LOS ANGELES (Legal Newsline) - Plaintiff lawyers who spent 14 years and tens of millions of dollars pursuing a whistleblower case only to win less than $200,000 for their clients shouldn’t be able to collect multiples of that amount from the defendant, pipemaker JM Eagle said in a filing calling the fee request “patently unreasonable.”
Lawyers with Day Pitney, Constantine Cannon and McKool Smith asked a federal judge in California to award them fees for their work in the long-running case on Nov. 4, saying there was no question they prevailed. After the liability phase of what was supposed to be a two-part trial, five representative municipalities won $162,000 in penalties over claims JM Eagle falsely portrayed its PVC pipe as meeting industry standards.
The second phase over damages ended in mistrial, however. The judge limited the finding of liability to the five cities, essentially requiring plaintiffs to restart the case from the beginning if they want to win money for any more plaintiffs.
The result was far from a victory deserving fees, JM Eagle said in a Dec. 2 filing with U.S. District Judge George H. Wu, who presided over the ill-fated case.
“Put simply,” the company’s lawyers argue, the benefits of litigation for every plaintiff but the five representative plaintiffs “were exactly zero.” The award of $162,000 in penalties is also a failure, since in just those cases plaintiff lawyers were seeking $59.4 million in damages.
Lawyers pegged the total damages suffered by municipalities around the country as being in the billions of dollars, under a theory JM Eagle had sold them substandard water pipe that needed to be replaced to avoid catastrophic failures. Despite the claims, plaintiff lawyers never presented evidence of pipe failure other than one incident JM Eagle blamed on incorrect testing procedure, and none of the 200-plus plaintiff municipalities have made a warranty claim on the company.
The plaintiff lawyers have said they spent at least $50 million on the case so far, JM Eagle said in its filing. The lawsuit began with claims by a self-described whistleblower, John C. Hendrix, who accused the company of violating industry standards but was himself accused by the company of shaking down a customer over a warranty claim.
Hendrix joined forces with Phillips & Cohen, a well-known qui tam law firm, and obtained favorable coverage for his claims in the New York Times. But Phillips & Cohen ultimately left the case as the plaintiff lawyers’ theories shifted constantly, leading Judge Wu several times to complain that he was confused by what they were trying to prove.
The judge ultimately disqualified the plaintiff experts after they failed to make a connection between the results of short-term strength tests on pipes and raw PVC and the actual expected life of the finished product. That left five plaintiffs with the award of less than $200,000 in damages and a finding of liability that couldn’t be used in any other cases.
The plaintiff lawyers still argue they are entitled to fees, both for the award of penalties and other accomplishments including inducing JM Eagle to provide an extended, 50-year warranty on pipe. JM Eagle said that’s hardly a justification, since it offered the warranty in 2010, more than a year before trial, and the opposing lawyers belittled it as the equivalent of a prize award of a trip to Philadelphia.
“If this was the substantial benefit obtained by the litigation, plaintiffs could have stopped litigating this case as of April 5, 2010,” JM Eagle said.
The company also argues plaintiffs sued under state whistleblower statutes that don’t provide for attorney fees unless they win actual damages. Even if the court does award fees, JM Eagle said, precedent dictates they be a reasonable percentage of what the plaintiffs won. In one Ninth Circuit decision, the appeals court rejected a fee request by saying “no reasonable person would pay lawyers $148,000 to win $34,000.”
“Plaintiffs’ counsel rang up tens of millions of dollars in fees and costs and recovered only $162,000,” JM Eagle said. “This strongly suggests plaintiffs did not obtain benefits from their lawyers that justifies a special enhanced rate.”