Racketeers or Victims? The Melard cases

It is a familiar story in New Jersey: immediately after Melard Manufacturing Corporation closed its Passaic plant, laying off 111 workers, 84 of the former employees promptly filed workers’ compensation claims alleging a variety of “occupational” maladies. (Melard, which manufactured plastic bathroom parts and packaged other items, laid off the workers in 2002.) The problem: the employees were represented by a single law firm, which filed identical complaints for each former employee, changing only the personally-identifying information on each court pleading. Melard filed a complaint in federal Court alleging Racketeer Influenced and Corrupt Organizations Act (RICO) violations by the employees and their lawyers – alleging that “fraudulent claims were being filed” and that “workers were being coached.” Melard claims that the workers gave false complaints to their physicians and that the lawyers who filed the claims solicited and developed the complaints. Melard argued that none of their workers ever filed a claim for pulmonary-related complaints before the plant closed and no worker claimed retaliation for filing a claim. Melard allegedly was told of this wrong-doing by a former employee who came forward.

The law firm that filed to complaints quietly settled with Melard (Ginarte, O’Dwyer, Winograd & Laracuente) for an ‘undisclosed’ sum. That left the federal lawsuit pending against the 84 factory workers who filed the allegedly fraudulent claims. On February 21, 2006, a default judgment was obtained against the workers, who did not appear or defend the case on their own behalf.

Three weeks later, Federal (U.S. District) Judge Stanley Chesler entered a judgment of $2,264,691 against the workers (of which $350,678 was attorneys’ fees for Melard’s lawyers).

The saga as it stands now? The lawyers who brought the claims settled their portion of the case and moved on. The 84 workers were not so lucky. The federal judgment against them, likely uncollectable, stands.

More interesting is the fate of the two former-employees who continued to pursue their workers’ compensation claims against Melard (and were provided a court-appointed attorney, Gregory Jachts, Esq.). Two of those claimant received awards of compensation after trial (Judge Beverly Karch, Presiding Judge of Comepnsation, Paterson). In other words, the Compensation Judge found that the claimants had compensable injuries. Nonetheless, under the terms of the RICO judgment, the awards obtained by the employee were the results of a tainted claim, and the employees who recovered owe Melard triple their award!
We will continue to follow this story as it develops.

Presenting the Occupational disability case: Trial proofs

Two cases decided in February 2007 examined the proofs in an occupational-disability case.

Credibility is King . . . Patel v. Federated Logistics, App. Div. February 7, 2007 (not approved for publication)

Petitioner Yogina Patel claimed that exposure to “dust, fumes, pulmonary irritants, bending, lifting and repeated manipulations” while working for three years as a checker in a dusty warehouse caused her to become permanently disabled.

During a full trial, the claimant presented the testimony of her physicians, who testified that the petitioner suffered from “inflammation of the soft tissues of the muscles” and “chronic bronchitis.”

The employer presented the testimony of its Human Resources manager, who disputed the claimant’s descriptions of the premises and her claims that the warehouse was “dusty.”

The Judge of Compensation dismissed the case, finding that the claimant’s description of the warehouse was not true and her complaints were therefore not credible.

Practice tip: In defending occupational disease claims, the testimony of an employer-representative to dispute specific facts asserted by the claimant may be powerful evidence for the defense.

. . . Objective Medical Evidence- Larsen v. City of East Orange, App. Div., February 13, 2007 (not approved for publication)

East Orange firefighter Kenneth Larsen brought a claim for occupational exposures to asbestos resulting in colon cancer and pulmonary disabilities which he alleged were related to his employment.
Both parties retained experts. During the trial, respondent’s expert admitted that he could “not rule out” the claimant’s workplace exposures as a possible cause of the Larsen’s cancer and disability.

There was no dispute that the claimant worked in a facility with “free asbestos” present.

Based upon the lack of disagreement between the experts and the presence of the admittedly cancer-causing substance in the workplace, the Appellate Division affirmed the decision of the Judge of Compensation finding a causal relationship between the cancer and the work exposures.

Intoxicated employees

Quest Diagnostics of Lyndhurst, NJ is the biggest U.S. provider of workplace drug tests. Quest said that in 2006 positive results for workplace drug tests were the lowest since the company began testing.

Quest said that 3.8% of the 9 million tests administered came back positive.

Going-and-coming rule in NJ

The New Jersey Workers’ Compensation Act states that “employment starts when an employee arrives at the employer’s place of employment to report for work and [ends] when the employee leaves the employer’s place of employment.”

The Act provides exceptions for (1) paid travel time; (2) employees using an employer-authorized vehicle; (3) travel by emergency personnel (fire, police) traveling to an emergency. Generally, off-premises travel to and from work is not compensable, UNLESS the employer provides the transportation.

