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BASF, Cahill Law Firm to Pay $72.5 Million in Talc-Scam Deal (5)

July 24, 2020, 5:23 PM

BASF SE, the world’s biggest chemical maker, and a law firm agreed to pay a combined $72.5 million to resolve claims they hid evidence that certain talc products contained asbestos in an effort to scuttle thousands of lawsuits.

Executives of BASF, along with lawyers from the New York-based Cahill, Gordon & Reindel LLP, agreed to the joint settlement, without saying how much each would pay, according to a filing Thursday in federal court in New Jersey. Including legal fees and other costs, the total value of the settlement is almost $100 million, the filings say.

BASF unit Engelhard Corp. owned a talc mine in Vermont that produced the mineral for use in industrial settings and in consumer products such as wallboard and balloons used for kids’ parties. It later changed its name to BASF Catalysts LLC. BASF acquired Engelhard for $5 billion in 2006.

The settlement resolves claims that credibly alleged actions by Engelhard and its law firm amounted to a “systematic fraud” designed to “thwart the judicial process,” a federal appeals court said in 2014. That court resurrected the case after a judge threw it out.

The allegations involve Engelhard’s conduct prior to the BASF acquisition and “relate to talc sold from 1967 to 1983,” Maureen Paukert, a spokeswoman for BASF, said in an email. “The talc at issue in the lawsuit was primarily used in industrial applications, such as auto body filler, and generally not used in any cosmetic or personal care products such as baby powder.”

Julie Cohen, a Cahill spokeswoman, said Friday the allegations about the law firm’s mishandling of Engelhard’s asbestos defense reach back to the 1980s. “This matter relates to a representation that was undertaken more than 35 years ago, and we are pleased to have resolved it amicably,” Cohen said in an emailed statement.

Compensating Claims

BASF and Cahill didn’t admit any wrongdoing and maintain the allegations against them are meritless, according to court filings.

Under the terms of the deal, potentially thousands of asbestos claimants will receive compensation. The settlement also allows plaintiffs who dropped their cases to revive them, if possible, according to the filing. Asbestos claimants who sued Engelhard and BASF between March 7, 1984 and March 30, 2011 -- and who voluntarily dismissed their cases or had them thrown out by judges -- are eligible for compensation, according to court filings.

Talc litigation has become a hot topic recently as Johnson & Johnson faces a wave of suits alleging its iconic Baby Powder caused cancer. The company, which denies the claim, pulled its talc-based version of the product off the market in the U.S. and Canada in May.

Federal regulators last year found traces of asbestos in one lot of the powder, which amounted to about 33,000 bottles. J&J recalled the tainted products and retailers such as Walmart Inc. and CVS Health Corp. took it off shelves. The world’s largest maker of health-care products faces almost 20,000 lawsuits accusing its baby powder of causing either ovarian cancer or mesothelioma, a cancer specifically linked to asbestos exposure.

BASF and other makers of building products are still grappling with asbestos litigation, which began in the 1970s and has turned into the longest-running mass tort in U.S. history. According to a 2005 study by the Rand Corp., companies and insurers had paid at least $70 billion to settle injury claims tied to asbestos-laden products.

In 2012, a federal judge in New Jersey dismissed a proposed class-action suit in which asbestos claimants alleged Engelhard and its lawyers schemed to work “a fraud on the court” by lying about the presence of asbestos in the company’s talc products.

‘Rigged the Game’

A federal appeals court in Philadelphia revived the case, saying asbestos claimants properly raised fraud claims and produced evidence showing Engelhard officials and Cahill’s lawyers “rigged the game from the beginning,” Judge Julio Fuentes wrote in a 42-page ruling.

BASF first had to defend the litigation practices of Engelhard and Cahill in 2009, when Donna Paduano sued in state court in New Jersey over her mesothelioma. Paduano, who never worked at Engelhard, claimed she was exposed to asbestos from washing her scientist father’s clothes or visits to his workplace. She later settled her claim.

In a deposition by her father, David Swanson, the ex-research scientists admitted company officials knew about the asbestos in its talc “for years.” That triggered an investigation by lawyers, such as Chris Placitella, that led to the discovery of what they called a cover-up of evidence of the carcinogen in Engelhard’s talc, court filing show.

The cover-up began after a lawsuit filed in 1979 blamed the mesothelioma death of a tire worker on Engelhard talc. Engelhard settled in 1983 and the pre-trial evidence, including testing that showed varying levels of asbestos from a Vermont mine that the company ran since 1967, was sealed by a confidentiality order. The company argued in succeeding cases that its talc was asbestos free, according to the filings.

No-Asbestos Defense

Cahill lawyers, who served as Engelhard’s national counsel in asbestos litigation from the late 1980s until 2009, used the “no-asbestos” defense to persuade other asbestos plaintiffs to drop their cases or settle on the cheap. Some plaintiffs accepted as little as $3,000 in settlements of claims they developed asbestos-related cancer from the talc, the filings show. Veteran plaintiffs’ lawyers, such as Houston’s Mark Lanier, say those cases now routinely settle for millions of dollars.

“The allegation is that Cahill lawyers helped BASF hide and destroy evidence of asbestos in its talc,” said Stephen Gillers, a legal ethics professor at New York University Law School. Ethical guidelines bar lawyers “from assisting clients in committing a fraud,” said Gillers, adding that the BASF-Cahill case is a frequent topic in his classes.

Cahill, founded in 1919, handles corporate and commercial litigation, along with bankruptcy and tax cases, according to its website. It has offices in New York, Washington and London.

Plaintiffs’ lawyers contend Engelhard officials and Cahill lawyers have finally acknowledged that “for nearly 30 years, they concealed from the courts and litigants” the presence of asbestos in their talc. “This is admission is long overdue,” the lawyers added in the 2018 filing.

U.S. Magistrate Judge John Dickson must decide whether the settlement passes legal muster. He took over the case from U.S. District Judge Esther Salas, whose son was murdered and husband critically injured in an attack aimed at her over the weekend. Authorities say a self-described “anti-feminist” lawyer -- disguised as a Federal Express deliveryman -- shot the pair at Salas’ home on July 19. He later killed himself.

The lower-court case is Williams v. BASF Catalysts LLC, 11-cv-1754, U.S. District Court, District of New Jersey (Newark). The appeal is Williams v. BASF Catalysts LLC, 13-1089, U.S. Court of Appeals for the Third Circuit (Philadelphia).

(Updates with law firm’s comment in sixth paragraph.)

To contact the reporter on this story:
Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net

To contact the editors responsible for this story:
David Glovin at dglovin@bloomberg.net

Joe Schneider, Steve Stroth

© 2020 Bloomberg L.P. All rights reserved. Used with permission.

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