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December 30th, 2010

Fraud Suit Against Personal Injury Law Firm Reinstated

A federal appellate court today reinstated a lawsuit brought against a Pittsburgh personal injury firm for allegedly engaging in a scheme designed to generate fraudulent asbestos claims.  ATRA had filed an amicus (friend of the court) brief, urging the court to take such action.

A federal trial court in West Virginia had earlier dismissed CSX Transportations’ claims against the law firm, Peirce Raimond & Coulter, as untimely.  Rather than find that the company should have been on notice that the asbestos claims were fraudulent when filed, the U.S. Court of Appeals for the Fourth Circuit recognized that it was only later that the company learned or should have known of the alleged fraud.

The lawsuit was featured in the 2009-10 Judicial Hellholes report supporting its naming West Virginia last year’s #1 Judicial Hellhole:

After being hit with one too many questionable claims in West Virginia, CSX Transportation decided it had had enough. It filed its own lawsuit in federal court against the Pittsburgh, Pennsylvania, law firm Robert Peirce & Associates, P.C. and a physician, alleging that they knowingly conspired to file fraudulent asbestos claims.  CSX’s suit originally stemmed from several suspicious asbestos claims. For example, Earl Baylor had attended not one but three asbestos screenings sponsored by the law firm between 1999 and 2003. In the first, Dr. Ray Harron found no evidence of asbestosis.

The second x-ray was deemed unreadable. In the third, Dr. Harron found signs of asbestosis. Mr. Baylor’s claim was one of over two hundred claims brought in a class action against CSX in West Virginia state court, which has been “voluntarily discontinued.”

CSX sued the lawyers and doctors involved under the Racketeer Influenced and Corrupt Organizations Act (RICO), usually used to prosecute organized crime. CSX documented a “fraudulent entrepreneurial model” whereby lawyers paid doctors who spent virtually all their time working on litigation to find asbestosis in a certain percentage of screened cases.  According to CSX, the screening companies intentionally produced low-quality x-rays that would show more white marks in the lungs, which a doctor could then rely upon to make inaccurate diagnoses. Lawyers also allegedly altered questionnaires filled out by clients without their knowledge in order to suggest that the clients were exposed to the defendant’s products. Dr. Harron, the physician relied upon by the lawyers to supply diagnoses for the lawsuits, was exposed by a federal judge in 2005 as part of a virtual litigation machine.  After Dr. Harron was discredited, the lawyers hired another doctor and paid him over a million dollars to rubber stamp Dr. Harron’s prior findings, which he did 90 percent of the time, according to CSX.

In a series of 2009 rulings, the federal court found that CSX had failed to bring the lawsuit quickly enough and did not provide sufficient evidence of the law firm’s actual intent to defraud the company. It dismissed the case. The court held that only actual and direct evidence that the law firm knew that its clients did not have asbestosis would suffice to state a claim for fraud.

The Fourth Circuit ruling clears the way for the case to move forward.  “We thank the Court for its thoughtful decision, which will allow us to have the merits of these important matters thoroughly reviewed by a trial court,” the company said, as reported by Legal Newsline.

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