Filed: Dec. 30, 2010
Latest Update: Feb. 21, 2020
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 09-2135 CSX TRANSPORTATION, INCORPORATED, Plaintiff - Appellant, v. ROBERT V. GILKISON; PEIRCE, RAIMOND & COULTER, PC, a/k/a Robert Peirce & Associates, P.C., a Pennsylvania Professional Corporation; JOHN DOES; ROBERT N. PEIRCE, JR.; LOUIS A. RAIMOND; MARK T. COULTER; RAY A. HARRON, Dr., Defendants – Appellees, and RICHARD CASSOFF, M.D., Party-in-Interest, LUMBERMENS MUTUAL CASUALTY COMPANY, Intervenor. - AMERICAN SOCIETY OF R
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 09-2135 CSX TRANSPORTATION, INCORPORATED, Plaintiff - Appellant, v. ROBERT V. GILKISON; PEIRCE, RAIMOND & COULTER, PC, a/k/a Robert Peirce & Associates, P.C., a Pennsylvania Professional Corporation; JOHN DOES; ROBERT N. PEIRCE, JR.; LOUIS A. RAIMOND; MARK T. COULTER; RAY A. HARRON, Dr., Defendants – Appellees, and RICHARD CASSOFF, M.D., Party-in-Interest, LUMBERMENS MUTUAL CASUALTY COMPANY, Intervenor. - AMERICAN SOCIETY OF RA..
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 09-2135
CSX TRANSPORTATION, INCORPORATED,
Plaintiff - Appellant,
v.
ROBERT V. GILKISON; PEIRCE, RAIMOND & COULTER, PC, a/k/a
Robert Peirce & Associates, P.C., a Pennsylvania
Professional Corporation; JOHN DOES; ROBERT N. PEIRCE, JR.;
LOUIS A. RAIMOND; MARK T. COULTER; RAY A. HARRON, Dr.,
Defendants – Appellees,
and
RICHARD CASSOFF, M.D.,
Party-in-Interest,
LUMBERMENS MUTUAL CASUALTY COMPANY,
Intervenor.
----------------------------------
AMERICAN SOCIETY OF RADIOLOGIC TECHNOLOGISTS; AMERICAN TORT
REFORM ASSOCIATION; ASSOCIATION OF AMERICAN RAILROADS;
DANIEL E. BANKS; COALITION FOR LITIGATION JUSTICE,
INCORPORATED; ALFRED FRANZBLAU; LAWRENCE MARTIN; NATIONAL
ASSOCIATION OF MANUFACTURERS; PROPERTY CASUALTY INSURERS
ASSOCIATION OF AMERICA; VIRGINIA SOCIETY OF RADIOLOGIC
TECHNOLOGISTS; WASHINGTON LEGAL FOUNDATION; WEST VIRGINIA
CHAMBER OF COMMERCE,
Amici Supporting Appellant.
Appeal from the United States District Court for the Northern
District of West Virginia, at Wheeling. Frederick P. Stamp,
Jr., Senior District Judge. (5:05-cv-00202-FPS-JES)
Argued: October 26, 2010 Decided: December 30, 2010
Before DUNCAN, AGEE, and DAVIS, Circuit Judges.
Affirmed in part, vacated in part, and remanded by unpublished
per curiam opinion. Judge Davis wrote a separate concurring
opinion.
ARGUED: Dan Himmelfarb, MAYER BROWN, LLP, Washington, D.C., for
Appellant. Walter P. DeForest, III, DEFOREST KOSCELNIK YOKITIS
KAPLAN & BERARDINELLI, Pittsburgh, Pennsylvania, for Appellees.
ON BRIEF: Evan M. Tager, Michael B. Kimberly, MAYER BROWN, LLP,
Washington, D.C.; E. Duncan Getchell, Jr., Samuel L. Tarry, Jr.,
Mitchell K. Morris, MCGUIREWOODS LLP, Richmond, Virginia; Marc
E. Williams, Robert L. Massie, NELSON MULLINS RILEY &
SCARBOROUGH LLP, Huntington, West Virginia, for Appellant.
Robert A. Lockhart, SCHUDA & ASSOCIATES, PLLC, Charleston, West
Virginia, David J. Berardinelli, Matthew S. McHale, DEFOREST
KOSCELNIK YOKITIS KAPLAN & BERARDINELLI, Pittsburgh,
Pennsylvania, for Appellees Peirce, Raimond & Coulter, PC,
Robert N. Peirce, Jr., Louis A. Raimond, and Mark T. Coulter;
Lawrence S. Goldman, Elizabeth M. Johnson, LAW OFFICES OF
LAWRENCE S. GOLDMAN, New York, New York, Jerald E. Jones, WEST &
JONES, Clarksburg, West Virginia, Ron Barroso, Corpus Christi,
Texas, for Appellee Ray A. Harron; John E. Gompers, GOMPERS,
MCCARTHY & MCCLURE, Wheeling, West Virginia, Stanley W.
Greenfield, GREENFIELD & KRAUT, Pittsburgh, Pennsylvania, for
Appellee Robert V. Gilkison. David P. Goch, Heidi K. Abegg,
WEBSTER CHAMBERLAIN & BEAN, Washington, D.C., for American
Society of Radiologic Technologists and Virginia Society of
Radiologic Technologists; Ashley C. Parrish, Candice Chiu, KING
& SPALDING LLP, Washington, D.C., for American Society of
Radiologic Technologists, Amici Supporting Appellant. Mark A.
