E&O Insurer: No Coverage for RICO Damages
I want to get to a few things that have accumulated on my desk over the past few days, so I’ll start with the ongoing legal problems of a Pittsburgh, Pennsylvania law firm that has represented thousands of plaintiffs in asbestos litigation in West Virginia, among other states.
Peirce, Raimond & Coulter, P.C. is a defendant in a declaratory judgment complaint filed last September by Lumbermens Mutual Casualty Company, in United States District Court for the Western District of Pennsylvania. Lumbermens Mutual Casualty Company v. Peirce, Raimond & Coulter, P.C., Civil Action No. 2:08–CV-1257 (W.D.Pa. 2008).
Here is the complaint, in which Lumbermens, as Peirce, Raimond & Coulter, P.C.’s errors and omissions carrier, asks for a declaratory judgment that it is not obligated to defend or indemnify the firm and its members in a lawsuit filed by CSX Transportation, Inc. In that lawsuit, which is filed in United States District Court for the Northern District of West Virginia, CSX Transportation, Inc. alleges that the Peirce firm and its members were part of a scheme to prosecute fraudulent or unmeritorious asbestosis claims. Here are some of allegations from the amended complaint:
The defendants listed herein are well-organized and financed asbestos personal injury attorneys and medical experts who have orchestrated a scheme to inundate CSXT and other entities with thousands of asbestosis claims without regard to their merit.
Due to the sheer volume of claims filed as well as the number of claimants included in any one particular lawsuit CSXT and others were unable to adequately defend or even evaluate the merits of each claim on an individual basis. Instead, in an effort to alleviate the stress placed on the judicial system by these mass filings, CSXT was forced to engage in a large scale mediation process with only limited information provided by the claimants’ own attorneys.
This case arises from the successful efforts of the defendants to deliberately fabricate and prosecute objectively unreasonable, false and fraudulent asbestosis claims against CSXT. Specifically, the defendants orchestrated an asbestosis screening process deliberately intended to result in false positive diagnoses and then knowingly prosecuted claims against CSXT with no basis in fact. As will be explained more fully below, this conduct violated the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq., and also supports claims for common law fraud and conspiracy.
CSX Transportation v. Gilkison, Civil Action No. 5:05–CV-00202 (N.D.W.Va. 2005).
CSXT’s lawsuit has received attention for naming Dr. Ray Harron as a defendant. Dr. Harron, a retired radiologist from Bridgeport, West Virginia, is alleged to have provided false positive diagnoses of asbestosis in thousands of plaintiffs, which formed the basis for their lawsuits against CSXT.
Dr. Harron has already been accused of falsifying x-ray diagnoses of silicosis, as described by this 2006 story by Mike Tolson in the Houston Chronicle and this 2006 story by Wade Goodwyn on NPR.org. And although Goodwyn’s article provides a link, here is the 249–page opinion by United States District Judge Janis Graham Jack.
But back to CSXT’s lawsuit. The defendants have made several motions to dismiss, which have been granted and denied. But most recently, the court denied Dr. Harron’s motion to dismiss the remaining claim against him for common law civil conspiracy on the grounds that the court lacked subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) (the court previously granted his motion to dismiss a claim for civil RICO conspiracy).
in a nutshell, Dr. Harron alleged that the plaintiff had not satisfied the requirement of proving that the amount in controversy is at least $75,000, as required for federal diversity jurisdiction. Judge Frederick P. Stamp, Jr. disagreed, and in his order found that CSXT’s legal expenses of nearly $68,000 (so far) in investigating and prosecuting its claims, coupled with the possibility of punitive damages, satisfied the amount in controversy requirement. So it looks like Dr. Harron will remain a defendant for at least a while longer.
Finally, let me offer my belated congratulations to Marc E. Williams, one of CSXT’s lawyers and my law school classmate. Marc, who practices at Huddleston Bolen LLP, is the 2008–2009 president of DRI, the membership organization for civil litigation defense lawyers.
