Patterson v. Mobil Oil Corp.

• Decision Date: 08 July 2003
• Docket Number: No. 02-40698.,02-40698.
• Citation: 335 F.3d 476
• Parties: Ozan PATTERSON, Individually & as Rule 23 Class Representative on behalf of all other similarly situated individuals; John Ballenger, Individually & as Rule 23 Class Representatives on behalf of all other similarly situated individuals, Plaintiffs-Appellants, v. MOBIL OIL CORPORATION; Forum Insurance Company; Mobil Corporation; Glenda Matouse, Individually & as Agent for Mobil Oil Corporation; Robert Gronwaldt, Individually & as agent for Mobil Oil Corporation; Ben Stiff, Individually & as agent for Mobil Oil Corporation; Charles Teeples, Individually & as Agent for Mobil Oil Corporation; National Union Fire Insurance Company of Pittsburgh, PA; AIG National Insurance Company; AIG Risk Management Inc.; AIG Inc.; Energy Printing Inc.; American Home Assurance Company; Insurance Company of the State of Pennsylvania, Defendants-Appellees. Thomas J. Ballenger, Plaintiff, Ella Ray Whitehead, Appellant, v. Mobil Oil Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

335 F.3d 476

Ozan PATTERSON, Individually & as Rule 23 Class Representative on behalf of all other similarly situated individuals; John Ballenger, Individually & as Rule 23 Class Representatives on behalf of all other similarly situated individuals, Plaintiffs-Appellants, v. MOBIL OIL CORPORATION; Forum Insurance Company; Mobil Corporation; Glenda Matouse, Individually & as Agent for Mobil Oil Corporation;

Robert Gronwaldt, Individually & as agent for Mobil Oil Corporation; Ben Stiff, Individually & as agent for Mobil Oil Corporation; Charles Teeples, Individually & as Agent for Mobil Oil Corporation; National Union Fire Insurance Company of Pittsburgh, PA; AIG National Insurance Company; AIG Risk Management Inc.; AIG Inc.; Energy Printing Inc.; American Home Assurance Company; Insurance Company of the State of Pennsylvania, Defendants-Appellees Thomas J. Ballenger, Plaintiff Ella Ray Whitehead, Appellant, v. Mobil Oil Corporation, Defendant-Appellee.

No. 02-40698.

United States Court of Appeals, Fifth Circuit.

July 8, 2003.

COPYRIGHT MATERIAL OMITTED

Gilbert T. Adams, Jr., Law Offices of Gilbert T. Adams, Beaumont, TX, Craig Smyser, Larry R. Veselka, Justin M. Waggoner, Asim M. Bhansali (argued), Smyser, Kaplan & Veselka, Houston, TX, for Patterson, Ballenger and Whitehead.

David Michael Gunn (argued), David J. Beck, Thomas Edward Ganucheau, Fields Alexander, Beck, Redden & Secrest, Jennifer Bruch Hogan, Hogan, Dubose & Townsend, Houston, TX, for Mobil Oil Corp. and Mobil Corp.

Harvey Ferguson, Jr., Chaves, Gonzales & Hoblit, San Antonio, TX, for Forum Ins. Co.

Lipscomb David Norvell, Jr., Benckenstein, Norvell & Nathan, Beaumont, TX, for Matouse and Gronwaldt.

Robert B. Wellenberger, Thompson, Coe, Cousins & Irons, Dallas, TX, Gregory Duane Smith, Ramey & Flock, Tyler, TX, for National Union Fire Ins. Co. of Pittsburgh, PA, AIG Nat. Ins. Co., AIG Risk Management Inc., AIG Inc., Energy Printing Inc., American Home Assur. Co. and Insurance Co. of State of PA.

Appeal from the United States District Court for the Eastern District of Texas.

Before EMILIO M. GARZA and DeMOSS, Circuit Judges, and DUVAL,^* District Judge.

EMILIO M. GARZA, Circuit Judge:

This case arises from a wave of state and federal litigation brought by employees and former employees of Mobil, as well as their relatives. Generally, the employees assert that Mobil failed to comply with Texas workers' compensation law, such that Mobil was never a valid subscriber to the workers' compensation system. Under Texas's scheme, employees covered by subscriber-purchased policies receive compensation on a no-fault basis, and, in exchange, subscribing employers benefit from an exclusive remedy provision. This provision prevents employees from suing subscribers for negligence. Thus, the theory is that these employees were injured because Mobil's allegedly fraudulent representations that it was a subscriber caused them to forgo negligence lawsuits against Mobil.

In the instant case, the plaintiffs, Ozan Patterson and John Ballenger, are using this theory to allege a variety of civil violations under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1861 et seq. Originally, Patterson and Ballenger brought this suit as a class action under Fed.R.Civ.P. 23, but we previously vacated the district court's class certification. See Patterson v. Mobil Oil Corp., 241 F.3d 417, 419 (5th Cir.2001). Upon remand, the district court granted summary judgment to the defendants. The plaintiffs timely appeal.

I

The issues presented by this case necessitate a detailed recitation of the facts and procedural background, including a brief summary of the allegations in the pleadings and the roles of the parties. In the primary cause of action, the plaintiffs allege that Mobil violated RICO by conspiring with various insurers and claims adjusters over a thirty-year period (hereinafter "the RICO suit"). Specifically, they allege that the defendants engaged in a long-term scheme to deprive the plaintiffs of their common-law negligence causes of action against Mobil for workplace injuries. Mobil allegedly used "fronting" insurance companies to obtain "sham" workers' compensation policies in order to hide the fact that it was self-insuring, which was not permitted by the Texas workers' compensation scheme then in force. Further, the plaintiffs allege that the defendants used the interstate mail and telephone wires to further this illegal enterprise.