A recent case, decided February 22, 2007, discusses the application of the going-and-coming rule in the context of a familiar set of facts.

In Lawhead v. Harleysville Insur. Co., App. Div. February 22, 2007 (not approved for publication), defense attorney Mark Lawhead appeared in workers’ compensation court in Newark to represent his employer, Harleysville Insurance Company. He was busy in court until 2:45pm. He was scheduled to appear the following day in Freehold workers’ compensation court, and because he did not have the necessary files, he drove in a company-owned vehicle from Newark to his office in Somerset to pick them up. After retrieving the files, he was injured while driving from his office to his home in Tinton Falls (again, in the company-owned vehicle).

The Judge of Compensation found Lawhead’s injuries compensable by deciding that Lawhead was “engaged in an activity for his employer’s benefit when he had his accident” and because Lawhead was operating a company-owned vehicle at the time of the accident.

The Appellate Division panel disagreed and reversed the Compensation Judge, finding that the petitioner was “merely in the course of traveling from his office to his home at the end of a normal workday.” The Appellate Division found that the claimant was “engaged in his regular commute” and therefore not entitled to benefits.

Practice tip: The facts surrounding an off-premises accident are of paramount importance in determining whether the claim is compensable.

Tompkins McGuire continually monitors the decisions of the workers’ compensation courts. Any questions? Feel free to contact us!

New Uninsured Employer Forms

The Division of Workers’ Compensation has simplified the process for obtaining payment from the Uninsured Employers’ Fund.
From Director Calderone’s February 5, 2007 memo:

“The current law requires that a petitioner or the petitioner’s attorney make a request for payment in writing to the Commissioner of Labor and Workforce Development before the Uninsured Employer’s Fund (UEF) can comply with an order for petitioner benefits, counsel fees or other costs. To have each individual petitioner or petitioner attorney prepare separate letters for payment has created unnecessary benefit delays and expenses for the parties.”

The Division has created a new form that all UEF attorneys will have available at the time a judgment or order for UEF benefits is entered. The UEF attorney will bring the completed form back to the Division to commence the payment process. No additional letters or mailings will be required by the parties.

Occupational disease death claims in NJ

A panel of Appellate Division judges overruled the Judge of Compensation in this occupational disease death case. The Workers’ Comp Judge found that the decedent, a heavy smoker, was exposed to asbestos when he worked for Mid-State Sprinkler. The Judge of Compensation decided that the asbestos exposure was what caused the cancer that the claimant died from. The Appellate Division disagreed, finding that the plaintiff’s proofs did not establish medical causation and there was no evidence brought out at trial that the decedent had symptoms of asbestosis.

The facts in the case are important to the ruling of the Appellate Judges. The decedent worked as a sprinkler pipe installer for 29 years with different companies (ultimately, working for himself for the last fifteen years of his employment). The claimant was also a smoker: he smoked from age 15 to age 25, quit for about ten years, and then began smoking again for two years before he was diagnosed with cancer (small-cell type)in 1996.

Various witnesses were called who testified about the working conditions the claimant experienced. A union leader who testified on behalf of the plaintiff described the potential for exposure to asbestos. In addition, doctors testified about the epidemiology of cancer (Dr. Neugut for the claimant). The plaintiff’s medical experts testified that the “heavy smoking” combined with the exposures to asbestos to cause the claimant’s lung cancer.

The plaintiff’s medical expert testified that it was asbestos exposure and cigarette smoking “acting in synergy” which caused the claimant’s lung cancer.

Another medical expert, Dr. Kritzberg, who testified for the defendant Mid-State Sprinkler, said that the type of cancer (small-cell carcinoma) is closely linked to smoking, not asbestos exposure. Dr. Kritzberg also testified that the the claimant’s CT scans and x-rays did not show changes in the lungs consistent with asbestosis or asbestos exposure. Dr. Kritzberg testified that the medical records he reviewed showed that the claimant smoked “4 or 5 packs a day” from age 15.

The Judge of Compensation found it was “more probable than not” that the claimant’s exposure to asbestos caused his lung cancer.

The Appellate Judges reversed: they said that the medical proofs were insufficient to establish causation. Specifically, the Appellate Judges found that ‘small cell carcinoma’, like the cancer the plaintiff had, is not causally linked to asbestos exposure. Further, the “synergy” theory of causation was dismissed as not based upon scientific evidence.

Case: Leonard v. Mid-State Sprinkler, A-4952-06T2-06T2 (App. Div. decided May 20, 2008)(per curiam, unpublished as of blog date).

Defending Employers