Behrens, Cary Silverman, SHOOK, HARDY & BACON, LLP, Washington,
D.C.; H. Sherman Joyce, AMERICAN TORT REFORM ASSOCIATION,
Washington, D.C.; Ann W. Spragens, Sean McMurrough, PROPERTY
CASUALTY INSURERS ASSOCIATION OF AMERICA, Des Plaines, Illinois;
Quentin Riegel, NATIONAL ASSOCIATION OF MANUFACTURERS,
Washington, D.C.; Daniel Saphire, ASSOCIATION OF AMERICAN
2
RAILROADS, Washington, D.C., for American Tort Reform
Association, Association of American Railroads, Coalition for
Litigation Justice, Incorporated, National Association of
Manufacturers, and Property Casualty Insurers Association of
America, Amici Supporting Appellant. David Craig Landin, Cheryl
G. Ragsdale, HUNTON & WILLIAMS LLP, Richmond, Virginia, for
Daniel E. Banks, Alfred Franzblau, and Lawrence Martin, Amici
Supporting Appellant. Daniel J. Popeo, Richard A. Samp,
WASHINGTON LEGAL FOUNDATION, Washington, D.C., for Washington
Legal Foundation, Amicus Supporting Appellant. Scott L.
Winkelman, Michael L. Martinez, Robert L. Willmore, Jennifer G.
Knight, CROWELL & MORING LLP, Washington, D.C., for West
Virginia Chamber of Commerce, Amicus Supporting Appellant.
Unpublished opinions are not binding precedent in this circuit.
3
PER CURIAM:
CSX Transportation, Incorporated (“CSX”) filed a complaint
against Robert V. Gilkison (“Gilkison”), Peirce, Raimond &
Coulter, P.C. (“Peirce firm”), Robert N. Peirce, Jr. (“Peirce”),
Louis A. Raimond (“Raimond”), Mark T. Coulter (“Coulter”), and
Ray Harron, M.D. (“Harron”), alleging violations of the
Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18
U.S.C. § 1961, et seq., common law fraud, and civil conspiracy,
all “aris[ing] from the successful efforts of the defendants to
deliberately fabricate and prosecute objectively unreasonable,
false and fraudulent asbestosis claims against CSX.” (J.A. 143). 1
The district court granted defendants’ motion to dismiss as
to the RICO counts and as to all but two fraud counts. On
appeal, CSX contends that the district court erred by dismissing
those RICO and fraud claims, abused it discretion by denying CSX
leave to amend its complaint, erred by granting the defendants’
motion for summary judgment on one remaining fraud count, and
abused its discretion by excluding certain evidence during trial
on another fraud count. For the following reasons, we affirm in
part and vacate in part the district court’s judgment and remand
the case for further proceedings.
1
We refer to the individuals Peirce, Raimond, and Coulter
collectively as the “lawyer defendants” in keeping with the use
of that convention by the parties and the district court.
4
I.
In its first amended complaint (hereinafter “complaint”), 2
CSX alleges that the defendants—a law firm, certain attorneys,
an investigator, and a medical expert, all employed by the law
firm—“embarked upon a calculated and deliberate strategy to
participate in and to conduct the affairs of the Peirce firm
through a pattern and practice of unlawful conduct, including
bribery, fraud, conspiracy, and racketeering,” (J.A. 145), by
“orchestrat[ing] a scheme to inundate CSX[] and other entities
with thousands of asbestosis cases without regard to their
merit.” (J.A. 142).
In order to perpetrate this alleged scheme, CSX contends
“the lawyer defendants gained access to potential clients
through unlawful means, [and] retained clients and procured
medical diagnoses for them through intentionally unreliable mass
screenings.” (J.A. 145-46). CSX charges that the screenings
were unreliable, in part, because “[t]he lawyer defendants . . .
deliberately hired unreliable doctors such as . . . Harron to
‘read’ the x-rays for signs of asbestosis.” (J.A. 148). In the
complaint, CSX averred that, Harron “agreed to read unusually
high numbers of x-rays with reckless or deliberate disregard for
2
CSX’s original complaint was dismissed without prejudice,
and CSX was granted leave to amend.
5
their true content with the full knowledge that the lawyer
defendants intended to file personal injury claims based on his
diagnoses.” (J.A. 163). Ultimately, CSX alleges that defendants
used this scheme to “fabricate[] and prosecute[] asbestosis
claims with no basis in fact.” (J.A. 146).
The complaint specifies nine personal injury suits the
Peirce firm filed against CSX on behalf of former CSX employees,
which CSX alleges to have been “a deliberate effort by the
lawyer defendants to defraud CSX[].” (J.A. 160). Count 1 of the
complaint charged the lawyer defendants with violating RICO as
to each of the nine suits while Count 2 charged a RICO
conspiracy as to those suits. Count 3 charged the lawyer
defendants, individually, with common law fraud as to each of
the nine suits. Count 4 charged the lawyer defendants and
Harron with common law civil conspiracy as to each of the nine
suits, and Counts 5 and 6 charged Gilkison and the Peirce firm
with conspiracy and fraud as to the so-called “May/Jayne
Incident,” infra.
The defendants moved pursuant to Federal Rule of Civil
Procedure 12(b)(6) to dismiss Counts 1 through 4 and Count 6 of
the complaint. The district court granted the motion in part
and denied the motion in part. As to the RICO counts, the
district court found that because “eight of the nine lawsuits
that comprise the basis of th[e] claims were filed more than
6
four years before CSX filed its amended complaint in this case,”
(J.A. 696), and “CSX was on inquiry notice of the injuries
alleged in Counts 1 and 2 when the nine allegedly fraudulent
claims against it were filed and/or settled,” (J.A. 698), eight
of the claims were time-barred. As to the ninth suit, (the
“Baylor suit” on behalf of Earl Baylor), the district court
reasoned that since the other eight RICO claims were time-
barred, and because proving “[a] ‘pattern of racketeering
activity’ requires a showing of at least two acts of
racketeering activity[,] . . . . CSX has failed to show the
requisite pattern to sustain its RICO claims.” (J.A. 699-700).
