CSX Transportation, Inc. v. Gilkison et al
Filing
1039
MEMORANDUM OPINION AND ORDER DENYING PLAINTIFF'S 885 MOTION TO DISMISS THE LAWYER DEFENDANTS' COUNTERCLAIMS. Signed by Senior Judge Frederick P. Stamp, Jr on 4/24/2012. (kac) (Copy to counsel)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
CSX TRANSPORTATION, INC.,
Plaintiff,
v.
Civil Action No. 5:05CV202
(STAMP)
ROBERT V. GILKISON,
PEIRCE, RAIMOND & COULTER, P.C.,
a Pennsylvania professional corporation
a/k/a ROBERT PEIRCE & ASSOCIATES, P.C.,
a Pennsylvania professional corporation,
ROBERT PEIRCE, JR., LOUIS A. RAIMOND,
MARK T. COULTER and RAY HARRON, M.D.,
Defendants.
MEMORANDUM OPINION AND ORDER
DENYING PLAINTIFF’S MOTION TO DISMISS
THE LAWYER DEFENDANTS’ COUNTERCLAIMS
I.
Background1
The plaintiff, CSX Transportation, Inc. (“CSXT”) commenced the
above-styled civil action by filing a complaint in this Court on
December 22, 2005.
on July 5, 2007.
The plaintiff later filed an amended complaint
(ECF No. 208.)
On May 2, 2008, after this Court
granted the defendants’ motion to dismiss various portions of the
amended complaint, the plaintiff sought leave to file a second
amended
complaint.
(ECF
No.
278.)
This
Court
denied
the
plaintiff’s motion for leave to file a second amended complaint on
the grounds that such amendment would be futile and would unduly
1
For the purpose of resolving the pending motion, this Court
believes that the following abbreviated summary of this case is
sufficient.
prejudice the defendants by extending discovery when it is not
necessary.
(ECF No. 284.)
to
and
trial
judgment
Thereafter, the case continued forward
on
the
plaintiff’s
May/Jayne
fraud
allegations and to summary judgment for the defendants on the
plaintiff’s remaining claims.
Following the entry of this Court’s judgment in favor of the
defendants regarding the May/Jayne fraud, the plaintiff appealed to
the United States Court of Appeals for the Fourth Circuit.
In its
judgment of December 30, 2010, the Fourth Circuit upheld the jury’s
verdict as to the May/Jayne allegations but vacated the dismissal
of Counts One through Four of the amended complaint, reversed the
summary judgment as to the Baylor claims, and held that the
plaintiff should have been permitted to file the second amended
complaint. (ECF No. 817.) On February 2, 2011, the Fourth Circuit
issued a mandate compelling further proceedings consistent with its
opinion.
(ECF No. 821.)
Pursuant to this mandate, this Court held a status and
scheduling conference on March 7, 2011.
At that conference, the
parties discussed the plaintiff’s proposal that a third amended
complaint be filed in order to reflect the changes in the case and
to offer a concise summary of the remaining claims.
On July 14,
2011, the plaintiff filed a motion for leave to file a third
amended complaint (ECF No. 841), which this Court granted on
October 18, 2011.
(ECF No. 850.)
2
The third amended complaint,
filed on October 19, 2011 (ECF No. 853) names Robert N. Peirce,
Jr., Louis A. Raimond, Mark T. Coulter (“lawyer defendants”) and
Ray Harron, M.D. as defendants.
In short, the third amended
complaint alleges that the defendants have orchestrated a scheme to
inundate CSXT with thousands of asbestos cases without regard to
their merit.
(Third Am. Compl. ¶ 1.)
On July 28, 2011, the lawyer defendants filed a motion for
permission to file counterclaims and have the counterclaims deemed
filed nunc pro tunc as of that date.
(ECF No. 842.)
On October
19, 2011, this Court issued a memorandum opinion and order granting
the lawyer defendants’ motion for permission to file counterclaims
and have the counterclaims deemed filed nunc pro tunc as of July
28, 2011.
