Civil RICO: An Effective Deterrent to Fraudulent Asbestos Litigation?

Abstract

In January 2014, a bankruptcy judge, in an unprecedented act, held that several plaintiff law firms specializing in mesothelioma litigation had engaged in a “startling pattern of misrepresentation” by directing their clients who had sued the Debtor to falsely deny exposure to the asbestos-containing products of other companies which had previously gone bankrupt. A U.S. District Court judge presiding over RICO actions filed by the Debtor against four of the mesothelioma firms concluded that the bankruptcy judge’s holdings mirrored the Debtor’s allegations in the RICO suits that “Defendants engaged in a wide-ranging systematic and well-concealed fraud designed to suppress evidence. . .” These RICO actions posed a clear and present danger to the plaintiffs’ mesothelioma litigation bar. Few RICO actions have been filed in mass tort litigations even where there has been compelling evidence of fraudulent practices by plaintiffs’ counsel. Despite the paucity of such actions, two authors have published articles in the Michigan and Iowa Law Reviews warning against allowing application of RICO to “retaliate” against plaintiffs’ counsel. One author contends that use of RICO would be “illegal on several grounds including the Rules Enabling Act” and “threatens the right to petition the courts for redress.” Even when a mass tort defendant is alleging that a plaintiffs’ counsel, in multiple state court filings, had engaged in a wide-ranging scheme to defraud the defendant in those actions, for that author, RICO “is not the answer.” The other author contends that allowing unfettered RICO actions would unleash a parade of horrors including “upset[ting] the delicate federal-state balance,” “squander[ing] scare judicial resources,” “exacerbat[ing] courthouse incivility” and “ultimately skew[ing] the civil justice system further in favor of well-heeled players.” These claims, in the main, do not pass the test of rationality. In this article, I counter the arguments raised by these authors including claims that remedies already exist for defrauded mass tort defendants such as abuse of process, malicious prosecution, FRCP Rule 11 and FRCP Rule 60. None of these listed remedies, however, have any utility in deterring mass tort fraud. As for the argument posed that effective fraud-curtailing mechanisms have emerged in recent years, I show that the evidence cited in support is less than meets the eye. In this article, I closely examine five RICO suits alleging mass tort fraud to show both the strengths and weaknesses of RICO as a deterrent to mass tort fraud. I also point out how the civil justice system has not only failed to deter mass tort fraud but actually facilitates fraudulent testimony by doctors in such litigations and how bankruptcy courts have inadvertently facilitated fraudulent practices by plaintiffs’ counsel in asbestos litigation by rulings that effectively legitimate those practices. Fraudulent practices have permeated a variety of mass tort litigations. The only reasonable conclusion that can be reached in view of the lack of sanctions is that lawyers and doctors they hire because of their propensity to “manufacture diagnoses for money” and “find evidence of the disease that they were. . . being paid to find” have immunity from prosecution or professional discipline. Hobbling RICO will remove one of the only ways in which lawyers that have engaged in wide-ranging fraudulent practices in mass tort litigations may be sanctioned.