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G-I HOLDINGS, INC. v. BARON & BUDD;
July 17, 2002
G-I HOLDINGS, INC., PLAINTIFF,
BARON & BUDD; FREDERICK BARON; RUSSELL BUDD; NESS, MOTLEY, LOADHOLT, RICHARDSON & POOLE; RONALD MOTLEY; JOSEPH RICE; WEITZ & LUXENBERG; PERRY WEITZ AND ROBERT GORDON, DEFENDANTS.
The opinion of the court was delivered by: Robert W. Sweet, United States 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 portions
of the Third Amended Complaint of G-1 Holdings ("Holdings"). In
addition, the Ness Motley defendants (the law firm and individual
defendants Ness and Motley) have moved to strike certain allegations in
For the following reasons, the Defendants' motion is granted in part
and denied in part, and Ness Motley's motion is granted.
Holdings is a New Jersey corporation and is a holding company that
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
This action was initiated by the filing of an action by Holdings
against the Defendants on January 10, 2001, alleging violations of the
federal Racketeer Influenced and Corrupt Organizations Act,
18 U.S.C. § 1961 et seq. ("RICO"). The First Amended Complaint (the
"FAC") was filed on April 30, 2001 and alleged 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 FAC contained ten
counts and alleged that Defendants (1) maliciously interfered with GAF's
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 contracts with GAF (Counts VIII, IX); and
(6) fraudulently induced GAF to enter into contracts they never intended
to honor (Count X). That complaint was dismissed in part on December 11,
2001, but leave was granted to replead.
In a Second Amended Complaint, filed on January 25, 2002, Holdings
repled certain of its state law claims, asserted a cause of action
against Baron & Budd for common law fraud, and amended the allegations
with regard to its witness tampering theory. Defendants moved to dismiss
the Second Amended Complaint and Weitz & Luxenberg moved to strike
certain allegations in the complaint.
On March 18, 2002, however, Holdings filed a Third Amended Complaint
(the "TAC" or the "Complaint") in which it added a common law fraud claim
against Weitz & Luxenberg and amended two paragraphs of its mail and wire
fraud allegations against the Baron & Budd defendants to identify five
cases and asserted on information and belief that "the Baron & Budd
Memorandum was used to create false product identification and testimony
in the deposition of each of the plaintiffs who were deposed in these
actions." Holdings also sought the Court's permission to file the Third
Amended Complaint after it had already filed it.
At a hearing on April 17, 2002, leave to file the Third Amended
Complaint was granted, and the Defendants' motions to dismiss the Second
Amended Complaint and strike certain allegations were denied inasmuch as
they no longer targeted the current complaint. The Defendants were then
given leave to renew their motions with regard to the TAC.
On April 26, 2002, the Defendants moved to dismiss certain of the
counts, and Weitz & Luxenberg moved to strike certain allegations in the
The Complaint consists of thirteen counts. However, not all the Counts
are at issue, as demonstrated below:
• Count I (prima facie tort against all Defendants)
not in contention; Holdings included it for the
purposes of appeal.
• Count II (tortious interference with economic
advantage against all Defendants): in contention.
• Count III (tortious interference with contract
against all Defendants): not in contention; the
Defendants did not move against it.*fn1
• Count IV (antitrust violations against all
Defendants): not in contention; Holdings included
it for the purposes of appeal.
• Count V (RICO mail and wire fraud against Baron &
Budd): in contention.
• Count VI (RICO mail and wire fraud against
individual defendants Baron and Budd): in
• Count VII (RICO substantive violation of
witness tampering against all Defendants): not in
contention except as to the grounds for dismissal.
• Count VIII (RICO conspiracy against all
Defendants): not in contention; Holdings included
it for the purposes of appeal.
• Count X (breach of contract against Ness Motley)
not in contention; defendants did not move against
• Count XI (fraudulent inducement against Weitz &
Luxenberg and Ness Motley): in contention.
• Count XII (common law fraud against Baron & Budd)
• Count XIII (common law fraud against Weitz &
Luxenberg): in contention.
In sum, of the thirteen Counts, only Counts II, V, VI, XI, XII, and
XIII are in contention. In addition, Holdings seeks clarification for the
grounds for dismissal of Count VII.
The motions were considered fully submitted on May 15, 2002, at which
time oral argument was heard.
