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Judge wants more information on Formosa settlement

By: Catherine Kavanaugh

December 19, 2013

A federal judge has postponed his decision on a $22.5 million settlement proposed to resolve a False Claims Act (FCA) lawsuit between resin supplier Formosa Plastics Co. USA (FPC-USA) and 45 government entities that bought questionable PVC pipe made with its materials by JM Eagle.

U.S. District Judge George Wu said Dec. 19 that he wants additional information from the parties before he approves or rejects the settlement. He set a new court date of Jan. 16 to issue his ruling as to whether the dollar amount Formosa is ready to pay is fair, reasonable and adequate.

Formosa, a Taiwan-based plastics giant, was sued along with JM Eagle by a whistle blower, three states, and 42 cities and water districts over the questionable quality of PVC pipe produced and sold to the plaintiffs from 1996-2006.

Formosa is the former parent company of JM Eagle, which is the largest PVC pipe extruder in North America, according to Plastics News' ranking.

As co-defendants in the lawsuit filed back in 2006, Formosa and JM Eagle are proceeding on a couple different legal tracks. Formosa reached a mediated settlement with the plaintiffs but doesn’t admit any liability while JM Eagle is fighting the allegations that it violated the FCA in a two-phase trial.

The first part of the trial ended Nov. 14 with a jury finding JM Eagle liable for making false claims about PVC pipe produced and sold to the plaintiffs in the 10-year period. JM plans to appeal.

Jurors said the pipe maker “falsely represented uniform compliance” with two industry standards — American Water Works Association C905 and Underwriters Laboratories 1285 — on the 50-page verdict form that they filled out.

However, the jury verdict form does not say any of the plaintiffs received defective or substandard pipe. And, defense attorneys argued there is no evidence that any of the pipe in the ground ever burst, leaked, cracked or failed to perform.

A new jury will be seated to determine what, if anything, JM Eagle owes during the next phase of the trial.

In the meantime, JM Eagle attorneys had asked the judge not to approve the proposed settlement — at least not yet, in essence pitting JM Eagle owner, Walter Wang, against Formosa, which was founded by his late father, Taiwanese billionaire Y.C. Wang.

Formosa lawyers questioned the timing of JM Eagle’s attempt to block or postpone the settlement. In a legal brief filed Dec. 13, they noted that JM Eagle did not object when the court ordered the parties to mediation, or when the settlement was disclosed, or when Formosa was given a conditional dismissal from the first phase of the trial.

The proposed settlement is the result of weeks of extensive negotiations involving retired Chief U.S. Magistrate Judge Edward Infante as the mediator.