As to the common law fraud and conspiracy counts, the
district court held that “[t]he foregoing [RICO] statute of
limitations analysis similarly applies to [those] [c]ounts.”
(J.A. 700). As a result, the district court concluded that,
“[b]ecause eight of the nine lawsuits . . . were filed more than
two years before the amended complaint was filed in this case,
reliance on those suits is time-barred” under West Virginia law.
(J.A. 700). The Baylor suit was not time-barred but decided on
summary judgment as discussed below.
The district court denied the motion to dismiss Count 6,
and the fraud and conspiracy claims arising from the May/Jayne
Incident proceeded to trial.
7
After the district court’s ruling on the Rule 12(b)(6)
motion, CSX moved for leave to amend its complaint and proffered
a proposed second amended complaint, which “added [eleven] more
recent fraudulently filed claims as well as detailed allegations
concerning the difficulty of discovering the fraud.”
(Appellant’s Br. 13). The district court denied the motion.
CSX noted a timely appeal as to all its claims, and this
Court has jurisdiction over the appeal pursuant to 28 U.S.C. §
1291.
II.
A.
CSX first contends that the district court erred by
granting the defendants’ motion to dismiss the RICO and common
law fraud counts. CSX argues that this Court should adopt the
so-called “separate accrual rule” for RICO statute of
limitations purposes, under which “a cause of action accrues
when new predicate acts occur within the limitations period,
even if other acts were committed outside the limitations
period.” (Appellant’s Br. 19) (quotations and alterations
omitted). CSX also asserts that the district court erred by
concluding that CSX had or should have had notice of its
injuries, for both the RICO and fraud counts, near the dates the
suits were filed and/or settled. CSX contends that the district
8
court’s “analysis [on this point] depended upon mistaken
assumptions about the materials to which CSX[] had access and
disregarded features of mass asbestos litigation that severely
limited CSX[]’s ability to discover the fraud.” (Appellant’s Br.
33). Finally, CSX suggests that “a Rule 12(b)(6) motion may be
granted only in the unusual case in which all facts necessary to
the defense clearly appear on the face of the complaint,” and
that the case at bar does not meet that standard. (Appellant’s
Br. 14).
We review the district court’s grant of the motion to
dismiss the RICO and common law claims de novo. Monroe v. City
of Charlottesville, 579 F.3d 380, 385 (4th Cir. 2009). In
reviewing the order, “we must take the facts in the light most
favorable to the plaintiff.” E. Shore Markets, Inc. v. J.D.
Assocs. Ltd. P’ship,
213 F.3d 175, 180 (4th Cir. 2000).
1. RICO Claims
This Court has recognized that a “dismissal [pursuant to a
Rule 12(b)(6) motion] is inappropriate unless, accepting as true
the well-pleaded facts in the complaint and viewing them in the
light most favorable to the plaintiff, ‘it appears to a
certainty that the plaintiff would be entitled to no relief
under any state of facts which could be proved in support of his
claim.’” Brooks v. City of Winston-Salem, 85 F.3d 178, 181 (4th
9
Cir. 1996) (quoting Mylan Lab., Inc. v. Matkari, 7 F.3d 1130,
1134 & n.4 (4th Cir. 1993)). We have noted that asserting an
affirmative defense, like a statute of limitations defense, in a
motion to dismiss presents a particular “procedural stumbling
block” for defendants. Richmond, Fredericksburg & Potomac R.R.
v. Forst,
4 F.3d 244, 250 (4th Cir. 1993). Accordingly,
a motion to dismiss filed under Federal Rule of
Procedure 12(b)(6) . . . generally cannot reach the
merits of an affirmative defense, such as the defense
that the plaintiff’s claim is time-barred. But in the
relatively rare circumstances where facts sufficient
to rule on an affirmative defense are alleged in the
complaint, the defense may be reached by a motion to
dismiss filed under Rule 12(b)(6). This principle
only applies, however, if all facts necessary to the
affirmative defense “clearly appear[] on the face of
the complaint.”
Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir. 2007)
(quoting
Forst, 4 F.3d at 250). “To require otherwise would
require a plaintiff to plead affirmatively in his complaint
matters that might be responsive to affirmative defenses even
before the affirmative defenses are raised.”
Id. at 466.
The Supreme Court has held, as did the district court
below, that the applicable statute of limitations for RICO
violations is four years. See Agency Holding Corp. v. Malley-
Duff & Assocs., Inc., 483 U.S. 143, 152 (1987). There is no
contest on this point, as the dispute in this case concerns when
the injury accrued, that is, when did the four year statute of
limitations begin to run. See
Brooks, 85 F.3d at 181. This
10
Court has held that “the statutory period [for a RICO claim]
begins to run when a plaintiff knows or should know of the
injury that underlies his cause of action.” Pocahontas Supreme
Coal Co. v. Bethlehem Steel Corp., 828 F.2d 211, 220 (4th Cir.
1987); see also Rotella v. Wood,
528 U.S. 549, 555 (2000)
(“[D]iscovery of the injury . . . is what starts the clock.”).
Having set out the applicable law, we turn to the complaint
to determine whether all the facts necessary to conclude CSX’s
claims are time-barred appear on its face. In that regard, we
note the complaint was filed July 5, 2007, so the specific
inquiry is whether the face of the complaint pleads facts such
that it clearly appears CSX was on notice of its claimed injury
by July 4, 2003. We conclude a fair reading of the complaint’s
allegations does not establish such notice on the face of the
complaint and therefore the district court erred in granting the
Rule 12(b)(6) motion.
