The RICO Trend in Class Action Warfare

• Author: Briana Lynn Rosenbaum
• Position: Associate Professor, University of Tennessee College of Law
• Pages: 165-221

165

The RICO Trend in Class Action Warfare

Briana Lynn Rosenbaum*

ABSTRACT: Aggregate litigation, including class-actions and mass actions,

have been under attack for decades. Recent Supreme Court cases have further

weakened class actions, and the current Congress is considering numerous

aggregate litigation and tort reform efforts. Recently, defendants in aggregate

litigation have employed an additional tactic by filing civil RICO cases

against plaintiffs’ counsel. In a number of these cases, defendants’ primarily

allegation is that plaintiffs’ counsel are fraudulently inflating the value of

lawsuits by filing baseless lawsuits as part of aggregate litigation. In some of

these cases, the predicate acts consist solely of litigation filings: the filing of

complaints and related litigation documents in aggregate litigation. Members

of the defense bar have made no secret of the fact that these RICO cases are

part of a larger strategy to prevent plaintiffs’ attorneys from bringing large-

scale litigation. Despite the rich literature on aggregate litigation, there is little

scholarship exploring this recent aggressive use of RICO by the defense bar

and corporate interest groups to punish plaintiffs’ attorneys for the alleged

fraudulent filing of aggregate litigation.

This Article pulls together several previously unassociated areas of

law



including RICO, Rule 11, complex litigation, SLAPP motions, and

asbestos litigation



to develop a model for defendants’ use of RICO as a tool

of reprisal. It argues that holding plaintiffs’ attorneys liable under civil RICO

solely for litigation activities is illegal, results in the lamentable federalization

of state common law, and leads to improper forum shopping. The RICO

reprisal also avoids legitimate state protections for litigation activity and is a

thinly veiled attempt by the defense bar to further weaken aggregate litigation

by targeting the plaintiffs’ attorneys themselves. This use of RICO punishes

*

Associate Professor, University of Tennessee College of Law. For helpful conversations

and astute insights regarding various drafts of this Article, I would like to thank Dwight Aarons,

Bradley Areheart, Ben Barton, Bernard Burk, Brooke Coleman, Judy Cornett, Mark Fenster,

Maggie Gardner, Michael Higdon, Alexandra Lahav, Elizabeth Lear, Elizabeth McCuskey,

Tamara Piety, Richard Rueben, Norman Spaulding, Gregory Stein, and David Wolitz. I also

received valuable suggestions from participants in the Second Annual Civil Procedure Workshop,

the 2016 Grey Fellows Forum at Stanford Law School, the “Litigation and Professional

Responsibility” panel at the 2016 Southeastern Association of Law Schools Annual Conference,

and from the faculty at the University of Florida College of Law. Finally, thank you to Matthew

Sipf and Garett Franklyn, my brilliant student assistants.

166 IOWA LAW REVIEW [Vol. 102:165

the aggregate litigation device itself, rather than the underlying fraudulent

conduct; as a remedy for frivolous aggregate litigation conduct, it is both over-

and under-inclusive. The Article concludes by proposing several alternatives,

including effectively barring any civil RICO action targeting attorneys’ pure

litigation activities without a showing of malicious intent—a proposal that

draws on existing common law litigation privilege doctrine.

I. INTRODUCTION ............................................................................... 166

II. REMEDIES FOR FRIVOLOUS CLAIMS IN AGGREGATE LITIGATION ...... 173

A. ACHIEVING A BALANCE: GOALS OF REGULATION OF MERITLESS

LITIGATION ............................................................................ 175

B. ALTERNATIVE REGULATION OF LITIGATION CONDUCT .............. 178

III. CIVIL RICO BACKGROUND .............................................................. 184

IV. THE CURRENT LANDSCAPE .............................................................. 188

A. CSX AND THE RICO REPRISAL MODEL .................................... 188

B. OTHER EXAMPLES OF USE OF RICO AGAINST AGGREGATE-

LITIGATION PLAINTIFFS’ ATTORNEYS ....................................... 195

V. THE RICO REPRISAL—ANALYSIS ...................................................... 200

A. EXPANSION OF RICO TO COVER GARDEN-VARIETY WRONGS ...... 201

B. ELEVATION OF RULE 11 VIOLATIONS TO FEDERAL TORT ........... 204

C. FEDERALIZATION OF STATE COMMON-LAW MALICIOUS-

PROSECUTION ACTIONS ........................................................... 208

D. PUNISHMENT OF THE AGGREGATE LITIGATION TOOL

SPECIFICALLY .......................................................................... 211

VI. PROPOSALS ...................................................................................... 216

VII. CONCLUSION .................................................................................. 220

I. INTRODUCTION

Many plaintiffs would be shocked to learn that a law firm could file a mass

action consisting of over 5300 claims on behalf of asbestos victims and then

be forced to pay over $7 million dollars to the opposing party because 11 of

the plaintiffs—or just 0.2%—did not actually suffer the alleged harms. Yet

that is precisely what happened in CSX Transportation, Inc. v. Gilkison, in which