The Factual Allegations of the Complaint
The Complaint adopts in great measure the factual allegations of the
First Amended Complaint. These facts were described in greater detail in
G-I Holdings v. Baron & Budd, 179 F. Supp.2d 233 (S.D.N.Y. 2001),
familiarity with which is presumed. Therefore, this section will only
detail the additions or alterations from the First Amended Complaint.
None of the facts set forth below represent findings by the Court. As
befits a motion to dismiss under Rule 12(b)(6), the facts are assumed
to be as alleged in the complaint for purposes of the instant motion.
Specific Instances of Falsifications of Affidavits
Holdings alleges that Baron & Budd filed false affidavits in connection
with asbestos litigation. In December 1995, paralegals at Baron & Budd
working under the supervision of Melanie Oliver, a Baron & Budd
supervisor ("Oliver"), were instructed to gather hundreds of affidavits
from Baron & Budd clients for use against GAF and other asbestos
defendants for trial and/or settlement purposes. Such affidavits were
critical to establish liability against a particular defendant whether
they were to be used for trial or settlement purposes.
Under Oliver's supervision, the paralegals gathered the affidavits and
began to compile the results in a conference room at Baron & Budd. With
their deadline looming, the paralegals realized that approximately 200 of
the affidavits were missing necessary information, including: (1) the
asbestos product to which the affiant had been exposed; (2) the work
site(s) at which the affiant had been exposed/employed; and/or (3) the
The paralegals reported these omissions to Oliver, who instructed that
the affidavits be "fixed." None of the affidavits was returned to the
affiant for completion, correction, review or signature. Instead, at
Oliver's direction, the paralegals "filled in" the missing information
Missing product identification was added without reference to or
knowledge of whether the client could truthfully testify that he had been
exposed to a particular asbestos product. For example, where a client had
failed to identify a particular asbestos product to which he had been
exposed, the paralegals would attempt to research which of the
manufacturer's products "might" have been used at the identified work
site and then simply add that product to the affidavit. Where a client
had failed to identify a work site, the paralegals would create that
information using the client's social security printout (to identify
employment history) and then would deduce an appropriate work site that
would match the particular product
and the particular asbestos manufacturer.
The paralegals also signed clients' names on the unsigned affidavits.
In each case, after a deficient affidavit was "fixed" by Baron & Budd's
paralegals, it was filed with the court in which the case was pending or
was submitted to the defendants to support a settlement. Holdings claims
the affidavits were false and fraudulent and were known by Baron & Budd
to be so when they were filed or submitted.
Following their falsification by Baron & Budd, all or substantially all
of the affidavits included identification of Ruberoid (plaintiff's
predecessor by merger) as a manufacturer of asbestos products to which the
affiant was exposed. Holdings claims these identifications were false and
GAF, through its agent, the Center for Claims Resolution ("CCR"),
relied upon these false and fraudulent identifications in settling the
cases and in allocating portions of the settlement to GAF.
Based on settlement date, trial location, and other salient
characteristics, Holdings claims on information and belief that the
universe of settlements in which these 200 or so false and fraudulent
affidavits were submitted is contained within the list of 190 cases
listed in an exhibit to the Complaint. The amount that GAF was defrauded
into paying in these cases is a substantial portion of the $891,663 it
paid to settle these cases.
Until January 16, 2002, Holdings claims that plaintiff was not, and in
the exercise of reasonable diligence could not have been, aware of the
specific instances alleged above because (1) the nature of the fraud was
self-concealing; (2) the volume of litigation by Defendants made
individualized investigation into the merits of each case an
impossibility; and (3) Baron & Budd took active steps to hinder GAF's
investigation into Baron & Budd's ongoing fraud by, inter alia,
interfering with GAF's ability to locate and interview former Baron &
Budd employees. GAF has spent millions of dollars since the revelation of
the Baron & Budd memorandum investigating Baron & Budd's misdeeds and
seeking to identify the pattern of fraud and specific instances thereof.
The Effects of the Routine Falsification of Product Identification
The falsification of product identification was not limited to the
events of December 1995 described above. Claim forms filed by the Baron &
Budd bankruptcy department also included false product identifications
provided by a Baron & Budd employee. A paralegal working under the
supervision of Baron & Budd bankruptcy department manager Tiffany Tuggle
("Tuggle") routinely listed products on claim forms for clients that had
never been identified by the client or were wholly inconsistent with the
information that had been provided by the client. Baron & Budd was made
aware of this practice and did nothing to stop it. In fact, the paralegal
Backdating Claims and Falsifying Court Records
Subsequent to the filing of the Second Amended Complaint, Holdings
claims to have uncovered additional evidence of wrongdoing by defendant
Weitz & Luxenberg. The following eleven paragraphs are alleged on
information and belief based on the investigation of private
investigators working for Holdings.