The complaint alleges the following with respect to the
timing of the RICO violations: in December 2003, Peirce was
linked to a union president who had pled guilty to federal
racketeering charges; in 2007, Harron lost his medical license;
the B-reads for the underlying lawsuits ranged from 2000 to
2003; the dates the underlying lawsuits were filed and settled,
ranging from 2000 to 2006; several specific alleged acts of mail
and wire fraud occurring since 2000; and allegations of civil
11
RICO conspiracy beginning in “the early to mid 1990s.” (J.A.
163). Viewed in the light most favorable to CSX, it is not at
all clear from these facts when CSX knew or should have known of
the alleged RICO violations, that is, when the fraud commenced.
The district court, however, conflated the filing of the
various underlying suits as, in and of themselves, putting CSX
on notice of the fraudulent scheme underlying the RICO counts.
However, nothing “clearly appears” on the face of the complaint
to show that the filing of these suits by the lawyer defendants,
as well as the settlements, establish that CSX knew or ought to
have known by July 2003 that the alleged fraud was afoot.
Additional factual development may or may not prove that
premise, but it is not plainly apparent on the face of the
complaint.
The case at bar is readily distinguishable from the rare
cases in which this Court has held the district court properly
dismissed, pursuant to Rule 12(b)(6), a complaint as time-
barred. In Brooks, we found that, because it was undisputed
that the relevant charge of unlawful warrantless arrest
“accrue[s] on the date of . . . arrest,” the date of arrest was
included in the complaint, and because “[t]here is no question
that on the day of his arrest Brooks knew or should have known
both of the injury . . . and who was responsible for any
injury,” dismissal on a Rule 12(b)(6) motion was appropriate. 85
12
F.3d at 182; see also McMullen v. Lewis,
32 F.2d 481, 484 (4th
Cir. 1929) (“Where upon the face of the bill the staleness of
the demand is apparent—that is, the claim has remained
unasserted for 50 years—the question of its antiquity can always
be called to the court’s attention . . . . [T]he laches of the
complainant in asserting his claim is a bar in equity, if that
objection is apparent on the bill itself, there can be no good
reason for requiring a plea or answer to bring it to the notice
of the court.” (quotations omitted)).
In contrast to the foregoing cases in which the complaint
clearly identified the start date for the running of the statute
of limitations, the case at bar necessitates a fact-intensive
inquiry as to when CSX knew or should have known of the
existence of the claimed RICO violations. The fact that an
underlying asbestos suit was filed or settled, without more,
does not establish as a matter of law that the separate gravamen
of RICO fraud should have been known by that event alone. The
district court thus erred in making the unilateral finding that
either the date of the filing or of the settlement of the
underlying lawsuits was dispositive on this question. It does
not follow from the facts pled on the face of the complaint that
CSX knew or should have known that the underlying asbestos
lawsuits were fraudulently filed when they were filed. Nor does
reading the face of the complaint show that CSX knew or should
13
have known of the alleged fraudulent screening scheme when the
lawsuits were filed or settled.
Accordingly, the case at bar does not qualify as one of the
“rare circumstances,” in which Rule 12(b)(6) dismissal of the
RICO claims as time-barred was appropriate. Thus, “we conclude
that the face of the complaint does not allege facts
sufficiently clear to conclude that the statute of limitations
had run, and the district court therefore erred in dismissing
the complaint on that basis.” Goodman, 494 F.3d at 466.
Instead, we find that in this case “[t]h[is] defense[] [is] more
properly reserved for consideration on a motion for summary
judgment,”
Forst, 4 F.3d at 250, and we vacate the district
court’s judgment in so far as it granted the motion to dismiss
Counts 1 and 2 of the complaint. 3
3
Because we find that the district court erred by
dismissing the RICO counts for the reasons just described, we do
not address CSX’s argument regarding the separate accrual rule
for RICO statute of limitations purposes.
As a separate matter, since the issue may arise on remand,
we do note our concern regarding the district court’s apparent
alternate holding that, “[b]ecause only one alleged act of
racketeering activity is not time-barred, CSX has failed to show
the requisite pattern to sustain its RICO claims.” (J.A. 700).
While we have determined that, at the motion to dismiss stage,
the district court erred in finding the CSX claims time-barred,
some of those claims may yet be determined as time-barred at a
later stage of the proceedings. However, even if a claim or
claims are found to be time-barred, that fact alone does not
make the claim ineligible as a predicate act to establish a RICO
pattern.
(Continued)
14
2. Common Law Fraud Claims
Common law fraud under West Virginia law is the gravamen of
Counts 3 and 4 of the complaint. West Virginia’s applicable
statute of limitations for such common law fraud claims is two
years. See Alpine Prop. Owners Assoc., Inc. v. Mountaintop Dev.
Co., 365 S.E.2d 57, 66 (W. Va. 1987). Similar to a RICO claim,
a West Virginia fraud claim accrues from “the perpetration of
the fraud,” or if “there has been fraudulent concealment,” then
“the statute begins to run only from the time when the wrong was
discovered, or ought to have been discovered.” Plant v.
Humphries,
66 S.E. 94, 98 (W. Va. 1909).
Viewed in the light most favorable to CSX, the complaint
alleges the same facts as to the West Virginia common law fraud
counts as recounted above regarding the RICO counts. For the
same reasons discussed above concerning the RICO counts, the
pled facts do not reveal when CSX knew or should have known of
the alleged fraud. That is, the face of the complaint does not
In order to demonstrate the requisite pattern of RICO
activity, the statute permits the contemplation of acts within a
ten year period. 18 U.S.C. § 1961(5). Thus, even assuming that
only one of those acts occurred within the statute of
limitations period, that would not defeat the existence of a
RICO pattern provided the other predicate act took place within
the applicable ten year period. Whether all of the injuries
might independently support an award of damages is a separate
issue.
