LOS ANGELES (Legal Newsline) - A long-running whistleblower lawsuit against the nation’s largest plastic pipe manufacturer ended with a whimper – but also with the possibility of millions of dollars in plaintiff legal fees – as a federal judge approved $162,000 in fines on behalf of five municipalities.
In an Oct. 14 order, U.S. District Judge George Wu entered final judgment on the civil penalties for five municipal plaintiffs against J-M Eagle but said he would hold off on deciding other questions, including attorneys’ fees and the fate of some 150 other cases, until the U.S. Court of Appeals for the Ninth Circuit hears appeals of his decisions.
The litigation started after J-M Eagle employee John Hendrix downloaded megabits of internal documents shortly before he was fired on accusations of accepting kickbacks from customers. The self-described whistleblower turned his evidence over to the prominent qui tam law firm of Phillips & Cohen and received favorable coverage from the New York Times about claims J-M violated industry standards.
A federal jury found the company liable in the first phase of a bellwether trial featuring five municipal plaintiffs from California, Nevada and Virginia, but deadlocked on the question of whether they were entitled to damages. After declaring a mistrial, Judge Wu ordered J-M to pay civil penalties allowed under state laws, preserving a narrow win for the plaintiffs.
Lawyers with Day Pitney, Constantine Cannon and McKool Smith, who took over for Phillips & Cohen in the case, asked Judge Wu to order J-M to repay the more than $50 million they spent on the case. J-M argued they were entitled to nothing since they failed to win any damages for their clients.
In orders this summer, Judge Wu said he would order fees because the plaintiffs successfully won a liability ruling exposing J-M to potentially huge damages under state and federal false claims act laws. The fact they didn’t win any damages in the first trial doesn’t matter, the judge wrote.
“What Plaintiffs accomplished was substantial,” he wrote. “While the Court ultimately found that exemplar plaintiffs failed to establish any actual damages, that does not change the fact that J-M was found liable for having knowingly made `false or fraudulent’ claim that its pipe met certain industry standards when it did not.”
Formosa Plastics, the former parent of J-M Eagle, paid $22.5 million to settle on the eve of trial, yielding plaintiff lawyers $5.5 million in fees. After the Ninth Circuit decides any appeals, Judge Wu said, he will determine how much more money the lawyers are entitled to.
Throughout the litigation, J-M argued the plaintiffs failed to provide any evidence its pipe had failed. The U.S. government declined to intervene after testing sample pipe, and during the trial the plaintiff theories changed so much that Judge Wu later complained “it was unclear during major portions of the trial what exactly was being litigated.”
“I am not saying a train wreck as to one side or the other,” he said. “I am just calling it a train wreck because that is really what it was.”