In order to pursue claims against asbestos defendants that would
otherwise be time-barred, Weitz & Luxenberg has backdated documents filed
in asbestos personal injury cases and tampered with and falsified records
of the Supreme Court of the State of New York.
In the spring of 2000, Weitz & Luxenberg maintained an office at 120
Wall Street in Manhattan that oversaw the prosecution of asbestos
personal injury cases on behalf of clients who had died. In May 2000,
Weitz & Luxenberg attorneys recognized that they had failed to amend in a
timely fashion a complaint filed in New York County, the effect of which
was to bar claims against one or more named or unnamed defendants under
applicable statutes of limitations. Weitz & Luxenberg remedied the problem
by backdating the amended pleading, falsifying the filing stamp and
altering the books and records of the New York County Supreme Court to
reflect the fact that the amendment had been filed long before it
actually was filed.
Pleadings filed in the New York County Supreme Court all bear an
official court stamp, affixed by court employees, reflecting the date
upon which the pleading was filed in the County Clerk's office (the "Filed
Stamp"). The filing date, reflected in the Filed Stamp, is relied upon by
both the Court and by litigants (including GAF) in calculating the
timeliness of the filing. In the spring of 2000, GAF was a named
defendant in all, or substantially all, of the asbestos liability actions
brought in New York County by Weitz & Luxenberg on behalf of its
Sometime after Weitz & Luxenberg attorneys discovered the error, Weitz
& Luxenberg personnel, acting under the direction of Weitz & Luxenberg
attorney Marie Ochigrassi ("Ochigrassi"), undertook to ensure that the
amended complaint would be filed with a false backdated Filed Stamp and
that the court's records would be falsely altered to reflect that the
pleading had been filed before it actually was filed. Ochigrassi was the
head of a department comprised of two other attorneys and paralegals. The
two supervising paralegals in the department were Alicia Ostracher and
Vanessa Ostracher, both of whom are daughters of Elba Aguilar
Aguilar is and was at that time a court employee at the New York County
Supreme Court building at 60 Centre Street in Manhattan. Aguilar's duties
at the courthouse are such that she has and at all relevant times had
access to the New York County Clerk's Filed Stamp and New York County
Supreme Court case records.
Aguilar is the mother of three present or former Weitz & Luxenberg
paralegals: the Ostrachers and Mary Jo Sci. In addition, Weitz & Luxenberg
is representing Aguilar's former husband (with whom she is now
reconciled) in litigation with Nassau County in which Aguilar's interests
appear to be aligned with his. Weitz & Luxenberg is handling the
litigation at no charge.
Under the direction of Ochigrassi, Weitz & Luxenberg personnel first
prepared a back-dated amended complaint. When the new papers were ready,
Ochigrassi summoned a paralegal to her office where paralegal Alicia
Ostracher was also waiting. Ochigrassi instructed the paralegal that he
was "to take something down to Alicia's mother" and "to follow Alicia's
instructions." Ostracher handed the paralegal an envelope containing the
amended complaint and indicated that she had called her mother who would
be waiting to meet him at 60 Centre Street.
Aguilar and the paralegal took the file, the logbook, and the documents
to a space near the copy machine. Aguilar stamped the amended complaint
with the court's Filed Stamp to reflect falsely that it had been filed at
an earlier date, before the statute of limitations ran on the newly added
claims. Aguilar then added a false entry to the court's log book. The
entry Aguilar placed in the log book falsely indicated that the amended
complaint had been filed on the false filing date. At Aguilar's
instruction, the paralegal then took the case file to the copy machine,
copied a document in it (so as to suggest that was the reason he had
requested it) and then placed the falsely stamped pleading in the case
file. The log book and case file were then returned to the filing clerk.
