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A major asbestos maker will not be sanctioned for alleging that Weitz & Luxenberg conspired with a New York County Supreme Court clerk to backdate time-barred asbestos claims. Southern District of New York Judge Robert W. Sweet found that G-I Holdings, which filed suit charging widespread fraud by leading members of the asbestos plaintiffs’ bar, adequately investigated the alleged backdating before accusing New York-based Weitz & Luxenberg of fraud. In July, Sweet had dismissed the charge from an amended complaint in G-I Holdings v. Baron & Budd, 01 Civ. 0216, and then considered an application for sanctions made by Weitz & Luxenberg. However, while Sweet gave G-I Holdings the chance to replead the charge if it obtained more evidence, he warned the asbestos maker and its attorneys to be careful in making the charges again or sanctions would be “a very real possibility.” The decision filed by Sweet Wednesday focused on whether G-I Holdings should be sanctioned for making such damaging allegations without first doing its homework. One key to his decision was Thomas Fitzpatrick, a former federal prosecutor who was appointed special master by the judge to oversee interviews conducted by the G-I Holdings legal team of employees of the three defendant law firms in the case: Weitz & Luxenberg; Baron & Budd; and Ness, Motley, Loadholt, Richardson & Poole. The interviews were designed to glean information about what G-I Holdings charges is a coordinated effort to drown asbestos makers with claims and retaliate should G-I Holdings join an effort to limit liability in Congress. The judge said Fitzpatrick was present on three occasions, once by conference call, when either an investigator or attorneys working for G-I Holdings interviewed a former Weitz & Luxenberg paralegal about the alleged backdating of asbestos claims by court clerk Elba Aguilar. The former paralegal, referred to only as Source 1, worked in Weitz & Luxenberg’s estates department. The paralegal described being sent to the courthouse at 60 Centre St. to meet with Aguilar and hand her documents so she could affix backdated stamps, thus bringing time-barred complaints within the statute of limitations. In February, before he submitted an amended complaint containing the allegation, G-I Holdings’ lawyer Thomas Kavaler of Cahill Gordon & Reindel met with Fitzpatrick and asked whether he found the paralegal to be credible. Fitzpatrick, the judge said, believed the paralegal was telling the truth. CREDIBLE SOURCES “Holdings concedes that some details conveyed by Source 1 were not fully understood, but they believed his account of the events to be too detailed to be fabricated and some of his statements had been corroborated by other witnesses,” Sweet said. “None of his statements were contradicted.” Moreover, Judge Sweet said, counsel for G-I Holdings noted that Aguilar had lied when she told an investigator with Kroll Associates that she knew no one at Weitz & Luxenberg — her daughters worked at the firm as paralegals. And counsel for G-I Holdings also asserted that Weitz & Luxenberg had represented Aguilar’s husband on another matter free of charge. “As a result, they concluded that Aguilar had an incentive to do a ‘favor’ for Weitz & Luxenberg, and that Source 1 had told the truth with regard to the backdating allegations,” Sweet said. Since the filing of the amended complaint in March, Sweet said, G-I Holdings investigator Kroll Associates also learned from two other sources, both former paralegals at Weitz & Luxenberg, that Aguilar’s daughter Alicia Ostacher was paid $65,000 by the firm when the standard pay for other paralegals was $25,000. One of those paralegals asserted that Aguilar was often used to expedite matters at 60 Centre St. After a review of the matter by several attorneys at Cahill Gordon, and one day after filing the amended complaint, Kavaler sent a copy of the allegations to the Disciplinary Committee of the Appellate Division, 1st Department, and a Kroll investigator sent copies of the papers to Manhattan District Attorney Robert M. Morgenthau. Weitz & Luxenberg fought back, decried the allegation as outrageous, and argued that G-I Holdings should be sanctioned on three grounds: that its attorneys failed to conduct a reasonable investigation, failed to find legal support for its claims, and “making the allegations for the improper purpose of garnering media attention,” Judge Sweet said. Sweet rejected Weitz & Luxenberg’s charge that the allegations amounted to sanctionable conduct because they were based solely on the statements of the Source 1 paralegal. The allegations would only be improper, he said, if Cahill Gordon lawyers believed Source 1 or other evidence was untrustworthy. And the judge noted that “Holdings, its counsel, and its private investigators expended 850 hours in investigating and pursuing these charges,” and Holdings’ counsel “did not act precipitously” when they first obtained Source 1′s initial statement. PLAINTIFFS’ FIRM COUNTERS Weitz & Luxenberg and its lawyer, Elkan Abramowitz of Morvillo, Abramowitz, Grand, Iason & Silberberg, charged that the backdating of documents was “impossible,” for two reasons. First, the paralegal claimed that Aguilar had presented a badge to a counter clerk at 60 Centre St. for a “log book” and made a false entry in the book after backdating a complaint. But Chief Deputy County Clerk James A. Rossetti had stated that the so-called log book was actually a “minute book” that is maintained in the public area of the clerk’s office, and therefore, Aguilar needed no identification to obtain the minute book. Moreover, Rossetti stated that minute books were used only for cases commenced before 1993. Second, Weitz & Luxenberg claimed its own investigation showed that G-I Holdings’ predecessor, GAF, could not have been a defendant in the backdated case because all cases in which the firm had sued the company were resolved in a 1993 settlement agreement. But Judge Sweet said, “It is unclear whether the W&L defendants have proven the ‘impossibility’ of the charges against them as it relates to GAF.” And “even assuming that the W&L defendants have not proven without a doubt that Source 1′s story could not be true … ” the judge said, ” … the issue of whether Holdings adequately investigated does not turn on whether a particular stone left unturned would have disproved their theory unless they intentionally avoided finding unfavorable information.” However, Sweet warned that G-I Holdings should “carefully analyze the results of the investigations by the W&L defendants” before reasserting the claim. Finally, Judge Sweet found the allegations made by G-I Holdings were sufficient to state a claim for common-law fraud and were not made in bad faith. He added that “efforts to generate media attention are insufficient to show an improper purpose” unless the complaint lacks foundation in law or fact.

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