15
plead facts which conclusively show CSX knew or should have
known of the alleged fraud by July 4, 2005, two years prior to
the filing of the complaint.
Our analysis of the error in the district court’s dismissal
of CSX’s RICO claims likewise applies to its dismissal of the
common law fraud claims. Accordingly, because the face of the
complaint does not allege sufficient facts to conclusively
determine when CSX knew or should have known of the existence of
the common law fraud, the district court erred by granting
defendants’ Rule 12(b)(6) motion to dismiss Counts 3 and 4 of
the complaint.
B.
CSX next contends that the district court abused its
discretion by denying the motion to file a second amended
complaint. In denying leave to amend, the district court found
“that CSX was dilatory in filing this motion for leave” and
“[m]oreover, this Court finds that CSX’s proposed amendment to
the complaint would be futile.” (J.A. 791). Referring to its
earlier decision that the RICO and common law fraud claims were
time-barred, the district court stated “CSX is charged with
notice of its injury by March 2000 when the first alleged
objectively baseless and fraudulent lawsuit was filed against
it,” and thus the additional claims in the proposed second
16
amended complaint would likewise be time-barred. (J.A. 792-93).
Because the district court found that amendment would be futile,
it also observed that “allowing CSX to file a second amended
complaint would unduly prejudice the defendants by extending
discovery when it is not necessary.” (J.A. 795). The district
court made no finding that CSX acted with a dilatory motive or
that being dilatory alone would cause any prejudice to the
defendants.
Because CSX contends that the district court erred in
dismissing its RICO and fraud claims as time-barred, CSX
correspondingly argues that amendment of the complaint would not
have been futile. This is so, CSX argues, because of the seven
additional claims in the proposed second amended complaint,
“[o]ne . . . was filed in the same lawsuit as the Baylor claim
(as to which the district court found no time bar); three were
filed after the Baylor claim (and thus necessarily raise no time
bar); and three were filed in the same lawsuit as the Peterson
and Wiley claims (as to which discovery commenced less than four
years before CSX[] filed its RICO claims).” (Appellant’s Br. 34-
35). Accordingly, CSX avers that the additional claims
proffered in the second amended complaint were not time-barred.
This Court reviews a district court’s denial of leave to
amend for abuse of discretion. United States ex rel. Wilson v.
Kellog Brown & Root, Inc., 525 F.3d 370, 376 (4th Cir. 2008).
17
Leave to amend “should freely [be given] when justice so
requires.” Fed. R. Civ. P. 15(a)(2). Thus, “[i]n the absence of
any apparent or declared reason—such as undue delay, bad faith
or dilatory motive on the part of the movant, repeated failure
to cure deficiencies by amendments previously allowed, undue
prejudice to the opposing party by virtue of allowance of the
amendment, futility of amendment, etc.—the leave sought should,
as the rules require, be ‘freely given.’” Foman v. Davis, 371
U.S. 178, 182 (1962).
The district court’s finding that amendment would have been
futile followed solely from its earlier holding in granting the
motion to dismiss the RICO and fraud counts as time-barred.
From that basis the district court reasoned that the additional
claims must likewise be time-barred. However, because we
determined above that the district court erred by dismissing
CSX’s RICO and common law fraud claims in the complaint as time-
barred, it axiomatically follows that the district court’s
finding of futility based on the later, additional claims was
erroneous and thereby an abuse of discretion as a matter of law. 4
4
The record supports the district court’s finding that CSX
was dilatory in offering its second amended complaint. CSX had
access to the information about the additional eleven asbestos
cases it now claims were fraudulent when it filed the complaint,
but, for whatever reason, did not include those claims.
However, there is no evidence that CSX’s delay was in bad faith
and, more importantly, “[d]elay alone, without prejudice, does
(Continued)
18
See Koon v. United States, 518 U.S. 81, 100 (1996) (“A district
court by definition abuses its discretion when it makes an error
of law.”).
Likewise, the district court’s finding that amendment would
be unduly prejudicial to the defendants was based solely on its
finding that the additional claims would be futile. The
district court found that the defendants would be prejudiced
because amendment would “extend[] discovery when it is not
necessary,” (J.A. 795), based only on its conclusion that the
additional claims were time-barred. Because the district court
erred in its futility determination, and because that
determination directly informed the court’s unduly prejudicial
determination, the court’s unduly prejudicial determination must
also fail. Accordingly, the district court’s finding that
amendment would be unduly prejudicial to the defendants was also
an abuse of discretion.
Therefore, we find the district court abused its discretion
by denying the motion for leave to amend and the district
court’s judgment to that effect is hereby vacated.
not support the denial of a motion for leave to amend.” Deasy v.
Hill, 833 F.2d 38, 41 (4th Cir. 1987). Without a finding of
dilatory motive and prejudice, the district court’s finding that
CSX acted in a dilatory manner is an insufficient ground upon
which to deny the motion to amend.
19
C.
CSX next argues that the district court erroneously granted
summary judgment to the defendants in the Baylor suit. In its
award of summary judgment, the district court found that “[t]he
undisputed facts show that CSX cannot produce evidence
sufficient for a reasonable jury to find that CSX relied upon
the defendants’ alleged fraudulent act.” (J.A. 2091). In the
district court’s view, “there remains no evidence that the
lawyer defendants knew that Mr. Baylor did not have asbestosis,”
because “CSX, itself, admits that ‘a B reader could
hypothetically undertake to review the 2003 x-ray and believe in
good faith that they [sic] find [signs of asbestosis].’” (J.A.
2092).
