Raymark Industries, Inc. v. Stemple, 88-1014-K.

• Decision Date: 10 August 1988
• Docket Number: No. 88-1014-K.,88-1014-K.
• Citation: 714 F. Supp. 460
• Parties: RAYMARK INDUSTRIES, INC., a Connecticut Corporation, Plaintiff, v. Gordon A. STEMPLE, et al., Defendants.
• Court: U.S. District Court — District of Kansas

714 F. Supp. 460

RAYMARK INDUSTRIES, INC., a Connecticut Corporation, Plaintiff, v. Gordon A. STEMPLE, et al., Defendants.

No. 88-1014-K.

United States District Court, D. Kansas.

August 10, 1988.

COPYRIGHT MATERIAL OMITTED

Jeffrey D. Lewin, Sullivan, McWilliams, Lewin & Markham, San Diego, Cal., for plaintiff.

William S. Boggs, David E. Monahan, Jeff L. Mangum, Robert A. McGregor, Gray, Cary, Ames & Frye, San Diego, Cal., for Gordon A. Stemple and Richard F. Gerry.

Jack Corinblit, Marc M. Seltzer, Corinblit & Seltzer, Los Angeles, Cal., for Gordon A. Stemple.

Turner and Boisseau, Wichita, Kan., and William H. Ginsburg, Harry Rebhuhn, Wood, Lucksinger & Epstein, Los Angeles, Cal., for Clara V. Gelbard.

Ara Aghishian, Aghishian & Danielian, Hollywood, Cal., for B. Rama Rao and Krishan Bharadwaja.

Gans & Blackmar, San Diego, Cal., for Krishan Bharadwaja.

MEMORANDUM AND ORDER

PATRICK F. KELLY, District Judge.

This matter is before the court on separate motions to dismiss brought by defendants Gordon A. Stemple and Richard F. Gerry pursuant to Fed.R.Civ.P. 12(b)(6) and 9(b), and by defendant Clara V. Gelbard pursuant to Rule 12(b)(6). In this action, plaintiff Raymark Industries, Inc. ("Raymark") alleges that the named defendants defrauded Raymark in connection with its class action settlement which was administered by this court. Defendants Stemple and Gerry are attorneys who filed claims against Raymark on behalf of tire workers who had allegedly been injured due to their exposure to asbestos manufactured by Raymark. These claimants were diagnosed by the defendant doctors, Clara V. Gelbard, B. Rama Rao, and/or Krishan Bharadwaja ("the medical defendants"). In this action, Raymark asserts the manner in which the claims were manufactured was fraudulent and that the claims themselves were false and/or frivolous. In its complaint, Raymark asserts claims against these five defendants for violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., common law fraud, and "unfair business practice" as defined by CALIFORNIA BUSINESS AND PROFESSIONS CODE § 17200. Additionally, Raymark asserts a claim for negligence against the medical defendants, and a claim for rescission of the settlement with the tire workers against all named defendants, including all local counsel and the class of all tire worker claimants.

In the motions now pending, defendants Gerry and Stemple assert that all claims against them must be dismissed pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted and pursuant to Rule 9(b) for failure to allege fraud with sufficient particularity. They further move, pursuant to Rule 12(f), to strike those portions of the complaint detailing how the tire workers' claims were manufactured, as they contend such facts are irrelevant to plaintiff's claims. In a separate motion, defendant Gelbard asserts she is entitled to have all claims against her dismissed pursuant to Rule 12(b)(6) as she is absolutely immune from liability under the doctrine of witness immunity.

The court may not dismiss plaintiff's complaint for failure to state a claim "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). In considering a motion to dismiss, all factual allegations, as distinguished from conclusory allegations, must be accepted as true, and all reasonable inferences must be drawn in favor of the plaintiff. Swanson v. Bixler, 750 F.2d 810, 813 (10th Cir.1984). In reviewing the sufficiency of Raymark's complaint, the court must determine not whether Raymark will ultimately prevail, but whether it is entitled to offer evidence which supports its claims. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). Motions to dismiss are generally viewed with disfavor. NL Industries, Inc. v. Gulf & Western Industries, Inc., 650 F.Supp. 1115, 1122 (D.Kan.1986).

For the reasons set forth herein, the court finds that the motions to dismiss must be denied as Raymark has adequately stated its claims.

I. Facts and Procedural History

Before setting forth the facts as pleaded by Raymark in its complaint, a brief explanation of the procedural background is warranted.