During the relevant years, Mobil obtained its workers' compensation insurance from several different companies. Pre-1970 through 1981, Mobil's insurer was Forum Insurance Company ("Forum"); from 1982 through 1991, Mobil's insurer was National Union Fire Insurance Company of Pittsburgh, Pennsylvania; in 1992, Mobil's insurer was American Home Assurance Company; and, in 1993, Mobil was insured through the Insurance Company of the State of Pennsylvania. All are named as defendants in the RICO suit. The latter three insurers are members of the American International Group of Companies ("AIG") and other various AIG companies have also been named as defendants (collectively, the "AIG Defendants"). In addition, the plaintiffs have sued Glenda Matous and Robert Gronwaldt, representatives of AIG who adjusted Mobil workers' compensation claims, individually and as agents of Mobil.

Patterson was a Mobil employee from 1947 to 1982. In 1974, 1976, 1979, 1981, and 1982, Patterson suffered on-the-job injuries. For each injury, Patterson sought and received workers' compensation benefits from Mobil's various insurers. Ballenger is the son of Thomas J. Ballenger, who died in 1970 from burns sustained after an explosion at a Mobil plant. Ballenger's mother, Ella Ray Whitehead, sought and received workers' compensation benefits from Forum, Mobil's carrier at that time. She also filed suit, on behalf of her and her surviving children, against Mobil, claiming gross negligence and seeking punitive damages. See Ballenger v. Mobil Oil Corp., 488 F.2d 707, 708-09 (5th Cir.1974). The jury found Mobil grossly negligent, but we reversed, concluding that the evidence did not support that finding. Id. at 708, 713. During that suit, Mobil stated in its pleadings that it had workers' compensation insurance.

On March 23, 1999, the same day the plaintiffs filed the RICO suit, Whitehead filed a "Request for Relief from Judgment" under Fed.R.Civ.P. 60(b) ("the Rule 60(b) motion"). She requested that the district court set aside the 1974 Ballenger judgment, arguing that Mobil had perpetrated a fraud on the court by representing that it had workers' compensation insurance.¹

The RICO suit was originally assigned to Judge Fisher. Just after granting class certification, Judge Fisher recused himself, sua sponte, without explanation. The case was reassigned to Judge Cobb.² The defendants immediately moved to have the certification order vacated, arguing that it was inappropriate for Judge Fisher to have ruled on the issue since nobody knew why Judge Fisher recused himself or when the conflict came to Judge Fisher's attention.

The plaintiffs moved to have Judge Cobb recuse himself, citing 28 U.S.C. §§ 144 and 455 as support. Specifically, they alleged that disqualification was mandatory because John Tucker, a partner in Judge Cobb's former law firm, Orgain, Bell & Tucker, L.L.P. ("OB&T"), represented Mobil in the original Ballenger suit while Judge Cobb was still a partner at that firm. The plaintiffs also argued that Judge Cobb's impartiality might reasonably be questioned because of his relationship with Tucker and OB&T. Finally, they contended that Judge Cobb was actually biased because he might be required to consider the actions of his former law partner and law firm during the course of the case. In particular, they noted that Tucker was one of the lawyers representing Mobil in the RICO suit.³ The plaintiffs also submitted an affidavit from John Ballenger in which he stated that he believed Judge Cobb was biased against his case and would not be able to preside impartially over the RICO suit.

At the hearing on the defendants' motion to vacate, Judge Cobb asked the plaintiffs whether Tucker or OB&T were mentioned in the complaint or whether the plaintiffs were seeking recovery against Tucker or the firm. The plaintiffs answered no to both questions, and Judge Cobb denied the motion to disqualify. Following this, the plaintiffs petitioned this court for a writ of mandamus, seeking Judge Cobb's disqualification, and we denied that petition. In re Patterson, No. 00-40001 (5th Cir. Jan. 10, 2000) (unpublished) (order denying mandamus).

After this court reversed the class certification, the defendants moved for summary judgment and the plaintiffs made a supplemental motion for disqualification. The basis of the plaintiffs' motion was new evidence that Judge Cobb had represented Forum in a Mobil workers' compensation case in 1975. See Forum Ins. Co. v. Mitchell, No. A-98,195 (58th Dist. Ct., Jefferson County, Tex. Apr. 25, 1975) (unpublished). They contended that this gave Judge Cobb personal knowledge of relevant facts, including whether Forum was a sham company that was actually controlled by Mobil at that time and whether Mobil was a valid subscriber in the Texas workers' compensation system. The defendants opposed the motion. Judge Cobb noted in a later order that he was asked to recuse himself in an earlier stage of the McClelland litigation⁴ for similar reasons, but had refused to do so. In one of his final memorandum orders, Judge Cobb explicitly stated that his position as Forum's counsel of record twenty-seven years ago in a separate litigation did not warrant disqualification and emphasized that the plaintiffs' earlier attempt to secure disqualification from this court had been unsuccessful. He then denied the motion to disqualify.

In a separate order, the district court granted the defendants' motion for summary...