UM Grace Case

 After the jury was dismissed Monday, the defendants began oral arguments on several motions to limit the testimony of Robert Locke. The defendants contended that Locke’s testimony would be unfairly prejudicial and would confuse the jury. They also contended that the testimony would not be relevant to the counts in the indictment.

The government argued that Locke’s testimony would establish the requisite mental state for the conspiracy charge and maintained that the testimony was at the heart of its case.

The evidence at issue is the potential testimony regarding W.R. Grace’s strategies to avoid litigation and maximize profits. The government seeks to introduce evidence that Grace calculated the costs of potential litigation resulting from the use of products containing asbestos before taking those products off the market. Additionally, the government plans to show that Grace lied to consumers by claiming that its products did not contain asbestos.

Judge Molloy did not make a ruling on the issue although he committed to having a ruling as early as possible tomorrow morning.

Mr. Bernick argued that Locke’s testimony should be limited pursuant to Evidence Rules 402 and 403. Under rule 402, the court can deny admission of irrelevant evidence. Under rule 403, the court may deny admission of relevant evidence if the evidence has the potential to confuse or mislead the jury or if the presentation of the evidence would amount to a waste of time.

Mr. Bernick spent a significant portion of his time focused on Monokote 3 (MK3) and drew distinctions between MK3,MK4, MK5 and MK6 (products sold by Grace in the 1970’s and 80’s). Mr. Bernick contested that allowing more testimony by Locke would force the defense to go into all of the evidence relating to these products and establish that there has never been liability. Mr. Bernick asserted that this would require the defense to present lengthy testimony, calling attorneys as witnesses and rehashing a number of civil and bankruptcy cases.

Mr. Bernick seemed to concede the government’s point that Grace was concerned by potential litigation over the products it produced that contained asbestos. But he characterized the government’s reliance on this theory to prove conspiracy counts as a “highly attenuated inference.”

Kris McLean responded to Mr. Bernick’s argument by clarifying that the government did not intend to talk about MK3. After his initial remarks, he was immediately interrupted by Judge Molloy who asked how the testimony would prove that 1) Grace was keeping information from the Government or that 2) Grace was exposing the people of Libby to an imminent threat.

In response to Judge Molloy’s question, Mr. McLean attempted to tie up the loose ends of the government’s theory by explaining, “These products were all made from Libby vermiculite.” Mr. McLean also asserted that the controversial testimony would provide evidence of a motive because it would show that Grace was attempting to “increase profit and avoid liability.”

Judge Molloy asked Mr. McLean how the government intended to show that knowledge of the dangers of these products and the allegation that Grace was attempting to avoid litigation amounted to liability in this case. Mr. McLean asserted that Locke’s testimony would prove that the Defendants had the requisite mental state. He argued that MK5 was labeled as “asbestos free” when in fact it was not. Mr. McLean attempted to show that Grace was lying to its customers. Next, Mr. McLean explained that Grace could not tell customers its products contained asbestos because the Government would find out. Mr. McLean referenced “OM Scott” where the EPA had learned about employees with “bloody plural effusions.” He insinuated that because of OM Scott, Grace had learned that if it knew a product was dangerous and was not willing to change it, Grace needed to keep the information to itself.

Mr. McLean conceded that the Government’s theory was complex but reasserted that the evidence went to the heart of the Government’s case.

Mr. Bernick’s rebuttal picked up on Judge Molloy’s questioning about proving the charges in the indictment. Mr. Bernick asserted that the testimony would not provide any evidence that Grace had attempted to defraud the Government. Mr. Bernick did not concede that Grace had defrauded consumers but he argued that even if Grace had defrauded consumers, this did not show that Grace defrauded the Government. Towards the end of his remarks Mr. Bernick explained that “at a certain point it is impossible for Grace to receive a fair trial.”

Next Mr. Spivack spoke on behalf of Defendant Robert Walsh. Mr. Spivack had filed two motions to limit Locke’s testimony on top of the motions filed by Grace. Mr. Spivack echoed many of the same concerns raised by Mr. Bernick however, he also added several new arguments.

First, Mr. Spivack argued that the Government had not given notice that it was going to introduce 404(b) evidence as required. Second, Mr. Spivack asserted that his client had complied with the law at all times. Finally, Mr. Spivack raised the issue of the complexity of the evidence. He maintained that the jury would not understand the Government’s argument and concluded that the Government was trying to confuse the jury.

Kevin Cassidy responded to Mr. Spivack’s remarks arguing that the evidence Robert Locke would present is not 404(b) evidence. After making this point, Mr. Cassidy’s argument turned into more of a question and answer session with Judge Molloy. Judge Molloy asked Mr. Cassidy directly if he could cite “any cases that say you can prove conspiracy to defraud the Government based on an inference that there is a conspiracy to defraud consumers?” Mr. Cassidy could not cite a case however, he did refer Judge Molloy to Rule 401 arguing the court should allow evidence if it makes a fact “more probable than not.” Mr. Cassidy went on to explain that the Government could not prove the conspiracy counts based merely upon consumer fraud but, that the Government has more evidence.

Judge Molloy next asked, “What is the conspiracy?” Mr. Cassidy referred Judge Molloy to a memo that referenced “putting off the NIOSH study.” Mr. Cassidy seemed to indicate that intentionally delaying the NIOSH study and keeping the reasons for changes in products a secret were the conspiracy, although Judge Molloy did not get a direct answer to his question.

Mr. Cassidy was followed by defense attorney David Krakoff. Mr. Krakoff picked up on the theme that defrauding consumers was not the same as defrauding the Government. Mr. Krakoff also pointed out that Grace was communicating with the Government during the time period in question. He accused the Government of “avoiding what the Government actually knew.”

Mr. Krakoff then asked Judge Molloy to order the Government to provide any communications between Locke and his attorney Peabody. Mr. Krakoff asserted that Locke had waived his attorney client privilege while on the stand and asked Judge Molloy to have the government produce any documents that resulted from communications between Locke and Peabody. Mr. Krakoff also asked Judge Molloy to have the Government issue Peabody a subpeona.

Judge Molloy agreed that Locke had waived his attorney client privilege but explained to Krakoff that he could not order the Government to produce documents that it does not have. Judge Molloy also explained that he could not force the Government to call Peabody as a witness although he did agree to subpeonea Peabody if Krakoff filed the appropriate paperwork.

Thomas Frongillo made the final argument of the afternoon. Mr. Frongillo explained that Grace began meeting to figure out how to avoid litigation because OSHA had changed the standard for how much asbestos could be allowed in products. According to Mr. Frongillo EPA regulations in 1973 allowed Grace to produce products with “up to 1% in weight asbestos.” Mr. Frongillo explained Grace’s products met that standard and Grace had disclosed its products contained asbestos. When OSHA changed the standard, Grace knew it had to change its products. Mr. Frongillo contended that even during this period Grace had provided outright disclosures to the US Government about its products.

Mr. Frongillo concluded his remarks by saying, “The Government knew the full story. They knew more about the health effects and friability than anybody.”

–Paul Nicol (posted at 12:02 a.m.)