CSX offers three contentions for reversal of the grant of
summary judgment:
First, the positive x-ray reading resulted from an
unreliable screening mechanism designed by the lawyer
defendants to generate false positives. Second, the
lawyer defendants failed to conduct a reasonable
inquiry before filing suit, and thus failed to uncover
medical records in their own files that effectively
ruled out asbestosis. Third, the only evidence that
Baylor had been exposed to asbestos while working for
CSX[] was a questionnaire that Baylor himself
confirmed was fabricated.
(Appellant’s Br. 39-40) (emphasis deleted). If we assume,
without deciding, that sufficient evidence was before the
district court so as to permit summary judgment on the first two
20
issues, there clearly were material facts in dispute as to the
last issue.
This Court reviews a district court’s grant of summary
judgment de novo. Shipbuilders Council of Am. v. U.S. Coast
Guard, 578 F.3d 234, 243 (4th Cir. 2009).
“Summary judgment is only appropriate ‘if the pleadings,
the discovery and disclosure materials on file, and any
affidavits show that there is no genuine issue as to any
material fact and that the movant is entitled to judgment as a
matter of law.’” George & Co. v. Imagination Entm’t Ltd., 575
F.3d 383, 392 (4th Cir. 2009) (quoting Fed. R. Civ. P. 56(c)).
“We construe the evidence in the light most favorable to . . .
the party opposing [the] summary judgment motion, and draw all
reasonable inferences in its favor.”
Id.
In order to make a prima facie claim for injuries arising
from asbestosis, not only must the plaintiff plead and show that
he has asbestosis, but “the threshold for every theory is [also]
proof that an injured plaintiff was exposed to asbestos-
containing products for which the defendant is responsible.”
Blackston v. Shook & Fletcher Insulation Co.,
764 F.2d 1480,
1481 (11th Cir. 1985); see also Marlin v. Bill Rich Const.,
Inc.,
482 S.E.2d 620, 635 (W. Va. 1996) (“[I]nhaling asbestos
fibers or other dustborne particles does not constitute an
injury under [West Virginia’s worker compensation statute],
21
absent the further showing that occupational pneumoconiosis has
been contracted after exposure . . . .”). Thus, to make out a
claim of injury from asbestosis, counsel must plead not only
that the claimant has the disease, but the additional element of
exposure to asbestos while working for the defendant.
“[R]ecovery will require the plaintiff to show that he was
exposed to defendant’s asbestos-containing product by working
with or in close proximity to the product.” Blackston, 764 F.2d
at 1481; see also Restatement 2d Torts § 431(a). It follows
that if the evidence could reasonably show that a lawyer filed
an asbestos claim knowing the necessary element of occupational
exposure did not exist, a reasonable jury could conclude that to
be an act of fraud. Of course, fraud is the gravamen of the
claim by CSX against the defendants in the Baylor suit.
Even if we assume, as the lawyer defendants argue and the
district court held, that CSX could not show the defendants did
not know Baylor did not have asbestosis, that assumption is
insufficient to support the grant of summary judgment. This is
because material facts remain in dispute as to whether the
lawyer defendants committed fraud in their representation that
the necessary element of occupational exposure was met in
Baylor’s case.
After Breyer confirmed Harron’s reading of Baylor’s x-ray,
the Peirce firm sent Baylor a copy of an “Asbestos
22
Questionnaire” with directions to complete the questionnaire,
although someone at the Peirce firm had already “partially
completed” it. (J.A. 92). In the response to a section of the
questionnaire entitled “Claimed Exposures,” the terms “Asbestos
rope, cement, Asbestos valve packing” are written. (J.A. 93). 5
The foregoing writing appears to be in handwriting different
from that on the remainder of the questionnaire, and Baylor
testified that it was “not [his] writing.” (J.A. 1199). He also
testified that it was “not [his] wife’s writing,” (J.A. 1199),
and responded “[n]o” when he was asked “whether someone [from
the Peirce firm] might have asked you questions and wrote things
on this form while . . . you were sitting there?” (J.A. 1204).
Moreover, Baylor testified that while employed by CSX he did not
work with any asbestos rope or with any cement products. If the
jury believed this evidence, it could reasonably conclude the
lawyer defendants committed an act of fraud by falsifying the
occupational exposure required as a necessary element of the
asbestos claim they filed. Obviously, CSX would have “relied”
on the representation by filing the Baylor claim that all
elements of the cause of action were met as CSX would have had
no reason to know of the alleged act of fraud.
5
Additional information is written in that section;
however, the rest of the response does not allege any asbestos
exposure.
23
Thus, viewing the evidence in the light most favorable to
CSX, a reasonable jury could find that the lawyer defendants at
worst fraudulently manufactured the claimed exposures, or at
least lacked a good faith basis to file an asbestos injury claim
because they knew it lacked the necessary element of
occupational exposure. Consequently, a jury could find that the
lawyer defendants committed fraud by filing the lawsuit because
there was no evidence upon which they could have believed that
Baylor was exposed to asbestos-containing products in the course
of his employment with CSX. Consequently, a reasonable jury
could find CSX relied to its detriment on the defendants’
alleged fraud as the basis of the Baylor claim. 6
Accordingly, because material facts remain in dispute, we
reverse the district court’s award of summary judgment to the
defendants in the Baylor case. 7
6
Harron contends an independent basis (Breyer’s B-read of
Baylor’s x-ray) exists to sustain the award of summary judgment
as to him. We disagree. From the record evidence, a reasonable
jury could conclude Harron falsely certified Baylor’s x-ray and
that Breyer was also involved in a similar scheme particularly
if the jury found Breyer’s B-read came after receiving Harron’s
previous diagnosis. Thus, material facts remain in dispute as
to Harron which preclude summary judgment upon the current
record.
7
We have reviewed defendants’ arguments that alternative
grounds exist for the district court’s grant of summary judgment
and have found all of them to be without merit. This finding
includes, but is not limited to, the defendants’ argument that
CSX’s fraud claim is barred by the Noerr-Pennington doctrine.