This was not an isolated incident. On several other occasions, the
paralegal was instructed by Weitz & Luxenberg attorney Ochigrassi or Weitz
& Luxenberg paralegal Ostracher to take blue-backed documents to Aguilar
so that false Filed Stamps could be affixed on them. Once Aguilar took
the paralegal upstairs at the courthouse at 60 Centre Street and made him
wait on a bench. She then took the documents into another room and
brought them back, all with back-dated Filed Stamps newly affixed. On
another occasion, they met at the court's rotunda on the first floor. At
that time, Aguilar simply ducked behind a column and quickly stamped the
documents with the earlier, but false, filing dates. On yet another
occasion, Aguilar met the paralegal outside the side entrance to 60
Centre Street to effectuate the falsification of filing stamps on case
documents generated by Weitz & Luxenberg. On every occasion, Aguilar took
steps to ensure that her conduct was not being observed by others.
Under Rule 3025 of New York's Civil Practice Law & Rules, amended
complaints must be served on each party to the action, including each
named defendant, and each named defendant must serve and file a response
thereto. Weitz & Luxenberg's filing of fraudulently time-barred claims
increased the litigation costs for all defendants in those cases.
Prior to December 17, 1999, GAF had a valid, written contract with CCR
known as the Producer Agreement Concerning Center for Claims Resolution
(the "Producer Agreement"). The express purpose of the Producer Agreement
was to "provide for the administration, defense, payment, and disposition
of asbestos related claims" for the benefit of its participating
members. Under the terms of the Producer Agreement, CCR could only
terminate its contract with GAF under certain conditions and subject to
certain restrictions enumerated therein.
Pursuant to the terms of the Producer Agreement, GAF designated CCR as
its sole agent to administer and arrange on its behalf for the
evaluation, settlement, payment or defense of all asbestos-related claims
against it. In this capacity, CCR investigated claims, tried cases, and
negotiated settlements on behalf of all of its members, thereby
substantially reducing GAF's transaction costs in the asbestos claim
By causing CCR to expel GAF, Defendants maliciously and without
justification carried out the extortionate threats made in Defendants'
campaign to coerce GAF to cease its efforts to lobby Congress for passage
of the Fairness in Asbestos Claims Act, depriving GAF of the ongoing
benefits of CCR membership and causing GAF special damages and other
From January 17, 2000 to January 5, 2001, GAF was forced to establish
and fund a free-standing network of defense counsel and to litigate
asbestos bodily injury cases on its own. These expenses exceed the sum of
These counts allege mail and wire fraud in association with a number of
claimants. In the first complaint, Holdings had not identified the cases
in which the claimants were plaintiffs. The Complaint now asserts that
the claimants were plaintiffs in five cases: Beverly Jean Brown v. Keene
Corp., No. 93-10952 (98th Judicial District Court of Travis Co., TX);
Jimmy Leon Smathers v. Owens-Corning Fiberglas Corp., No. 95-06329 (126th
Judicial District Court of Travis Co., TX); Kenneth Shirley v.
Owens-Corning Fiberglas Corp., No. 95-10495 (250th Judicial District
Court of Travis Co, TX); C.J. English v. Owens-Corning Fiberglas Corp.,
No. 96-06308 (134th Judicial District Court of Dallas Co., TX); Edwin Ray
McCray v. Owens-Corning Fiberglas Corp., No. 95-3109 (28th Judicial
District Court of Neuces Co., TX). Further, Holdings alleges that Baron &
Budd submitted false and fraudulent affidavits, and that GAF justifiably
and reasonably relied upon these false and fraudulent affidavits to its
detriment in the amount of several hundred thousand dollars.
Holdings has amended its pleading to allege specifically that
Defendants intended to prevent GAF; Samuel J. Heyman, the former chairman
and chief executive officer of GAF ("Heyman"); and other members of the
Coalition for Asbestos Resolution from testifying before Congress in
support of FACA, or to cause their testimony to be less favorable to
Holdings has included specific examples of attempts by Defendants to
intimidate, threaten, or corruptly persuade former asbestos producers
with the intent of preventing their testimony before Congress and causing
them to withhold their testimony from Congress. With respect to GAF and
Heyman, Holdings now alleges that Defendants had actual knowledge that
Heyman was expected to be a witness in Congressional hearings on FACA.
The conduct alleged above was undertaken with the specific intent of
causing Heyman not to appear or, if he did appear, to moderate his
testimony to be less unfavorable to the Defendants. Further, with respect
to the other former asbestos producers, Defendants actually and correctly
believed that some of their number would be called (or would voluntarily
appear) as witnesses in those ...