The RICO Trend in Class Action Warfare

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

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... (see full summary)

 
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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.

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