(Continued)
24
D.
The fraud and conspiracy claim that proceeded to trial
arose from CSX’s allegation of Gilkison’s and, vicariously, the
Peirce firm’s participation in the so-called May/Jayne Incident.
This case involved two prior CSX employees: Danny Jayne
(“Jayne”) and Ricky May (“May”). Jayne had “attended and was
examined at a screening for asbestosis conducted by the Peirce
firm,” and his x-ray was read by Harron as having irregularities
“consistent with asbestosis.” (J.A. 166). As a result of this
diagnosis, the Peirce firm filed a personal injury suit on
Jayne’s behalf against CSX in 2000, which was ultimately
settled.
CSX alleged that, subsequently, Gilkison “suggested to . .
. May that he should get someone who had previously tested
positive for asbestosis to sit for his exam,” so that he would
“be able to file a claim against CSX.” (J.A. 167). May asked
Jayne to appear at an asbestosis screening and represent himself
As the district court found, “CSX’s amended complaint contains
sufficient allegations to support the sham exception,” (J.A.
703), and the record has sufficient evidence to support that
finding. Moreover, the defendants have not challenged the
district court’s finding of fact by cross appeal. The
defendants also contend a release by Baylor forecloses a claim
by CSX related to him. However, the district court has not
considered this ground and has made no factual findings which
would be a necessary condition precedent to appellate review.
25
to be May, which Jayne did. The resulting x-ray was later
“presented to CSX[] on behalf of . . . May by the Peirce firm as
part of a settlement package.” (J.A. 170).
At trial, May testified that “the idea” to “ask[] someone
else to sit on [his] behalf . . . came from . . . Gilkison.”
(J.A. 1622). Jayne testified that May “called [him] and asked
[him] to attend a screening and sit in his place and pretend[]
that [he was] May so that he could obtain a positive screening,”
and that May had told him that the suggestion for the scheme
originated with Gilkison. (J.A. 1720). Gilkison denied that he
was either the mastermind or a participant in the scheme.
Peirce testified that he had no knowledge of the scheme before
or during the time it was executed, and after he discovered the
fraud, he told May “he is no longer our client and he better get
a lawyer to defend himself on the allegations that CSX had made.
I wanted nothing to do with him at that point . . . .” (J.A.
1544).
During trial, CSX attempted to introduce evidence that the
Peirce firm had continued to represent May after the incident in
various personal injury matters against third parties other than
CSX (hereinafter “third party claims”). The district court
granted the defendants’ motion to exclude that evidence, finding
that “what actions the Peirce Law Firm did with regard to those
other [third party claims] seems to me to be irrelevant in the
26
first place under 401 and probably confusing to the jury and
unfairly prejudicial.” (J.A. 1323). Later, the district court
again found that “the third-party issues, which are described as
such which really involve claims that May had or may have had
against other asbestos manufacturers and possibly other related
parties, is not relevant to the claim of CSX against Gilkison
and Peirce for their damages for the fraud.” (J.A. 1560).
On appeal, CSX argues that the evidence was “manifestly
relevant” under Rule 401 because it “directly contradict[ed]
Peirce’s testimony” and “made it more likely that the fraud was
a calculated scheme by Gilkison and the Peirce firm to generate
revenue for the firm and assist May.” (Appellant’s Br. 56-57).
CSX contends that the evidence was particularly significant
because “the case ultimately came down to whether the jury
believed May and Jayne, on the one hand, or Gilkison and Peirce,
on the other.” (Appellant’s Br. 59).
This court reviews the district court’s decision to exclude
this evidence for an abuse of discretion. United States v.
Blake, 571 F.3d 331, 350 (4th Cir. 2009).
“To be relevant, evidence need only to have ‘any tendency
to make the existence of any fact that is of consequence to the
determination of the action more probable or less probable than
it would be without the evidence.’” United States v. Aramony, 88
F.3d 1369, 1377 (4th Cir. 1996) (quoting Fed. R. Evid. 401).
27
However, relevant evidence “must be excluded if its probative
value is substantially outweighed by the danger of undue
prejudice,” which occurs when “there is a genuine risk that the
emotions of a jury will be excited to irrational behavior, and
that this risk is disproportionate to the probative value of the
offered evidence.” Id. at 1378 (quotations omitted).
Because the district court has first-hand knowledge of
the trial proceedings, we have consistently held that
the district court should be afforded ‘wide
discretion’ in determining whether evidence is unduly
prejudicial and that the district court’s evidentiary
determinations should not be overturned “except under
the most extraordinary of circumstances.”
Id. at 1377 (quoting United States v. Heyward,
729 F.2d 297, 301
n.2 (4th Cir. 1984)).
We find that the district court did not abuse its
discretion by excluding the evidence. First, the evidence was
not clearly impeaching, as it was consistent with Peirce’s
testimony that the Peirce firm ceased representing May on
asbestos matters against CSX after Peirce discovered the fraud.
Evidence that the Peirce firm continued to represent May in
actions against other parties is not contrary to Peirce’s
testimony. Thus, Peirce’s credibility is not called into
question by the evidence.
Furthermore, Peirce’s testimony was not at all conclusive
on the issue of Gilkison’s guilt. Because CSX’s allegations as
to the Peirce firm’s liability were premised on a theory of
28
vicarious liability, and not on any direct actions on the part
of the Peirce firm, the evidence is not particularly relevant.
Therefore, the district court did not abuse its discretion by
finding that the possible confusion to the jury and prejudice to
the defendants outweighed any marginal relevance the evidence
may have had.
III.