(ECF No. 851.)
On November 23, 2011, CSXT filed a motion to dismiss the
lawyer defendants’ counterclaims.
(ECF No. 885.)
In support of
this motion, CSXT argues: (1) Count I fails to state a claim for
which relief can be granted because the counterclaims fail to plead
facts establishing the falsity of any alleged representation by
CSXT; and (2) Count II fails to state a claim for which relief can
be
granted
because
CSXT
did
not
make
any
misrepresentations
regarding the existence of the release and, in any event, the
lawyer defendants have failed to sufficiently plead justifiable
reliance.
3
The lawyer defendants filed a response in opposition to CSXT’s
motion to dismiss the counterclaims on December 16, 2011, in which
they contend that CSXT’s arguments against both Count I and Count
II are without merit.
support
of
its
(ECF No. 907.)
motion
to
dismiss
counterclaims on December 23, 2011.
CSXT filed a reply in
the
lawyer
(ECF No. 912.)
defendants’
The motion to
dismiss the counterclaims is currently pending before this Court.
For the reasons set forth below, this Court finds that the motion
to dismiss the counterclaims must be denied.
II.
Applicable Law
In assessing a motion to dismiss for failure to state a claim
under Rule 12(b)(6), a court must accept all well-pled facts
contained in the complaint as true.
Nemet Chevrolet, Ltd v.
Consumeraffairs.com, Inc, 591 F.3d 250, 255 (4th Cir. 2009).
However, “legal conclusions, elements of a cause of action, and
bare assertions devoid of further factual enhancement fail to
constitute well-pled facts for Rule 12(b)(6) purposes.”
Id.
(citing Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)).
This
Court
also
declines
to
consider
“unwarranted
unreasonable conclusions, or arguments.”
inferences,
Wahi v. Charleston Area
Med. Ctr., Inc., 562 F.3d 599, 615 n.26 (4th Cir. 2009).
It has often been said that the purpose of a motion under Rule
12(b)(6) is to test the formal sufficiency of the statement of the
claim for relief; it is not a procedure for resolving a contest
4
about the facts or the merits of the case.
5B Charles Alan Wright
& Arthur R. Miller, Federal Practice and Procedure § 1356 (3d ed.
1998).
The Rule 12(b)(6) motion also must be distinguished from a
motion for summary judgment under Federal Rule of Civil Procedure
56, which goes to the merits of the claim and is designed to test
whether there is a genuine issue of material fact.
Id.
For
purposes of the motion to dismiss, the complaint is construed in
the
light
essentially
most
the
favorable
court’s
to
the
inquiry
party
is
making
directed
the
to
claim
and
whether
the
allegations constitute a statement of a claim under Federal Rule of
Civil Procedure 8(a).
Id. § 1357.
A complaint should be dismissed “if it does not allege ‘enough
facts to state a claim to relief that is plausible on is face.’”
Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
“Facial
plausibility is established once the factual content of a complaint
‘allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.’” Nemet Chevrolet,
591 F.3d at 256 (quoting Iqbal, 129 S. Ct. at 1949).
Detailed
factual allegations are not required, but the facts alleged must be
sufficient “to raise a right to relief above the speculative
level.”
Twombly, 550 U.S. at 555.
5
III.
A.
Discussion
Count I
Count I of the lawyer defendants’ counterclaims sets forth a
claim
of
complaint.
fraud/fraudulent
misrepresentation
in
the
amended
Specifically, the lawyer defendants allege that CSXT
falsely represented that it incurred damages by being forced to
defend against the claims filed on behalf of Earl Baylor and to
prosecute the Baylor-related claims in this action.2
¶ 39.)
(Countercls.
According to the lawyer defendants, CSXT’s assertions of
its need to spend money to defend against Baylor’s case in state
court and to assert the Baylor-related claims in this action are
false because CSXT had a Release of Baylor’s claims when they were
filed in state court and when it filed its amended complaint.
(Countercls. ¶ 3.)
