Homefryin' with Fred Baron

Dallas' largest plaintiff's firm, Baron & Budd, cultivates friends, punishes enemies and beats allegations it prompts clients to lie and win

Baron, who responded to one question for this story and declined to comment further, says G-1's suit is a tit-for-tat move in a "very, very difficult war" with the company and its chairman and owner, Samuel Heyman. "They want to throw us off the creditor's committee and screw all of our clients," Baron says, referring to the company's bankruptcy. "Sam Heyman is a very bad guy."

"We won't even dignify that with a response," says Richard Weinberg, chief executive officer for G-1.

Weinberg says the racketeering suit grew out of a system of handling asbestos lawsuits in state courts that works very well for plaintiffs' lawyers but miserably for defendants, and in turn, asbestos victims who are demonstrably ill. In his experience, plaintiffs' lawyers will negotiate to settle cases for sick plaintiffs--those with asbestos-related cancers, for instance--by demanding $3,000 apiece for their huge inventory of cases from clients who show no ill-health effects, he says. In other words, they leverage a few strong cases against masses of weak cases that are too numerous to defend. Within the past year, companies such as vinyl floor-maker Armstrong and Owens-Corning, the nation's top maker of fiberglass insulation, have been driven into bankruptcy because of an ever-increasing volume of claims from workers who are not sick. And in bankruptcy, five or six years typically go by before anyone is paid, Weinberg says.

"We understand, as part of the industry, we have liability," Weinberg says. In 1967, his company acquired Ruberoid Co., which from the mid-1940s to the 1960s produced asbestos insulation. It made about $1 million in profits from its asbestos business, according to the lawsuit. G-1 has paid $1.5 billion in asbestos lawsuits, about half of which went to attorneys' fees, it says.

To pursue its allegations that Baron & Budd has suborned perjury and fabricated evidence to produce dubious cases, G-1 dispatched investigators to Dallas in 1999. Baron & Budd met them head-on. The firm obtained a temporary injunction from state District Judge Merrill Hartman, forbidding them from "communicating in any manner" with former Baron & Budd employees. Such information was likely "privileged and confidential," Hartman ruled.

Over the next year and a half, the battle over the investigators became bogged down in a series of appeals and counter-appeals that at one point occupied the services of eight lawyers at five law firms. It was still going on in January, when the company filed for bankruptcy.

Baron & Budd has consistently argued that talking to former employees about witness coaching violates the principle that communications between lawyers and their clients are confidential--the so-called attorney-client privilege. The day the script memo was accidentally handed over in Corpus Christi in 1997, lawyers from the two sides at one point literally grabbed opposite ends of the document in a fracas by a copy machine while the Baron & Budd lawyer argued that point. For the next six months, the legal question became whether the memo was evidence of fraud and thus not protected by the privilege. District judges in Austin and San Antonio found the memo was not protected, but two lower-level appeals courts overturned those rulings, one in a split opinion. The matter was dropped before it reached the Texas Supreme Court.

This January, after filing its racketeering lawsuit, G-1 employed a new set of investigators, Kroll & Associates, and by the end of the month, they were busy tracking down former employees. On January 30, they telephoned former Baron & Budd lawyer Amy Blumenthal, who in turn telephoned her former firm, which appears to have gone immediately on alert.

The same day, Dallas City Councilwoman Laura Miller, whose husband, state Rep. Steve Wolens, is a partner at Baron & Budd, called ObserverEditor Julie Lyons to inquire if Kroll had contacted the newspaper, which in 1998 posted witness-coaching documents on its Web site. "She said Fred asked her to call," Lyons says of Miller, a former columnist for the paper. "She wanted to know if Kroll had called us."

The next day, state District Judge Ann Ashby granted Baron & Budd's quickly drafted motion for a temporary restraining order. It barred Kroll from contacting the firm's employees and ordered Kroll's investigators to submit themselves to questioning by Baron & Budd about what they had learned.

Ashby declined to comment on her ruling.

In New York, G-1's lawyers were apoplectic. They complained to the federal judge overseeing the racketeering case that they had been, so to speak, homefried. They accused Baron & Budd of using a state court in its "home county" to "protect" the firm. The aim, they said, was to halt the company's inquiry "virtually as soon as it began."

After another round of legal maneuvering in which Ashby gave the firm a second restraining order, U.S. District Judge Robert Sweet, who is presiding over the racketeering case in New York, stepped in to resolve the matter. A hearing is scheduled next month. For his defense in the racketeering case, Baron has hired Abbe Lowell, the Washington lawyer who pleaded the case for President Clinton during impeachment proceedings in the House.


The last judge in Dallas to rule that the firm deserved further scrutiny, not protection, was Marshall. At a hearing in February 1998, he said the memo's "encouragement to fanciful testimony is unmistakable...It is time for the maneuvering and wordsmithing to come to an end." He referred the case to the Dallas County district attorney for criminal investigation.

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