The water utilities that sued JM Eagle alleging they received substandard PVC pipe from 1996-2006 didn't prove their cases and won't be paid any actual damages, according to a ruling issued by the federal judge who oversaw the two-phase, 14-year whistleblower trial against the world's largest plastic pipe manufacturer.
The whistleblower, a fired product assurance engineer, had said JM Eagle employees cut corners to meet production quotas, which raised questions about the lifespan of the products.
However, Los Angeles-based U.S. District Judge George Wu concluded that a reasonable jury couldn't make a finding of actual damages under the Federal Claims Act "that would not be erroneous as a matter of law, be totally unfounded and/or be purely speculative."
The judge granted JM Eagle's motion for judgment as a matter of law, which is essentially a direct verdict, on June 5. A teleconference was held June 22 regarding civil penalties that might be assessed.
During the call, JM Eagle said both sides stipulated the total civil penalties for legal fees and costs could range from $0 to a maximum of $260,000, which is far from the billions of dollars originally claimed.
In his 68-page ruling, the judge said "there is no real world evidence of defects as to the pipe" in the form of faulty pipe removed from any of the 26 projects installed by the first five plaintiffs, which includes the cities of Reno, Nev., and Norfolk, Va., and the water utilities in the California cities of Palmdale, Calleguas and South Tahoe.
"Plaintiffs have presented no evidence that they have removed or contracted for the replacement of all (or any portion) of the JM pipe in the ground; and it is undisputed that they have not ceased the use of that pipe and thereby have obtained, retained (for many years), and continue to receive value from it," Wu's ruling states.
The first five of some 40-plus plaintiffs were seeking at least $58 million to remove old pipe, install new pipe and pay insurance premiums after a jury in the first phase of the trial determined that JM Eagle violated the federal False Claims Act, which was enacted in 1863 to hold people and companies liable for defrauding government programs.
The first jury found in November 2013 that the manufacturer falsely represented uniform compliance with pipe standards set by the American Water Works Association and Underwriters Laboratories in order to receive government payments from 1996 to 2006. Without uniform compliance to standards, the plaintiffs successfully argued they got "the luck of the draw" with JM pipes purchased in that 10-year period.
However, the second phase of the case resulted in a mistrial in November 2018 when another jury deadlocked about awarding the plaintiffs any money.
Wu then made his ruling last month in a case that JM Eagle's lead attorney Frank Fletcher said should have never been filed.
"JM Eagle delivered high-quality pipe to the plaintiffs," Fletcher said. "There was no evidence of defects or noncompliance with standards in the pipe installed and placed in service by the exemplar plaintiffs, nor was there any evidence ultimately presented at trial that the pipe at issue had failed while in service. Our ... victory confirms what we have known all-along, that none of the plaintiffs received anything less than the quality pipe they were promised."
During the drawn-out trial, the plaintiffs' attorneys had said JM Eagle faced billions of dollars in damages should the cases involving all the plaintiffs — three states and 42 cities or water districts — go forward and settle in their favor.
Fourteen years later, JM Eagle CEO and President Walter Wang is claiming victory.
"JM Eagle has always been determined to see this matter through to its just conclusion," Wang said in the release. "We were determined to demonstrate that this case was baseless and that we had done nothing wrong. We also wanted to demonstrate that companies unjustly attacked must stand up and fight for what is right and not settle just to make the problem go away."
"If JM Eagle would have settled, we felt it would have encouraged future frivolous litigation against other blameless companies, putting hundreds or thousands of jobs, their reputations, and even the companies themselves at risk," Wang continued. "With our victory in ... we would hope that plaintiff attorneys are strongly discouraged from bringing similar baseless litigation."