However, despite having this Release, CSXT
allegedly did not inform the lawyer defendants of its existence
until August 28, 2009 -- over two years after the amended complaint
was filed.
(Countercls. ¶ 16.)
The lawyer defendants further
allege that in justifiable reliance on CSXT’s misrepresentations,
they incurred substantial costs and expenses in defending CSXT’s
claims related to Baylor.
(Countercls. ¶ 43.)
2
The lawyer defendants refer to Charles S. Adams v. CSX
Trans., Inc., Civil Action No. 06-C-72, filed on February 21, 2006
in the Circuit Court of Harrison County, West Virginia.
This
lawsuit asserted a claim on behalf of Earl Baylor for personal
injuries arising from asbestos exposure.
CSXT’s claims in the
third amended complaint are based on the lawyer defendants’
fraudulent filing of this 2006 suit.
6
In its motion to dismiss the counterclaims, CSXT argues that
the lawyer defendants failed to set forth any facts establishing
the falseness of CSXT’s representation that it incurred damages by
being forced to defend Baylor’s claim. CSXT also argues that Count
I fails because the facts pled in the counterclaims establish that
CSXT did, in fact, incur at least some damages as a result of the
lawyer defendants’ fraudulent filing of Baylor’s 2006 claim.3 CSXT
asserts that the lawyer defendants attack only the reasonableness
of the damages that CSXT incurred, but cannot establish the falsity
of CSXT’s factual representation that it incurred damages to defend
Baylor’s 2006 claim.
In
response,
the
lawyer
defendants
argue
that
CSXT
mischaracterizes the counterclaims, which assert that CSXT was not
forced to incur any damages.
The lawyer defendants highlight the
fact that CSXT’s amended complaint accuses them of forcing CSXT to
expend substantial money and resources to defend the Baylor claim.
(Third
Am.
Compl.
¶¶
165,
172.)
According
to
the
lawyer
defendants, these contentions regarding the Baylor claim are false
and the counterclaims properly plead them to be such.
The lawyer
defendants also argue that the counterclaims expressly plead that
3
CSXT points to paragraphs 24-29 of the counterclaims in
support of this assertion. According to CSXT, the annoyance and
inconvenience associated with going back and tracking prior claims
recorded in its computer tracking system (as the lawyer defendants
admit CST would have had to do) constitute damages.
(Mot. to
Dismiss Countercls. 6.)
7
CSXT knowingly made false representations on both the issue of its
“reasonable reliance” and on its incurring damages because of the
reliance. The question, according to the lawyer defendants, is not
simply whether CSXT incurred any costs, but rather, whether those
claimed costs are properly attributable to CSXT’s being allegedly
duped by reasonable reliance on Baylor’s claim filed by the Peirce
Firm.
Under West Virginia law, the essential elements of fraud are
as follows:
(1) that the act claimed to be fraudulent was the act of
the defendant or induced by him; (2) that it was material
and false; that plaintiff relied upon it and was
justified under the circumstances in relying upon it; and
(3) that he was damaged because he relied upon it.
Poling v. Pre-Paid Legal Servs., Inc., 575 S.E.2d 199, 202 (W. Va.
2002) (quoting Horton v. Tyree, 139 S.E. 737, 738 (W. Va. 1927)).
Rule 9(b) of the Federal Rules of Civil Procedure requires that
“[i]n
alleging
fraud
or
mistake,
a
party
must
state
with
particularity the circumstances constituting fraud or mistake.”
Fed. R. Civ. P. 9(b).
After reviewing the pleadings, this Court finds that Count I
of the lawyer defendants’ counterclaims survives CSXT’s motion to
dismiss.
Count I alleges that CSXT falsely represented that it
incurred damages by being forced to defendant against the claims
filed on behalf of Baylor and to prosecute the Baylor-related
claims in this action.
(Countercls. ¶ 39.)
8
The lawyer defendants
also allege that these representations by CSXT were both material
and false. (Countercls. ¶¶ 40-41.) Finally, the lawyer defendants
contend that in justifiable reliance on CSXT’s misrepresentations,
they incurred substantial costs and expenses.
