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JM Eagle urges judge not to accept Formosa settlement

By: Catherine Kavanaugh

December 9, 2013

Attorneys for JM Eagle are asking a federal judge not to approve a $22.5 million settlement between the plastic pipe maker’s former parent company, Formosa Plastics Corp. USA and 45 government entities, saying it is “woefully inadequate.”

U.S. District Judge George H. Wu is scheduled to rule Dec. 19 as to whether the settlement is fair, adequate and reasonable.

Formosa and JM Eagle were named as defendants in a 2006 whistle-blower lawsuit in which a quality assurance engineer alleged PVC pipe was stamped with certification ratings from Underwriters Laboratories and the American Water Works Association even though the product did not meet those standards.

Formosa reached a $22.5 million settlement with the plaintiffs at the onset of a seven-week trial, which ended Nov. 14 with a jury finding JM Eagle violated the False Claims Act. JM Eagle plans to appeal.

The damages owed by JM Eagle will be determined in a second phase of the trial. But already the plaintiffs’ attorneys estimate that “billions of dollars” will be owed has JM Eagle lawyers questioning the proposed multi-million dollar settlement with Formosa.

“Plaintiffs’ proposed settlement with FPC for $22.5 million is a pittance of what it should be under plaintiffs’ own theory of damages,” according to a brief filed Dec. 6 by JM Eagle’s legal team at Bird, Marella, Boxer, Wolpert, Nessim, Drooks & Lincenberg, P.C.

The defense attorneys contend the settling parties could not have meaningfully and intelligently assessed risk and expense before trial because the plaintiff’s theory of case wasn’t defined at the time.

At the very minimum, the motion to settle is premature because of unanswered questions as to what was decided in the first phase of trial, the brief says.

The court document goes on to question: Was the jury’s finding that J-M falsely represented “uniform compliance” with industry standards based on the company’s use of substandard resin or compound supplied by FPC? Was the jury’s finding based on alleged misconduct by JM that was directed or authorized by FPC?

“J-M urges the court to impose a sense of fairness and equity by declining to legitimize the proposed settlement agreement,” the brief says.

The settlement amount bears no relation to FPC’s alleged involvement in the activities at the heart of the case, the brief says, pointing to FPC’s ownership and control of J-M from 1996-2006, which is the period that the whistle blower claims questionable pipe was produced.

“When compared to plaintiffs’ own allegations that FPC’s role in the alleged misconduct, the $22.5 million figure on which the settling parties somehow agreed is a paltry fraction of the damages that the plaintiffs themselves expect the phase two trial jury to award them.”

In a related matter, JM Eagle reportedly has hired Anthony Michael Glassman, a lawyer who has represented clients like Playboy and Hugh Hefner in libel cases brought by other celebrities and public figures as well as Nicholas Cage against the National Enquirer. JM reportedly hired Glassman to threaten a defamation lawsuit against the plaintiff’s lead attorney team at Phillips & Cohen for post-trial comments they made about the case.