Federal Decide Guidelines Plaintiffs Who Sought Billions Towards JM Eagle Throughout 14-year Qui Tam Lawsuit Ought to Get Zero Damages


    The Court found that five exemplary municipal water districts that claimed JM Eagle had sold them water pipes that were not standard in 26 pipeline projects did not prove that they had suffered any damage. JM Eagle is the world's largest manufacturer of plastic pipes.

    Case 5: 06-cv-00055-GW-PJW was heard before the US District Court for the Central District of California.

    The JMOL decision states: "There is no" real "evidence of defects in the pipe."

    "The plaintiffs have provided no evidence that they have removed or instructed all or part of the JM pipe in the ground to have it replaced. It is undisputed that they have not stopped using this pipe and have maintained and retained it have (for many years), and continue to gain value from, "the June 5th ruling states.

    "There was no testimony from a plaintiff that a pipe had ever been removed and tested by JM from the 26 projects, although there were statements from experts on both sides that testified that such tests could be carried out." The ruling reads, "None of the plaintiffs' experts conducted experiments, tests, or other measures to determine a longevity number for conformal PVC pipes. Instead, they only adopted a number for the purposes of this lawsuit."

    "JM Eagle believes this case should never have been brought up," said the company's general counsel Frank Fletcher. "The case was determined by the plaintiffs' lawyer. The evidence used against JM Eagle was created for the purpose of this lawsuit and did not reflect the reality or practice of the industry.

    "JM Eagle delivered high quality pipes to the plaintiffs," said Fletcher. "There was no evidence of defects or non-compliance with the standards in the pipe installed and put into service by the exemplary plaintiffs, and there was no evidence that the pipe in question had failed in operation. Our JMOL victory confirms What we knew from the start that none of the plaintiffs received less than the promised quality pipe. "

    Lawyer for the plaintiffs six years ago Eric Havian (at that time from Phillips & Cohen LLP) issued a press release saying: "JM Eagle has to suffer billions in damage." Today's decision sets the amount of damage to zero. Now, 14 years after the lawsuit was filed, JM Eagle can win.

    "JM Eagle has always been determined to bring this matter to a fair conclusion," he said Walter Wang, JM Eagle President and CEO. "We were determined to demonstrate that this case was unfounded and that we hadn't done anything wrong. We also wanted to show that wrongly attacked companies have to stand up and fight for what's right and don't have to settle for that Solve a problem."

    "If JM Eagle had settled, we would feel that this would fuel future light-hearted litigation against other impeccable companies and jeopardize hundreds or thousands of jobs, their reputation, and even the companies themselves," he said. "With our victory in JMOL, we would hope that plaintiffs' lawyers are strongly prevented from conducting similar, unfounded litigation."

    The JM Eagle case was filed under the False Claims Act (FCA) in 2006, a civil war period law that allows individuals to file and up to a third of the Qui Tam lawsuits on behalf of the government get money reclaimed. The promise of high financial disbursements has led to an increase in these types of suits in recent years, leading to calls for reform. Critics have described qui-tam suits as "gold rush with false claims" and "treasure hunt for government crime bars".

    The long-standing case was negotiated in two phases with five exemplary plaintiffs, selected by the plaintiffs' lawyers from a broader pool of more than 190 intervening plaintiffs and genuine interested parties. The jury in phase I passed a judgment November 2013 that JM Eagle could not demonstrate that each and every tube rod it produced was 100% industry standard, although no JM tube that was the subject of the Phase I study was demonstrably not in line with industry standards.

    After JM Eagle argued that this was an impossible standard that no pipe manufacturer could match, Judge Wu decided that the Phase I judgment would only apply to the five exemplary plaintiffs.

    In court, Judge Wu said, "My problem with the Phase I trial was that during the main parts of the trial it was unclear exactly what was going on in court." And he described the phase I process as follows: "I'm not saying a train crash on one side or the other. I just call it a train crash because it really was."

    Phase II of the study ended in November 2018 with a hanging jury and Judge Wu's declaration of a mistrial. JM Eagle's attorneys then filed an application asking the court to give a decision ordering JM Eagle to give a judgment (JMOL).

    The JMOL regulation states: "In the 26 projects that are the subject of the phase 2 trial, the plaintiffs have clearly and undeniably received value from the JMOL pipe. In these projects, the pipe is never after 12 to 22 years canceled years since their installation ̶ from 1996 to 2006 until the end of the phase 2 trial in 2018. Thus, the plaintiffs have received (and still are) for every day that the JM pipe is in the ground and works without incident also) continue to get the benefit of their bargains. "

    The JMOL ruling states that the Phase I judgment to meet industry standards was based on three tests of pipe materials, not the durability of finished pipes. "All three tests concern thermoplastic pipe materials. They are not tests of the pipe itself, which is operated under real conditions," it says.