(Countercls. ¶ 43.)
The lawyer defendants do not attack the reasonableness of the
damages that CSXT incurred -- they argue that CSXT was perpetrating
a fraud by alleging that it incurred costs due to its reasonable
reliance on allegedly fraudulent representations in Baylor’s second
claim.
Thus,
defendants’
this
Court
counterclaims
finds
that
alleges
Count
enough
I
of
facts
the
lawyer
with
enough
particularity to state a claim to relief and must not be dismissed.
B.
Count II
Count II of the lawyer defendants’ counterclaims sets forth a
claim
of
responses.
fraud/fraudulent
misrepresentations
in
discovery
The lawyer defendants assert that in failing to
disclose the Release of Baylor’s claims in responding to discovery,
CSXT intentionally deceived them.4
(Countercls. ¶ 46.)
The lawyer
defendants go on to argue that CSXT’s failure to timely produce the
Release perpetuated its representations concerning the false fact
that it reasonably incurred damages by being forced to defend
4
The Release, executed by Earl Baylor in 2002, allegedly
indicates that CSX entered into a settlement with Baylor in which
it paid him $7,500.00 to obtain a release that covered his
asbestosis claims asserted in the 2006 suit, among other claims.
(Countercls. ¶ 4.)
9
against the claims filed on behalf of Baylor and to prosecute the
claims in this action relating to Baylor. (Countercls. ¶ 51.)
In its motion to dismiss the counterclaims, CSXT first argues
that the lawyer defendants fail to specifically identify the
misrepresentations CSXT is alleged to have made regarding the
existence of the Release.
Second, CSXT contends that it promptly
and voluntarily produced the Release after the lawyer defendants
provided it with a privacy release from Baylor on August 28, 2009.
Finally, CSXT contends that any claimed reliance by the lawyer
defendants on CSXT’s discovery objections and responses was legally
unjustified under the circumstances because CSXT expressly withheld
responsive
documents
based
on
its
objections
to
the
lawyer
that
CSXT’s
defendants’ document requests.
In
failures
response,
to
the
timely
lawyer
defendants
produce
the
counter
Release
were
representations upon which they reasonably relied.
material
Further, the
lawyer defendants assert that the counterclaims provide clear
notice of what constitutes fraudulent conduct committed by CSXT,
and therefore, are properly pled under Rule 9.
Second, the lawyer
defendants state that it will be a fact question for the jury
whether CSXT was, as they contend, fraudulently misleading when it
claimed it was forced to spend substantial money and resources to
defend against Baylor’s claim when it had a Release from Baylor in
its possession.
Moreover, the lawyer defendants argue that a fact
10
question exists as to whether CSXT’s disclosures in its privilege
log were adequate under the circumstances or whether they were
intentionally misleading.
This Court finds that Count II of the lawyer defendants’
counterclaims alleges a valid cause of action and presents numerous
issues for determination by a jury.
Count II sets forth facts in
support of the lawyer defendants’ contention that CSXT’s discovery
responses were part of the alleged fraud.
Contrary to CSXT’s
assertion, the counterclaims do identify the misrepresentations
CSXT is alleged to have made regarding the Release.
Count II
alleges that CSXT failed to timely disclose and produce the Release
in responding to discovery, either in its responses or on the
required
privilege
counterclaims
log.
also
(Countercls. ¶¶ 4-5.)
(Countercls.
describe
the
¶¶
nature
45;
of
51.)
the
The
Release.
Based upon the standard of review for
motions to dismiss, this Court believes that the allegations
presented in the counterclaims are sufficient to warrant denial of
the motion to dismiss.
More detailed factual allegations at this
stage are not necessary, thus, both Count I and Count II have been
pled with sufficient specificity.
IV.
Conclusion
For the reasons set forth above, the plaintiff’s motion to
dismiss the lawyer defendants’ counterclaims (ECF No. 885) is
DENIED.
11
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
DATED:
April 24, 2012
/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE
12
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