Appeals judges: Chicago not right court for John Crane's asbestos fraud RICO claims vs Simon Greenstone, Shein Law

By Jonathan Bilyk | Jun 4, 2018

A federal appeals panel in Chicago has agreed industrial seals and couplings maker John Crane Inc. should be afforded the chance to air its claims two law firms allegedly engaged in racketeering and fraud in the way they pressed asbestos-related personal injury claims against the company in the past.

However, the judges also agreed with lower court judges that Chicago federal court is not the right place for John Crane can pursue its claims.

On June 4, a three-judge panel for the U.S. Seventh Circuit Court of Appeals upheld the dismissal of JCI’s lawsuits against the Shein Law Center and the firm of Simon Greenstone Panatier Bartlett.

Seventh Circuit Judge Michael S. Kanne authored the decision, with Chief Judge Diane P. Wood and Circuit Judge David Hamilton concurring.

“Nothing in this opinion is meant to weigh on the merits of JCI’s allegations,” Kanne wrote. “The claims JCI levies are serious and ought to be examined. The Northern District of Illinois is simply the wrong jurisdiction.”

Chicago-based JCI had filed suit in 2016 in Chicago federal court, bringing two separate actions against the Philadelphia-based Shein and Dallas-based Simon Greenstone.

The lawsuits alleged the law firms had engaged in a “scheme” designed to make JCI bear greater responsibility – and pay more - for asbestos-related illnesses allegedly suffered by their clients, when other manufacturers, who went belly-up years earlier, should have borne a greater share of the blame.

As asbestos-related litigation swept the country in recent decades, many manufacturers whose names routinely landed on lawsuits related to mesothelioma lung cancer and other conditions opted to go into bankruptcy, placing a limited amount of money into trusts designed specifically to pay future asbestos-related injury claims. The structure allowed the companies to end the onslaught of lawsuits, asserting they should bear responsibility for injuries and illnesses suffered by workers and others who regularly came into contact with products containing asbestos.

However, among those companies regularly named as defendants, JCI has remained one of the few to remain in business.

As a result, the company has continuously defended against a steady stream of asbestos-related injury lawsuits in Chicago courts and elsewhere.

However, in the 2016 lawsuits, the company asserted the two law firms had improperly sued them, engaging in a “scheme” to boost the returns they could secure for them and their plaintiffs.

During litigation against JCI, the company asserted, the plaintiffs would repeatedly deny or bring motions to limit JCI’s ability to claim the plaintiffs’ illness could be attributed more to products made by other, now-bankrupt manufacturers, who used a different, “much more dangerous” form of asbestos in their products.

However, after securing judgments or settlements from JCI, the plaintiffs then allegedly would file claims against the bankruptcy trusts for the manufacturers of those other products.

“In essence, Defendants systematically and falsely denied that their clients were exposed to numerous other asbestos containing products in litigation against JCI, and then once that litigation was complete, filed claims with asbestos bankruptcy trusts set up by bankrupt companies,” JCI wrote in its June 2016 complaint. “The claims filed with those trusts were based on claimed exposures that were explicitly denied and fraudulently concealed in the litigation against JCI.”

JCI’s lawsuits came on the heels of litigation launched by gasket maker Garlock Inc. in North Carolina federal court, alleging a similar pattern of behavior by those law firms.

That pattern was unearthed thanks, in part, to a legal challenge launched by The Cook County Record’s sister publication, Legal Newsline, to a court order sealing evidence in Garlock’s bankruptcy proceedings, which showed that, after, several dozen asbestos defendants established bankruptcy trusts from 1999-2010, Garlock’s liability increased eight-fold.

Garlock has since settled those actions.

However, two Chicago federal judges shut down JCI’s lawsuits. While JCI is based in Chicago, the judges said that connection is not sufficient to allow the company to press its claims against the out-of-state law firms for their lawsuits, which were filed in Pennsylvania, Texas and California.

JCI appealed the question to the Seventh Circuit.

And, on appeal, the judges said the lower court judges had not erred in finding the cases did not belong in Chicago courts.

John Crane asserted the two law firms’ allegedly fraudulent communications, sent to its executives and attorneys in Chicago, justify keeping the cases in Illinois.

The judges disagreed, however.

“Here, the defendants sent allegedly fraudulent communications to JCI through JCI’s local counsel in Texas, Pennsylvania and California,” the judges said. “And the communications were incidental to the litigation, which is the basis of JCI’s claims. For these reasons, the communications between JCI and the defendants in these cases were not enough to establish specific personal jurisdiction in Illinois.”

The judges further noted it also would not matter if John Crane could uncover evidence the law firms had also filed claims against asbestos bankruptcy trusts in Illinois.

“… The location of these trusts was entirely coincidental and had nothing to do with the defendants’ decisions to file claims,” the judges wrote.

“Shein and Simon Greenstone’s alleged unlawful conduct at issue in this case was targeted at the litigation conducted in Texas, Pennsylvania and California,” the judges said. “All contacts the defendants had with JCI in Illinois were incidental to the litigation proceeding elsewhere. It would be unfair to require the defendants to appear in Illinois because of these limited contacts.”

JCI is represented in the action by attorneys Katherine G. Minarik, Mark E. Ferguson, Katharine A. Roin and Matthew R. Ford, of Bartlit Beck Herman Palenchar & Scott LLP, of Chicago.

Shein Law Center is defended by attorneys Daniel T. Brier and Donna A. Walsh, of Myers, Brier & Kelly LLP, of Scranton, Pa., and Eric D. Kaplan and Christopher S. Wunder, of Kaplan Papadakis & Gournis LLP, of Chicago.

Simon Greenstone is represented by attorneys Michael W. Magner Sr., Mark A. Cunningham and Avery B. Pardee, of Jones Walker LLP, of New Orleans, and David M. Macksey and Joseph R. Marconi, of Johnson & Bell Ltd., of Chicago.

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Organizations in this Story

Bartlit, Beck, Herman David M. Macksey John Crane Inc. Johnson & Bell Jones Walker LLP Joseph R. Marconi Kaplan Papadakis & Gournis Mark E. Ferguson Myers Brier & Kelly Shein Law Center Simon Greenstone Panatier Bartlett U.S. Court of Appeals for the Seventh Circuit U.S. District Court for the Northern District of Illinois

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