When BASF SE acquired Engelhard Corp. nine years ago for $5 billion, it appears that executives unknowingly inherited a ticking legal time bomb. It all began decades ago over the seemingly mundane industrial product talc, used in everything from wallboards to handling auto tires on the factory line. In 1983, Engelhard quietly settled a lawsuit after its officials testified in depositions that talc produced by a company mine contained cancer-causing asbestos. The evidence in that case was sealed and Engelhard and its law firm repeatedly said in subsequent lawsuits spanning more than two decades that the company’s talc was asbestos-free.

It wasn’t until 2009, after BASF assumed Engelhard’s liabilities, however, that another chapter began to emerge. A former Engelhard scientist, testifying in a lawsuit filed by his own daughter, said he was told that “asbestos in trace amounts was found in talc,” and the company’s legal department “told us to purge our records” relating to the mine. A co-worker testified about test results in the 1970s showing the presence of asbestos in the talc.

Those revelations have set off a legal battle over what Engelhard knew about its talc, how its lawyers may have acted and whether thousands of people around the U.S. should have the right to reopen old lawsuits or file new lawsuits, this time against BASF, for asbestos illnesses. It also raises fundamental questions about whether justice is possible if companies and lawyers hide evidence in civil litigation.

There have been about 300 lawsuits related to the talc filed against BASF, based in Ludwigshafen, Germany. The company, which is the world’s largest chemical maker and had $74.3 billion in revenue last year, has tried to distance itself from the alleged behavior of Engelhard and its former law firm, Cahill Gordon & Reindel LLP. It has been estimated by Plaintiffs’ lawyers that as many as 10,000 potential cases related to Engelhard’s talc could be reopened.

One case, which seeks class-action status, claims Engelhard and Cahill engaged in fraud and fraudulent concealment by lying about the talc, while hiding and destroying evidence. The company and law firm have consistently denied any wrongdoing. Another case, pending in state court in New Jersey, seeks to force BASF to produce dozens of documents about the talc that the company maintains are confidential. The talc was used in wall board, joint compound and auto body filler. Tires workers used it to help grip products. But they will have to prove they inhaled asbestos that came from Engelhard’s mine. BASF claims that will be hard to prove.

Former workers blame Engelhard’s talc for ailments ranging from mesothelioma, a cancer linked to asbestos, to lung ailments. It’s estimated that asbestos settlements may ultimately cost corporations and insurers more than $265 billion. This is the number according to the Rand Institute. 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. Ms. Paduano, who never worked at Engelhard, was exposed to asbestos from her father’s clothes or visits to his workplace. A deposition by her father, former Engelhard scientist David Swanson, triggered an investigation by lawyers who uncovered test results showing the presence of asbestos in Engelhard talc more than 25 years earlier.

Ms. Paduano has since died, as has her father, who had lung cancer but took no legal action. BASF settled the lawsuit with Ms. Paduano’s family before her death and the coverup began after another lawsuit filed in 1979 blamed the mesothelioma death of a tire worker on Engelhard talc. That case was settled by Engelhard in 1983. The evidence, discovered in pre-trial discovery, including testing that showed varying levels of asbestos from a Vermont mine that the company ran since 1967, was sealed. This is something that is all too common in corporate litigation. The company closed the mine in 1983 and subsequently issued a memo entitled, “DOCUMENT RETRIEVAL – DISCONTINUED OPERATIONS.” Engelhard staff was told to collect documents for discard relating to several companies, including the talc mine’s operator. The memo said the company would retain copies of “documents to be preserved.”

A federal lawsuit was filed in New Jersey against BASF on behalf of six Plaintiffs, seeking class-action status. A number of persons had previously sued, but their cases were either dismissed or settled. A federal judge initially dismissed this case on procedural grounds, but in a reversal last year, a three-judge appellate panel in Philadelphia revived the fraud and fraudulent concealment claims.

In reinstating most of the Plaintiffs’ claims, the panel didn’t rule on the merits of the case, returning it to U.S. district court for further proceedings. But the panel also spelled out its disdain for the sort of conduct described in the complaint. If indeed “they rigged the game from the beginning,” the judges said, “how then can calculated false and misleading statements serve the truth-seeking function of the litigation? According to the complaint, BASF and Cahill were not mischaracterizing the facts; they were creating them.” This is harsh language and it certainly doesn’t bode well for the Defense side in this litigation.

Source: Bloomberg News

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