissed, the RICO claim (Claims IV-VI) is dismissed for failure to plead predicate acts of witness tampering and extortion and to plead fraud with particularity, the RICO conspiracy claim (Claim VII) is dismissed, the contract claim (Claims VIII and IX) survives and the fraudulent inducement claim (Claim X) is dismissed.

Parties

Holdings is a New Jersey corporation and is a holding company which 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 or about January 10, 2001, alleging

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violations of the federal Racketeer Influenced and Corrupt Organizations Act. 18 U.S.C. § 1961 et seq. ("RICO"). The First Amended Complaint (the "Complaint") under consideration here was filed on April 30, 2001 and alleges 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 Complaint contains ten counts and alleges 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 its contracts with GAF (Counts VIII, IX), and (6) fraudulently induced GAF to enter into contracts they never intended to honor (Count X).

The instant motion to dismiss was filed June 4, 2001 and was marked fully submitted on September 5, 2001, at which time oral argument was heard.

The Factual Allegations of the Complaint

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

The Asbestos Litigation

For many years prior to the late 1960's, asbestos was considered a strategic military resource, widely used in the United States in numerous military, industrial and commercial applications, including the production of high-temperature thermal insulation and fire retardant products. Over time, it was discovered that the application and removal of certain asbestos-containing products (friable asbestos products) created airborne dust containing asbestos fibers. In the late 1960's, medical studies emerged linking the inhalation of asbestos fibers to malignant diseases and nonmalignant asbestosis, a scarring of lung tissue accompanied by an impairment of lung function. As a result, the manufacture of friable asbestos-containing products essentially ceased in the early 1970's. Soon thereafter, lawsuits began to be filed seeking damages for personal injury as a result of exposure to asbestos. What started as a trickle soon turned into a tide of litigation on a scope not previously seen before.

Prior to the dissemination of the medical studies, dozens of companies in the United States manufactured asbestos-containing products. One such manufacturer was the Ruberoid Company. In the 1940's and 1950's, Ruberoid manufactured for the United States Navy, as well as others, in accordance with government specifications, a product called Calsilite — a thermal insulation product used to protect steam lines on ships and other high temperature applications. In 1967, the Ruberoid Company merged with General Aniline and Film Corporation. Prior to the merger, General Aniline and Film Corporation neither manufactured nor sold any asbestos-containing products. Shortly after the merger, all manufacture of Calsilite was halted. The GAF Corporation came into existence in 1987 and in 1989 was liquidated, and its assets and liabilities were thereafter acquired by GAF Building Materials Corporation. GAF has been named as a defendant in tens of thousands of asbestos personal injury lawsuits, and it has defended such lawsuits in its own name.

As the number of asbestos filings grew, certain law firms came to dominate asbestos litigation. Defendants Baron & Budd, Ness Motley, and Weitz & Luxenberg are

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three law firms that have spent more than twenty years litigating asbestos claims in courts throughout the country.

In 1978, approximately 125 plaintiffs' asbestos attorneys banded together to form and fund the Asbestos Litigation Group ("ALG") in order to promote asbestos litigation. Defendants were active in and effectively controlled the ALG. Acting jointly through the ALG, and through less formal asbestos-related organizations, defendants solicited tens of thousands of asbestos claimants and sued manufacturers without regard for, or in conscious disregard of, the merits of their claims against particular individual defendants such as GAF.

Defendants have received profits from their litigation by, among other things, charging their clients contingency fees, as high as fifty percent in some cases, notwithstanding the fact that many of these cases involve virtually no risk of non-recovery. It is estimated by Holdings that the Defendants have obtained billions of dollars in fees as a result of their role in asbestos litigation.

Defendants have used the profits from asbestos litigation to expand their recruiting network, enabling them to solicit tens of thousands of additional clients on a nationwide basis and through advertising in union and trade publications, which publications were mailed to the membership of virtually every trade union that ever worked near or within an industry even tangentially associated with asbestos, such as steelworkers and masons. Defendants also have established a local counsel network, which reaches into virtually every jurisdiction in the United States, to file claims on behalf of the claimants so solicited. Pursuant to agreements with each network member, a share of the fees thus generated is typically channeled back to the referring ALG member, and ultimately to the ALG, to be invested in future claimant solicitations, including mailed advertisements in newsletters. This has resulted in the filing of further claims.