Attorneys Stemple and Gerry, defendants herein, enjoy national prominence for their activities and success in the personal injury field. In recent times, the attorneys' focus has been in the pursuit of damages for those allegedly injured as a consequence of exposure to asbestos products. Today, any manufacturer or processor of asbestos is a likely target for a personal injury claim, as the product is now known to be a causative agent for serious lung impairment. Raymark is such a target. The massive filings of such claims abound and are pending in multiple numbers in most courts across the country. This consequence has contributed much to the state of congestion as pertains to the orderly exercise of court management. Indeed, it has presented a serious challenge for all the courts, and cries out for a reasonable and efficient solution. It was in this spirit that this court agreed to entertain a class action settlement.

The class action settlement, captioned Wells v. Raymark Industries, Inc., No. 87-1016-K, provides for the disposition and processing of approximately 20,000 claims by those who claim exposure to defendant Raymark's asbestos products and have demonstrated some lung impairment which was probably caused or contributed to, in part, by exposure to Raymark's product. The full mechanics of this procedure are well known to all parties and are not relevant here. It is from the Wells settlement, however, that the instant case arises.

In the course of the Wells settlement, approximately 7,000 claims from certain "tire workers" were presented through plaintiff's lead counsel by attorneys Stemple and Gerry, defendants herein. These claims emanate from approximately 12 states and have been coordinated with the assistance of defendants' local counsel. Approximately $16 million was set aside for this purpose of settling these claims.

Early in Wells, Raymark complained as to the propriety of the tire worker claims. Consequently, the processing of these claims was suspended and a random audit by Raymark representatives was authorized. Thereafter, Raymark advised the court that the settlement process could be resumed. The court thus assumed that the problems had been resolved. At that time, approximately 5,000 claims were processed and were either paid out or were under way for review and payment.

Throughout this process, unbeknownst to the court, Raymark had continued with its review of the tire worker claim process, and for reasons expressed in several pleadings filed in Wells, was convinced that many of the claims were not only false and invalid, but were fraudulently processed. Rather than further alert the court or to complain here, Raymark filed at least 12 suits against defendants Stemple and Gerry, Dr. Gelbard, Dr. Rao, Bharadwaja, each local attorney and representative claimants, in each of the several states from which the claims originated. Raymark included a count under 18 U.S.C. § 1964 (RICO) and a fraud count in each complaint.

Once these actions were under way, Raymark moved here for a stay of the disbursement of funds to the tire workers until the state actions were resolved. Defendants Stemple and Gerry then filed a motion on behalf of Dimas D. Alonzo, a claimant, for injunctive relief preventing Raymark from prosecuting the state actions.

In due course the motions were heard, and both were granted. The court ordered further proceedings in the state actions stayed. It further ordered that the settlement funds for approximately 1200 pending claims be rolled over to a separate interest-bearing account until the dispute is resolved. Finally, the court advised that should Raymark wish to proceed with its claims against the tire workers' attorneys, it should do so in this court. The court opined that the claim process could thus be clarified and Raymark's claims simplified and tested by way of summary judgment motion.

Thereafter, Raymark filed the action now pending. As noted, Raymark's complaint joins not only defendants Stemple and Gerry, but the same defendant doctors, each of the local counsel, and representative claimants from within the several states. The complaint similarly includes counts in RICO, fraud, and several pendent state claims.

During a status conference with counsel for Raymark and defendants Stemple and Gerry, the discovery process was shaped to the extent that the litigants were encouraged to proceed solely with that which was necessary as pertains to Raymark's claims against attorneys Stemple and Gerry. It was assumed that the massive filings in the state actions would, in part, suffice their respective needs, but, of course, the litigants were at liberty to discover representatives of Raymark, defendants Stemple and Gerry, the physicians, the local attorneys, and representative claimants, if counsel deemed such a process to be necessary. Additionally, the court stayed the requisite of the filing of an answer by all of the remaining defendants until such time as the matters against attorneys Stemple and Gerry could be resolved. The scheduling process anticipated hearing on defendant attorneys' inevitable summary judgment motion by the fall of 1988. The court did not anticipate that the claims would be tested by way of a motion to dismiss. Now, notwithstanding, defendants Stemple and Gerry have filed their motion to dismiss the complaint in its entirety.

According to the allegations in the complaint which is now before the court, when Raymark reviewed the tire workers' files during the court-authorized audit, it was satisfied that the medical reports by defendants...