Court Refuses to Dismiss Garlock’s RICO Complaints Against Plaintiff Law Firms

Following the well-publicized decision in the Garlock bankruptcy, Garlock commenced a number of actions in federal court against asbestos plaintiffs’ law firms that allegedly engaged in fraud in the settlement of their clients’ mesothelioma claims against Garlock. In two of these actions, the defendant plaintiffs’ firms moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) on a variety of grounds, including that the claims were time-barred. One of the arguments was that Garlock knew of the alleged misrepresentations so long ago that any Statute of Limitations expired.

In the action against Shein Law Center, the court held that since it is alleged that Garlock did not become aware of the misrepresentation until 2013, any RICO claim is well within the statute of limitations: “Defendants argue at length that Garlock’s claims are time-barred because it was aware of the fraud alleged in the Complaint while it was settling the mesothelioma claims against it in 2009. Defendants correctly note that the statute of limitations  for Garlock’s federal civil RICO and state law fraud claims are three and four years, respectively, and that the Complaint was not filed until January 9, 2014. Because Garlock “knew or should have known” of its injury while these settlement negotiations were taking place, Defendants argue, its claims are well outside these deadlines.  In response, Garlock argues that it did not discover Defendants’ fraud until January 2013; thus the Complaint was filed well within the applicable statutes of limitations. Indeed, the Complaint alleges as much. (See, e.g., Compl. ¶ 12). Perhaps more importantly, Garlock notes that the statute of limitations is an affirmative defense,see Fed. R. Civ. P. 8(c)(1), and argues that it is not appropriate for consideration on a motion to dismiss, see Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir. 2007) (en banc) (‘[A] motion to dismiss filed under Federal Rule of Civil Procedure 12(b)(6), which tests the sufficiency of the complaint, generally cannot reach the merits of an affirmative defense, such as the defense that the plaintiff’s claim is time-barred.’).”

In the case against the Simon law firm, the court reached the same conclusion: “Here, the point in time when Garlock knew or should have known of the alleged fraud being committed against it is clearly in dispute. Having carefully reviewed the Complaint and the parties’ arguments on this issue, the Court finds that all the facts necessary to resolve this issue do not clearly appear on the face of the complaint; thus Defendants’ motion to dismiss the claims as time-barred will be denied as premature. Defendants are free to re-assert these arguments at summary judgment.”

The court also denied the motions on various State Court privileges and immunities as premature on a 12(b)(6) motion to dismiss.

Read the first decision here.

Read the second decision here.