Because most American asbestos manufacturers stopped manufacturing friable asbestos products in the 1970's, the most severe instances of asbestos exposure occurred during and immediately after World War II. Given the average gestation period for asbestos-related illnesses of approximately 30 years, the number of seriously ill plaintiffs has substantially diminished over time. Thus, the number of legitimate asbestos claims began to decrease in the late 1980's as did the number of solvent asbestos companies.

In 1982, Johns-Manville Corporation ("Manville"), the largest U.S. manufacturer and supplier of construction products containing...

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42 practice notes
  • U.S. v. Pendergraft, No. 01-13057.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • 16 Julio 2002
    ...542, 547 (9th Cir.1988); I.S. Joseph Co. v. J. Lauritzen A/S, 751 F.2d 265, 267-68 (8th Cir.1984); G-I Holdings, Inc. v. Baron & Budd, 179 F.Supp.2d 233, 259 (S.D.N.Y. 2001); Heights Cmty. Cong. v. Smythe, Cramer Co., 862 F.Supp. 204, 207 (N.D.Ohio 1994); Am. Nursing Care of Toledo, Inc. v.......
  • E-Z Bowz v. Professional Product Research Co., Inc., 00 Civ. 8670 (LTS) (GWG).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • 5 Septiembre 2003
    ...and prospective economic advantage. See, e.g., Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90, 94 (1993); G-I Holdings, Inc. v. Baron & Budd, 179 F. Supp. 2d 233, 253-54 (S.D.N.Y. 2001). Each is examined separately. 1. Tortious Interference with Contractual Relations To assert a claim for tortious......
  • Burns v. Delaware Charter Guarantee & Trust Co., No. 10 Civ. 4534.
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • 8 Junio 2011
    ...2010) withdrawn in part on other grounds in 732 F.Supp.2d 423 (S.D.N.Y.2010) (citations omitted); G–I Holdings, Inc. v. Baron & Budd, 179 F.Supp.2d 233, 265–66 (S.D.N.Y.2001) (Sweet, J.) (“It is inconsistent with the standards for resolving a motion to dismiss to have this Court draw infere......
  • Calabrese v. Csc Holdings, Inc., No. 2:02-CV-05171-JS-ARL.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • 13 Agosto 2003
    ...not have a claim of right to that property. See U.S. v. Jackson, 180 F.3d 55, 68 (2d Cir.1999); G-I Holdings, Inc. v. Baron & Budd, 179 F.Supp.2d 233, 259 Defendants argue that threatening or instituting litigation does not constitute extortion. However, Defendants oversimplify the Plaintif......
  • Request a trial to view additional results
42 cases
  • U.S. v. Pendergraft, No. 01-13057.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • 16 Julio 2002
    ...542, 547 (9th Cir.1988); I.S. Joseph Co. v. J. Lauritzen A/S, 751 F.2d 265, 267-68 (8th Cir.1984); G-I Holdings, Inc. v. Baron & Budd, 179 F.Supp.2d 233, 259 (S.D.N.Y. 2001); Heights Cmty. Cong. v. Smythe, Cramer Co., 862 F.Supp. 204, 207 (N.D.Ohio 1994); Am. Nursing Care of Toledo, Inc. v.......
  • E-Z Bowz v. Professional Product Research Co., Inc., 00 Civ. 8670 (LTS) (GWG).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • 5 Septiembre 2003
    ...and prospective economic advantage. See, e.g., Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90, 94 (1993); G-I Holdings, Inc. v. Baron & Budd, 179 F. Supp. 2d 233, 253-54 (S.D.N.Y. 2001). Each is examined separately. 1. Tortious Interference with Contractual Relations To assert a claim for tortious......
  • Burns v. Delaware Charter Guarantee & Trust Co., No. 10 Civ. 4534.
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • 8 Junio 2011
    ...2010) withdrawn in part on other grounds in 732 F.Supp.2d 423 (S.D.N.Y.2010) (citations omitted); G–I Holdings, Inc. v. Baron & Budd, 179 F.Supp.2d 233, 265–66 (S.D.N.Y.2001) (Sweet, J.) (“It is inconsistent with the standards for resolving a motion to dismiss to have this Court draw infere......
  • Calabrese v. Csc Holdings, Inc., No. 2:02-CV-05171-JS-ARL.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • 13 Agosto 2003
    ...not have a claim of right to that property. See U.S. v. Jackson, 180 F.3d 55, 68 (2d Cir.1999); G-I Holdings, Inc. v. Baron & Budd, 179 F.Supp.2d 233, 259 Defendants argue that threatening or instituting litigation does not constitute extortion. However, Defendants oversimplify the Plaintif......
  • Request a trial to view additional results

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