When the Melard bathroom-components factory closed in Passaic, New Jersey, 112 workers were laid off, and more than 80 filed workers’ comp claims alleging that they’d been injured on the job but just hadn’t gotten around to reporting it previously. Mass comp filings of this sort are by no means rare following plant closings, at least in some parts of the country. However, the employer, Bath Unlimited — a subsidiary of Masco that does business as Melard — sniffed fraud, and decided to fight back. It sued the workers and the law firm that represented them, Ginarte O’Dwyer and Winograd, alleging racketeering:
The company claimed in its 2004 federal lawsuit that the Ginarte law firm and attorney [Michael] Policastro encouraged workers angry at being fired to file claims, most of which were identical except for employees’ personal information. According to the suit, the law firm directed workers to provide false information to doctors, and “virtually all” of the employees examined by physicians for Bath had no disabilities or none attributable to the company, the complaint charged.
The 84 worker-defendants did not make an appearance to contest the charges, and last month a federal judge signed a default judgment against them which leaves them personally on the hook for at least $2.26 million. (Greg Saitz, “$2.26M fraud judgment against workers shakes labor landscape”, Newark Star-Ledger, Mar. 21; “Workers penalty to be reviewed”, Mar. 30; John Petrick, “Workers must pay ‘compensation’ after losing claims suit”, Bergen Record, Mar. 25; Workers Comp Insider, Mar. 21 and Mar. 30).
Not surprisingly, the ruling has sent shock waves through the workers’ compensation and labor bar. Some of these lawyers argue as if granting employers any right at all to pursue fraud sanctions will impermissibly chill legitimate claims; presumably they imagine that the right to sue should forever be left a one-way affair. Others not unreasonably take exception to the severity of federal racketeering law’s treble-damage remedy (although the default “progressive” position, or so it seems, is otherwise to defend that same treble-damage remedy). Finally, and most cogently, they have pointed to the intrinsic harshness of the default judgment as a procedural device, which in this case has laid heavy burdens on unsophisticated immigrant workers, some of whom might plausibly have advanced the merits of their individual comp claims even if the bulk of the other 80-plus cases should be shown to be bogus.
But what of the law firm of Ginarte O’Dwyer and Winograd, which was at the center of the fraud scheme, if a fraud scheme there was? Well, this is the piquant part: after denying the allegations in court papers and trying unsuccessfully to get the federal case dismissed, the law firm settled separately with Bath/Masco/Melard on undisclosed terms. That protected its own interests, but left its former clients … well, “twisting in the wind” may not be too strong a way of putting it. The large law firm of Lowenstein Sandler has now stepped forward, acting on what it says is a pro bono basis, to attempt to get the default judgment against the workers overturned. (Greg Saitz, “Defending factory workers”, Newark Star-Ledger, Apr. 11).
7 Comments
I’d think the workers would have a pretty good case against the attorneys who were ostensibly representing them. Had Ginarte O’Dwyer and Winograd no obligation to put up a defense? To ensure that their clients did not lose by default?
John: To the extent that the workers were complicit in worker’s comp fraud, we shouldn’t have any sympathy for them. To the extent that they were poor unsophisticated non-English-speaking immigrants manipulated by Ginarte, their remedy should be against Ginarte.
And the workers may have a strong case against Ginarte — not for its behavior in the racketeering case, but for its behavior in the underlying workers’ comp cases.
While it’s incredibly unseemly that Ginarte settled and the workers defaulted, Ginarte couldn’t possibly represent them; their interests differed and it would be a huge conflict. (It may have been able to request an extension of time to answer on behalf of the workers to enable the workers to get their own lawyers; we don’t know what happened there.)
In reality, the workers are probably almost all judgement proof, so it doesn’t much matter.
Wouldn’t Ginarte doing that be an extreme conflict of insterest? I mean, don’t they have responsibilities to their clients?
I read all of the articles linked in the article, and some more links from those articles. Now, we here at OverLawyered are used to fairly credulous reporting. But in none of the articles, not even anything on Google, is it ever mentioned that this happened because Ginarte O’Dwyer and Winograd failed to represent their clients. The inclusion of some clients with legitimate complaints seems harsh, and I would be interested to see how much of this judgment ends up being overturned.
Rather than having a chilling effect on all cases, seems to me it’s more likely to have a chilling effect on filing bogus cases. But it would be nice, if the public took just one thing away from this, which is that, apparently, Ginarte O’Dwyer and Winograd failed to represent their clients.
{grin}
Is the State ethics agency looking into this? It seems to me that the lawyers violated a number of ethical obligations if they knowingly filed masses of fraudulent claims, and then let the workers hang out to dry.
Walter beat me to this: I’ve been following the story for a couple of weeks, waiting for a better story from the media. What’s amazing to me is that not one news story thinks it notable that there was obviously a giant workers’ compensation fraud involving identical bogus claims. But every story is about big, bad Bath Unlimited, who is clearly a victim in all this. Even a website readers have made me promise not to link to takes this tack.