Pipemaker dealing with lawsuit's publicity

John O'Brien Mar. 5, 2010, 10:40am

WASHINGTON (Legal Newsline) - Resuming normal business activities has been tough for pipemaker JM Eagle since plaintiffs attorneys spooked the public with a lawsuit, an attorney for the company told Legal Newsline.

Lanny Davis, former special counsel to President Bill Clinton, said press coverage of the lawsuit hasn't helped either. Since the lawsuit was unsealed a month ago, he has stressed that the federal government spent more than three years investigating the claims made by a whistleblower but chose not to intervene.

Some states have told JM Eagle that they will not buy their products until the issue is resolved.

"Plaintiffs lawyers have scared the daylights out of authorities," Davis said, adding that many in the media have overlooked the federal government's decision not to intervene.

"The reputation of a pipe manufacturer is important -- you bury these things underground. If they are a ticking time bomb you want to know if they're going to explode this year or next."

The law firm Phillips & Cohen is representing whistleblower John Hendrix, who was an engineer for J-M Manufacturing's product assurance division in New Jersey. J-M was JM Eagle's corporate predeccessor.

Hendrix was fired less than two weeks after writing a memo that said the pipes tensile strength was substandard, Phillips & Cohen said.

The company said that confusion clears once customers are given the details of the case, but it has been a battle "customer by customer."

Four states have decided to join the suit -- Nevada, Delaware, Virginia and Tennessee. Forty-three other municipalities and water districts have too.

"For safety, economic and health reasons, water and sewer lines need to be reliable and sustainable to meet the needs of Nevada's citizens," Nevada Attorney General Catherine Cortez Masto said.

Davis, though, said none of the states put much time into investigating the claims. Masto was the only attorney general with whom the company interacted.

Jason Miller, a spokesman for Delaware Attorney General Beau Biden, has said the state has experienced "no known failures of the pipe."

Other states, like Florida and California, decided not to join the lawsuit. California Attorney General Jerry Brown put together an investigation of his own, Davis said, before declining.

"He's very activist, pro-consumer, and chose not to intervene," he said.

Still, Brown's investigation didn't compare to the federal government's. The U.S. Attorney's Office in Los Angeles subpoenaed tens of thousands of documents and conducted what Davis called a "mini-trial" in which expert testimony was given.

"I'd never seen that before," Davis said. "At the very end of the process, they sent in people to take samples of the pipes, going over several years. They told us they were going to test the pipe, then we didn't hear from them anymore."

Phillips & Cohen, in a statement made Feb. 18, said the company is mischaracterizing the government's stance.

"The (federal) government's decision to decline intervention at this time should not be construed as a statement about the merits of the case," a letter from the federal government to JM Eagle said, according to one of the law firm's releases said.

"Indeed, the government retains the right to intervene at a later date upon a showing of good cause. Moreover, although the government is not currently a litigant, it remains the real party in interest, and is entitled to the majority of any damages and penalties recovered on its behalf."

Davis said he has been a part of several whisteblower lawsuits and the federal government doesn't make inferences about the merits of a case after declining to intervene.

The company is currently arguing that Phillips & Cohen broke the conditions of the seal by releasing which states decided to intervene in the suit.

From Legal Newsline: Reach John O'Brien by e-mail at jobrienwv@gmail.com.

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