BASF Must Face Asbestos Coverup Fraud Claims, Court Says

BASF SE, the world’s biggest chemical maker, was ordered to face claims it fraudulently hid evidence that its talc products contained asbestos as it sought to scuttle thousands of personal-injury lawsuits.

The U.S. Court of Appeals in Philadelphia yesterday revived a suit alleging a unit of BASF, based in Ludwigshafen, Germany, and law firm Cahill, Gordon & Reindel LLP systematically concealed damaging evidence and manufactured documents to defeat claims that its talc contained cancer-causing asbestos. The unit mined talc, a mineral used in products ranging from wallboard to balloons.

The decision comes as BASF is predicting it will hit profit targets despite economic growth that’s falling short of forecasts, as well as unfavorable exchange rates. Chief Executive Officer Kurt Bock told Bloomberg TV in July that the chemical maker is emphasizing efficiency to compensate for markets he described as “volatile and challenging.”

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. Companies and insurers have paid at least $70 billion to settle injury claims tied to asbestos-laden products, according to a 2005 study by the Rand Corp.

Joseph Jones, a BASF spokesman, said the court threw out some claims and left only a small portion of the case to proceed.

“BASF is evaluating its options to obtain further review of the court of appeals’ decision,” he said in an e-mailed statement.

John Villa, a lawyer for Cahill with Williams & Connolly LLP in Washington, said the firm intends to fight claims of wrongdoing in the BASF case.

‘The Facts’

“The firm is confident the facts will demonstrate that the allegations against it are unwarranted and that the firm’s conduct met all professional standards,” Villa said in an e-mailed statement.

In 2012, a federal judge in New Jersey dismissed the suit, in which asbestos claimants alleged that a predecessor company to BASF, Catalysts LLC, worked with Cahill to fabricate evidence showing the company’s talc was asbestos-free. The deception allegedly duped plaintiffs into dropping their cases or settling them on the cheap.

U.S. District Judge Stanley Chesler said that while the suit described “abhorrent and outrageous litigation tactics,” there was no basis for a fraud suit under New Jersey law because the actions occurred as part of judicial proceedings. Chesler didn’t rule on the merits of the allegations.

A three-judge panel of the Philadelphia appeals court overturned Chesler’s ruling, finding the asbestos claimants properly raised fraud claims.

‘Systematic Fraud’

New Jersey has never recognized a litigation privilege “to immunize systematic fraud, let alone fraud calculated to thwart the judicial process,” the panel said in its ruling.

The suit was filed by the families of six workers who died from asbestos-related illnesses allegedly caused by talc mined by Engelhard Corp., which BASF acquired for $5 billion in 2006. Engelhard operated a talc mine in Vermont from 1967 to 1983.

The families contend Engelhard executives, along with Cahill lawyers, undertook to hide or destroy documents showing the company’s talc contained asbestos to shield it from liability. The company had test results from as early as 1972 showing the talc contained the cancer-causing material, according to the suit.

In a 1979 suit against the company, three Engelhard employees testified that it was aware the talc mine contained asbestos, according to the suit. After the company settled, that testimony was sealed by a confidentiality agreement and never made public, according to the the suit.

State Cases

It wasn’t until another asbestos claimant sued the company in 2009 that a former Engelhard research chemist testified he’d found asbestos in the company’s talc “many years ago,” according to the appeals court ruling. That led plaintiffs’ lawyers to uncover the ditching of the asbestos evidence, the appeals court judges said.

Engelhard and its attorneys pursued “a strategy of denial and deceit” to hoodwink people into dropping or settling state-court cases cheaply, the asbestos claimants contend in their suit. Those cases were filed in courts in Ohio, Pennsylvania and New York, according to the appeals court’s ruling.

Cahill, which has more than 300 lawyers, handles corporate and commercial litigation, along with bankruptcy and tax cases, according to its website.

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).

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