the defendants in a mass-action case aggressively and unconventionally used

2016] THE RICO TREND 167

the federal Racketeer Influenced and Corrupt Organizations (“RICO”)

statute against their opponents.1

The CSX decision reflects a broader trend in which corporate defendants

are fighting back—seeking to punish plaintiffs’ attorneys by bringing RICO

claims alleging that plaintiffs’ attorneys have brought baseless lawsuits mixed

in with their clients who actually suffered an injury.2 Members of the defense

bar have made no secret about the fact that these RICO cases are part of a

larger strategy to stamp out large-scale aggregate litigation.3

1. See generally 18 U.S.C. § 1962 (2012) (RICO statute); 3 Defendants in Asbestos Fraud

Conspiracy Agree to $7.3 Million Settlement: CSX Trans. v. Peirce, 37 NO. 3 WESTLAW J. ASBESTOS 4 (Nov.

21, 2014). CSX Transportation, Inc. v. Gilkison is a civil RICO case by a railroad company against

attorneys at the now-defunct law firm, Peirce Raimond & Coulter PC (“the Peirce firm”), for

collaborating with a plaintiff-friendly expert to hide baseless lawsuits among thousands of asbestosis

claims against CSX. See generally Amended Complaint, CSX Transp., Inc. v. Gilkison, No. 5:05-cv-202

(N.D.W. Va. July 5, 2007). Despite the fact that CSX identified only 11 “baseless” claims out of the

Peirce firm’s over 5300 total asbestosis claims, CSX obtained a jury verdict of about $430,000 in its

favor, which was automatically tripled under RICO to roughly $1.3 million. 3 Defendants in Asbestos

Fraud Conspiracy Agree to $7.3 Million Settlement: CSX Trans. v. Peirce, supra, at 4. This verdict also

made the Peirce firm liable for potentially $10 million in costs and attorneys’ fees, as RICO liability

triggers automatic shifting of both the costs of the underlying litigation and the costs and attorney’s

fees of the civil RICO action. The Peirce firm un derstandably settled the case for $7.3 million

dollars. Emily Field, CSX, Asbestos Attys End 4th Circ. RICO Fight with $7.3M Deal, LAW360 (Nov. 6,

2014, 7:20 PM), http://www.law360.com/articles/594159/csx-asbest os-attys-end-4th-circ-rico-

fight-with-7-3m-deal. As one of the lawyers for CSX boasted, this is “believed to be the first civil

verdict in history to find lawyers in violation of federal racketeering laws for the filing of fraudulent

lawsuits.” See Samuel L. Tarry, Jr., Ethical and Professional Lessons from CSX Transp. Inc. v. Peirce et al.,

DRI ASBESTOS MED. SEMINAR PUBLICATIONS 535, 539 (2013), https://www.thelibrarybook.net/pdf-

ethical-and-professional-lessons-f rom-csx-transp-inc-v-peirce-et-al.html. For a full case study of CSX,

see infra Part II.

2. Tiger Joyce, How Business Can Fight Fraudulent Lawsuits: Trial Lawyers May Increasingly

Feel the Sting of the Racketeer Influenced and Corrupt Organizations Act, WALL STREET J. (Mar. 6, 2014,

7:28 PM),http://www.wsj.com/articles/SB10001424052702304815004579419600026911302.

In this Article, I use the term “aggregate litigation” to mean any category of large-scale litigation

in the judicial system involving multiple parties. Other authors have used the term “group

litigation” to describe this same category of litigation. See, e.g., JOHN C. COFFEE, JR.,

ENTREPRENEURIAL LITIGATION: ITS RISE, FALL, AND FUTURE 1–7 (2015). The term aggregate

litigation includes a number of different devices, many of which this Article will reference. These

include: (1) class actions, or litigation where representative plaintiffs litigate on behalf of

numerous absent class members, 1 NEWBERG ON CLASS ACTIONS § 1:1 (William B. Rubenstein

ed., 5th ed. 2016); (2) mass actions, a nebulous term broadly meaning a non-representative

action in which numerous claims are tried jointly, id. § 6:24; and (3) multidistrict litigation

(“MDL”), or groups of separate cases that are consolidated and temporarily transferred to one

state or federal court, usually for determination of limited pretrial common questions, see DAVID

F. HERR, ANNOTATED MANUAL FOR COMPLEX LITIGATION §§ 20.13–14 (4th ed. 2016).

3. Tiger Joyce, President of the American Tort Reform Association (“ATRA”), argued that

RICO “could become a powerful tool in the hands of companies that are tired of lawsuit

shakedowns.” See Joyce, supra note 2. Darren McKinney, also of the ATRA, declared that

“[c]ompanies are watching” suits like CSX “because they’re sick and tired of unfair mass-tort

verdicts.” Paul M. Barrett, Chevron’s $19 Billion Day in Court: It’s Battling a Massive Judgment by

Targeting a Plaintiffs’ Lawyer, BLOOMBERG BUSINESSWEE K (Oct. 17, 2013, 4:36 PM),

http://www.bloomberg.com/bw/articles/2013-10-16/chevrons-day-in-court. According to Mr.