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The Third U.S. Circuit Court of Appeals has revived a fraud case against a unit of BASF SE BAS.XE -0.42% and the New York law firm that defended it for years in asbestos cases, Cahill Gordon & Reindel LLP, overturning a lower court judge who dismissed the purported class action.
A group of plaintiffs — representatives of alleged asbestos victims — claimed that BASF and Cahill systematically collected and destroyed or hid evidence of asbestos-contaminated products produced by a BASF predecessor, Engelhard, in order to evade liability and forge quick settlements.
The Third Circuit decision, handed down Wednesday, leaves BASF and Cahill Gordon to defend a possible class action that accuses the company of lying about the toxic material, then depriving those injured by it of their day in court.
“This action is not itself an asbestos injury case, but rather an action about Engelhard and Cahill’s conduct when they confronted asbestos injury cases in state courts around the country,” the appeals court wrote.
In a prepared statement, BASF spokesman Joseph M. Jones noted that multiple counts in the purported class action were not revived on appeal.
“The remaining claims concern asbestos-injury suits brought decades ago against Engelhard, a company BASF acquired in 2006, relating to Engelhard’s talc mining operations that ended in 1983,” the company said in a statement. “BASF is evaluating its options to obtain further review of the Court of Appeals’ decision.”
In a statement, Cahill said: “[T]he firm is confident that the facts will demonstrate that the allegations against it are unwarranted and that the firm’s conduct met all professional conduct.”
Jeffrey Pollock, who argued the appeal for those suing in the name of deceased relatives, said the decision was a “carefully written” analysis of the rule that protects lawyers from being sued over misstatements in court, the so-called litigation privilege.
Plaintiffs allege that the defendants did more than lie in court, according to the Third Circuit. They accuse the defendants of engaging in a scheme aimed at the integrity of the judicial process that included the destruction of evidence. “The New Jersey litigation privilege does not immunize systematic fraud directed at adversarial parties and the courts,” the appeals court said.
Engelhard mined talc used in products from wall board to children’s balloons, according to court papers filed by the plaintiffs. The company, court papers say, marketed its talc as “a viable asbestos substitute,” even though laboratory reports showed the talc contained asbestos.
According to the plaintiffs, the alleged scheme had its roots in a 1979 asbestos injury lawsuit filed by the estate of Thomas Westfall, a deceased rubber industry worker who was allegedly exposed to asbestos-containing talc products. The company, represented by Cahill, settled the case, according to the complaint.
But the corporation thereafter allegedly rounded up and destroyed documents referring to the asbestos-contaminated talc, the complaint says. Cahill, according to the plaintiffs, helped create a defense arsenal that included allegedly false affidavits and expert reports to be used to defend or ward off lawsuits.
Ultimately, Donna Paduano, the daughter of a former BASF research chemist, was stricken with mesothelioma, a serious lung disease associated with asbestos. In 2009, in the course of litigation concerning her death, her father testified about the company’s mid-1980’s collection of data, analyses and reports about the contamination, a collection of material which had disappeared.
BASF’s new lawyers uncovered and produced a trove of old documents, which had allegedly been housed in a Cahill storage facility. Those documents triggered the purported class action.