How to (allegedly) hide evidence, lie to opponents – and get away with it

October 3, 2014

If you want to know why the American public has such a dim view of lawyers, you should read an opinion issued last month by the 3rd U.S. Circuit Court of Appeals in Williams v. BASF.

The opinion describes the allegations of a class of onetime asbestos plaintiffs who claim that a BASF predecessor and lawyers at Cahill Gordon & Reindel conspired to cheat them out of their rightful recovery in decades-old asbestos suits. According to the plaintiffs, who have depositions and document evidence to back their accusations, Cahill and its former client, a BASF predecessor, systematically hid and destroyed evidence that the company’s products contained asbestos.

The alleged coverup began in the early 1980s and supposedly affected thousands of asbestos plaintiffs who settled on the cheap or dismissed cases because they were deprived of evidence they should have had. After a former company scientist mentioned the supposed scheme at a deposition in 2009, six former plaintiffs filed a class action against Cahill, BASF and assorted individual defendants in federal court in New Jersey, claiming that they’d been defrauded in their previous cases.

It quickly turned into a case study of the litigation privilege, the age-old doctrine that says lawyers and parties can’t be sued for what they say in court proceedings. U.S. District Judge Stanley Chesler of Newark tossed the class action, concluding that the privilege shielded Cahill and BASF. The 3rd Circuit vehemently disagreed. The privilege, “has never applied to shield systematic fraud directed at the integrity of the judicial process,” wrote Judge Julio Fuentes for a panel that also included Chief Judge Theodore McKee and Judge Thomas Ambro. “Nor should it.”

This week, Cahill and BASF filed briefs asking the 3rd Circuit to reconsider its holding on the scope of the litigation privilege in New Jersey. Cahill, which is represented by Williams & Connolly, argued that the 3rd Circuit ruling contradicts New Jersey state-court precedent. It asked the three-judge panel to seek the New Jersey Supreme Court’s views on the scope of the litigation privilege. BASF’s lawyers at Kirkland & Ellis, whose brief is substantially longer than the Cahill filing, also want the 3rd Circuit to ask the state high court for its opinion, though BASF suggested the certification could come from either the original panel or the en banc 3rd Circuit. (Hat tip to my friend Susan Beck at the Litigation Daily, who wrote about the briefs on Thursday.)

BASF and Cahill make the same essential argument: Under New Jersey case law, the litigation privilege is absolute, shielding even lies and misconduct as long as they’re committed in the course of a court proceeding. (To be clear, the privilege only bars suits based on conduct and statements in litigation. It doesn’t protect misbehaving lawyers from ethics proceedings or duplicitous clients from sanctions.) The 3rd Circuit may not like New Jersey’s precedent, BASF and Kirkland said. But the federal court “cannot convert New Jersey’s absolute litigation privilege into a qualified one, and thereby create an exception to the litigation privilege that New Jersey’s highest court has rejected,” wrote BASF. (BASF, I should note, acquired Cahill’s former client in 2006, after the alleged asbestos misconduct took place.)

The two briefs cite a bunch of New Jersey decisions holding that the privilege applies even to “unethical and negligent attorneys,” as one of the cases put it. Their strongest precedent is a 2006 opinion from the New Jersey Supreme Court in Loigman v. Township of Middletown, in which the state justices said that a town attorney couldn’t be sued for deceiving an administrative law judge in order to obtain an order barring a resident from a public hearing. The case began with a disgruntled police officer who believed he was wrongly denied a promotion. Larry Loigman, an unsuccessful candidate for town office who had a beef with the town’s labor lawyer, showed up at the hearing. The lawyer told an administrative law judge – falsely – that Loigman was a witness and had to be sequestered. Loigman sued, and the trial judge let his case proceed despite the litigation privilege. (He eventually won an injunction, and fees and costs.)

The New Jersey Supreme Court said, however, that while it didn’t condone the township lawyer’s conduct, he was immune from Loigman’s suit. “The litigation privilege must have sufficient breadth to advance the best interests of the administration of justice,” the opinion said. “In applying the privilege, we consider neither the justness of the lawyers’ motives nor the sincerity of their communications.” The Supreme Court said that acting in bad faith and lying to a judge “will not be tolerated and will subject an attorney to discipline,” but that the litigation privilege is absolute.

According to BASF and Cahill, the Loigman case shows that in New Jersey, the privilege stretches wide. (Indeed, BASF said, that’s true just about everywhere except Hawaii.) The 3rd Circuit had interpreted the New Jersey Supreme Court’s words about the best interests of justice to mean that Cahill and BASF could be held to account for an alleged “fraud calculated to thwart the judicial process,” because “the purposes of the privilege are never served by allowing counsel to practice deceit and deception in the course of litigation, nor by permitting counsel to make false and misleading statements in the course of judicial proceedings.” But BASF’s new brief said that the statements and conduct alleged in the asbestos victims’ suit against it and Cahill “fall in the heartland of the speech the privilege protects from civil liability.”

As you would expect, class counsel for the asbestos plaintiffs, Jeffrey Pollock of Fox Rothschild and Christopher Placitella of Cohen, Placitella & Roth, say that Cahill and BASF went way beyond the boundaries of the courtroom conduct shielded by the privilege. There’s a difference, they said in a joint interview Friday, between words and deeds. The original purpose of the litigation privilege, Pollock said, was to reassure lawyers and witnesses that they could deliver their positions without the fear of reprisals. The goal was to aid the search for truth – exactly what Pollock and Placitella contend Cahill and BASF worked so hard to impede, in an alleged conspiracy that wasn’t confined to particular proceedings. “It’s one thing to file a false pleading,” as in the Loigman case, Pollock said. “It’s a different thing to collect evidence and destroy it.”

Pollock and Placitella said they very much doubt the 3rd Circuit will ask for the New Jersey Supreme Court’s opinion. For one thing, the appeals court already passed on that invitation once, when plaintiffs suggested at the beginning of the appeal that the panel certify the case to the state high court. And for another, said Placitella, the federal appellate judges seemed very much to want to address the scope of the privilege. “That’s their job,” he said. “I believe this court could not accept that the New Jersey Supreme Court intended for the privilege to apply to this.”

Cahill has previously said that the 3rd Circuit opinion was based on unproved allegations. It is confident, it said, “that the facts will demonstrate that the allegations against it are unwarranted and that the firm’s conduct met all professional standards.”

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