For the foregoing reasons, we affirm the district court’s
judgment regarding the May/Jayne Incident. We vacate the
district court’s judgment granting the motion to dismiss as to
Counts 1 through 4. We also vacate the district court’s
judgment denying the motion by CSX to amend its complaint.
Finally, we vacate the district court’s grant of summary
judgment to the defendants on the Baylor claim. Accordingly,
this case is remanded to the district court for further
proceedings in accordance with this opinion.
AFFIRMED IN PART,
VACATED IN PART,
AND REMANDED
29
DAVIS, Circuit Judge, concurring:
I concur fully in the panel opinion and in the disposition
of this appeal. I write separately to express some lingering
reservations regarding our vacatur of the district court’s
summary judgment on the Baylor claim.
In West Virginia, as elsewhere, a plaintiff must prove
fraud by clear and convincing evidence. See, e.g., Bowling v.
Ansted Chrysler-Plymouth-Dodge, Inc., 425 S.E.2d 144, 148 (W.Va.
1992); White v. National Steel Corp.,
938 F.2d 474, 490 (4th
Cir. 1991). While the uncertainty surrounding the unidentified
handwriting on Baylor’s Asbestos Questionnaire may present a
factual issue, I have grave doubt that any reasonable resolution
of that uncertainty is sufficient on this record to show fraud
on the part of the lawyer defendants in light of the heightened
burden of proof West Virginia law imposes on plaintiffs. It is
far from obvious that a reasonable jury could find, by clear and
convincing evidence, that the lawyer defendants committed fraud
in “representing” that Baylor had been exposed to asbestos.
CSX argues that a fabricated Questionnaire is “compelling
evidence” that Baylor’s exposure history was falsified and,
thus, evidence that the lawyer defendants knowingly
misrepresented this fact in support of his claim when they filed
suit on Baylor’s behalf against CSX. The record shows that the
Questionnaire was not completed until 2005, two years after
30
Baylor’s initial screening. J.A. 92-95, 1154, 1157. The
Questionnaire alone, created after the lawyer defendants had
opened a file for Baylor on the basis of his work and medical
history, seems insufficient to show by clear and convincing
evidence that the individual lawyer defendants knowingly filed
Baylor’s claim on the basis of a factual allegation they knew to
be false. This is all the more so given the evidence in the
record supporting Baylor’s exposure history. According to
evidence in the record, brake exposures to track men (Baylor’s
position) were “certainly a possible source of exposure.” J.A.
1195. As this court has previously noted, “[f]raud ‘is not
deducible from facts and circumstances which would be equally
consistent with honest intentions.’” White, 938 F.2d at 491
(citing Steele v. Steele,
295 F. Supp. 1266, 1269 (S.D.W.Va.
1969)).
Furthermore, even if one assumes that CSX has projected
evidence sufficient to establish, by clear and convincing
evidence, a material misrepresentation, it is highly doubtful
that CSX can show its reasonable reliance on any such
misrepresentation. CSX claims that there “can be no question
that . . . CSX[] relied on that misrepresentation by treating
the claim like every other one in the mass asbestos docket.”
Appellant’s Br. at 48. However, a successful fraud action
requires that a plaintiff not only have “relied upon the
31
misrepresentation,” but to have been “justified in relying upon
it.” Martin v. ERA Good fellow Agency, Inc., 423 S.E.2d 379, 381
(W. Va. 1992) (emphasis added). Here, Baylor’s underlying
damages claim was based on allegations in a civil lawsuit
against CSX. As the defendant in that suit, CSX had the ability,
and its lawyers had a duty, to access, examine, and where
appropriate, contest the other side’s evidence, including, as
here, evidence with respect to the sufficiency of Baylor’s
asbestosis claim. Instead, CSX’s claim here, that it was damaged
by its (ostensibly reasonable) reliance on a misrepresentation
regarding Baylor’s workplace exposure, appears to turn on its
head the very adversarial regime that is one of the hallmarks of
our system of civil justice. One is left to ponder how a party
represented by capable counsel might reasonably rely on the
allegations made on behalf of its adversary.
I note, as well, that to the extent CSX rests its claim for
fraud on the lawyer defendants’ alleged “misrepresentation” of
their “good-faith basis” for filing the Baylor claim, this court
received no coherent answer at oral argument to its question
seeking the source of any such duty under West Virginia law. CSX
appears to rely for this proposition on West Virginia Rule of
Civil Procedure 11(a). Appellant’s Br. 39. However, West
Virginia courts have noted that “[t]he purpose of Rule 11 and
Rule 37 of the West Virginia Rules of Civil Procedure is to
32
allow trial courts to sanction parties who do not meet minimum
standards of conduct in a variety of circumstances.” Davis ex
rel. Davis v. Wallace, 565 S.E.2d 386, 389 (2002) (citing
Bartles v. Hinkle,
472 S.E.2d 827, 835 (1996)). Accordingly,
CSX’s claims for fraud on the basis of this rule appear plainly
unfounded. As has long been true of the corresponding federal
rule, a private cause of action may not be based on this rule of
procedure. See, e.g., Port Drum Co. v. Umphrey,
852 F.2d 148,
148-49 (5th Cir. 1988) (“Under [plaintiff’s] unique and
imaginative theory, injured third parties derive from Rule 11 a
private cause of action to enforce an attorney's professional
duties . . . . [W]e reject this novel legal argument.”). As we
have analogously observed, “[c]ourts have consistently refused
to use ethical codes to define standards of civil liability for
lawyers.” Schatz v. Rosenberg,
943 F.2d 485, 492 (4th Cir.
1991), cert. denied sub. nom. Schatz v. Weinberg and Green,
503
U.S. 936 (1992).
Notwithstanding my lingering misgivings, for the reasons
described in the panel opinion, I am content to remand the
Baylor claim to the district court so that the above issues
might have a proper airing.
33
