A proposal to split the $22.5 million court settlement paid more than two years ago by resin supplier Formosa Plastics Corp. USA (FPC-USA) gives the whistleblower in a federal case $6.29 million and dozens of states, cities and water districts a share of the balance — if it gets court approval.
The whistleblower, John Hendrix of New Jersey, accused FPC-USA and PVC pipe maker J-M Manufacturing Co. of misrepresenting the quality of pipes produced from 1996-2006. Hendrix is a former J-M engineer who alleged that the government entities got the luck of the draw with pipes purchased after J-M switched to a cheaper PVC compound and sped up extrusion lines.
J-M now goes by the name JM Eagle. FPC-USA is the former parent company of JM Eagle, which is based in Los Angeles and is the largest PVC pipe extruder in North America, according to Plastics News' rankings.
The settlement with FPC-USA was reached through mediation on July 16, 2013 — two months before the start of a trial that culminated with a jury finding co-defendant J-M guilty of violating the False Claims Act. The jury ruled that J-M falsely represented uniform compliance with pipe strength and durability requirements set by Underwriters Laboratories and the American Water Works Association.
In its pre-trial settlement, FPC-USA officials admitted no liability and agreed to the $22.5 million settlement to avoid further expenses in the lawsuit that dates back to January 2006. The settlement was achieved during lengthy negotiations mediated by retired Chief U.S. Magistrate Judge Edward Infante.
FPC-USA was conditionally dismissed from the case at the start of the September 2013 trial and the settlement funds were deposited in an escrow account.
However, JM objected, calling the settlement “paltry” compared to plaintiffs' statements that the pipe maker could owe billions of dollars of damages. It took until June 2014 for all claims against FPC-USA to be dismissed with prejudice. Then, an appeal period had to expire and representatives of all the plaintiffs had to come up with an allocation plan for the settlement funds.
Under the proposal filed Nov. 16, Hendrix will get at least 28 percent of each claimants proposed share of the settlement. He stands to receive $6,293,087 and the government entities will share $16.2 million upon court approval.
In all, 80 plaintiffs are listed in the court filing about the settlement distribution. The four-page chart of claimants includes the states of California, Massachusetts, Nevada and Virginia, and many cities and water districts in those states.
Proposed allocations range from $210 for Needles, Calif., to $3.3 million for the Calleguas Municipal Water District in California. Some of the other larger payments proposed include $2.5 million for Virginia, $2.4 million for the Las Vegas Valley Water District, $2.25 million for the city of San Diego, and $710,579 for North Las Vegas.
The plaintiffs are asking the trial judge, U.S. District Judge George Wu in Los Angeles, to approve the settlement allocations on Dec. 14.
The parties had previously agreed that FPC-USA would make an additional payment of $5.5 million to settle claims for the plaintiffs' attorney fees and costs.
In the meantime, the case against JM Eagle continues. The trial in which the pipe maker was found guilty of violating the False Claims Act focused on just five “exemplar plaintiffs.” Their damages are to be determined in a second phase of the trial set to start Nov. 29, 2016.
Judge Wu also scheduled a conference hearing about the other non-exemplar plaintiffs for Jan. 7.
In addition, settlement mediation is scheduled for Dec. 8 before U.S. Magistrate Judge Jay Gandhi but it is not clear which plaintiffs are involved.