    "In addition, none of the plaintiff's experts conducted experiments, tests, or other means to determine a longevity number for compliant PVC pipes. Instead, they only adopted a number for the purposes of this litigation," the JMOL regulation said . "At various times during and after the second phase process, the plaintiffs' attorney practically admitted that he was unable to quantify an alleged impairment of the J-M pipe during the relevant periods."

    Judge Wu's order states: "The court concludes that at the Phase 2 trial, the plaintiffs did not provide evidence that could be used by a reasonable jury to determine that there was actual FCA damages, that would not be faulty for legal reasons. " be unfounded and / or purely speculative. "

    The court had a status conference by telephone for on June 22, 2020 planning the remaining part of the process in relation to civil penalties that could be assessed in connection with the jury's determination in phase I of the process. According to the stipulations of both sides, the total penalties could range from $ 0 up to a maximum of $ 260,000, far from the billions originally claimed.

    JM Adler's 14-year legal odyssey

    The story of JM Eagle's 14-year legal odyssey has been filled with unfounded accusations, betrayal by an angry ex-employee, and even the disqualification of his own ex-attorneys.

    The JM Eagle leaders initially viewed the matter as a frivolous lawsuit with unfounded accusations, but it became "the lawsuit from hell," said Mr. Fletcher. "In retrospect, in our opinion, this litigation, led by lawyers, ultimately reflected the worst of the legal profession," he said. "We were faced with false accusations, unfair and inaccurate media coverage. We were also disqualified on the eve of the trial because they kept us and the court secret that they also represented one of the exemplary plaintiffs, albeit on a different matter."

    The saga actually started in January 2006, when a disgruntled former JM Eagle employee who was fired on suspicion of having an illegal kickback program filed the "qui tam" charge under the FCA. During the first four years of the case, while he was under lock and key, JM Eagle didn't know what was in the complaint or who submitted it.

    The company was forced to respond to numerous subpoenas from the Department of Justice without knowing the details of the complaint. Government investigators, who sometimes worked with plaintiffs' lawyers, confiscated numerous samples of the JM Eagle pipe for laboratory testing. After receiving and analyzing the results, the U.S. Department of Justice declined to intervene in the case.

    "Bursting pipes" that didn't exist

    Unsealing the complaint in February 2010 opened the door under the FCA so that the plaintiffs could act independently. The first thing the plaintiffs' attorneys did was to file the complaint with The New York Times. "Bursting pipes lead to litigation," it says in February 12, 2010 sensational headline.

    The headline surprised the company as JM Eagle was and is the industry leader with the best production equipment and quality control systems, and had sold more than 11.4 billion feet of pipe in the past decade, while receiving gross defect claims less than 0.1 % of pipe sold.

    The U.S. Attorney General's Office in los Angeles had investigated the allegations for three years before refusing to join the case. The Attorney General of California, Delaware and Tennessee had publicly stated that their own investigations of JM pipes did not pose any problems.

    None of the pipes in operation that were involved in the lawsuit were defective, burst, or nearby. So far, the pipe delivered to the exemplary plaintiffs has worked flawlessly during operation – for periods between 13 and 23 years. Some of the plaintiffs, who were interrogated under oath, admitted that the pipe that JM sold them may be fully in line with industry standards. And they admitted that none of them had ever tested the installed pipe and had no intention of testing or replacing it.

    The lifting of the complaint was also the first time that JM Eagle learned that it had been filed by a former employee who was fired in 2005 on suspicion of an illegal kickback program. The former employee was the person in the company who processed the claims. JM Eagle had received an affidavit from a contractor that the former employee had asked the contractor to triple the number $ 30,000 claim he was against the company and the clerk said, "After I have received your money and cashed the check, I will send you my address so that you can compensate me for my efforts on your behalf."

    Document theft and secret tapes

    JM Eagle continued to examine the evidence and was dismayed by other measures taken by the employee prior to his release. According to JM Eagle's later court file, the former employee had "run a month-long program to embezzle J-M's confidential and confidential documents" to promote the lawsuit.

    The filing continues: "In addition, while the employee was involved in the theft of documents with (his lawyers), he invented evidence for the express purpose of initiating the immediate litigation against JM. This included illegal, secret tapes of Dismiss JM employees self-help approval applications in the form of setup emails (the employee) to JM employees and (the) misrepresentation of themselves as current JM employees towards the external laboratory of JM (after they have already done so) ) to secure confidential reviews. "

    None of this information was available to the jury in the phase 1 study.

    Some of the plaintiff's systems did not even have a JM Eagle pipe

    The plaintiffs' lawyers had added dozens of plaintiffs to the case without their knowledge or consent, which is approved by the FCA. While the case was pending, the federal government, District of Columbia and seven states withdrew or refused to join him. Two of the greatest plaintiffs added by lawyers, the cities of los Angeles and Washington, D.C.found that they didn't even have a plastic pipe in their municipal systems.

    Eight years after the Qui Tam was filed under seal and three years after JM Eagle first learned about the nature of the lawsuit, the case was brought before a federal court los Angeles.

    JM Eagle's first law firm is disqualified

    As the lawsuit approached, the firm's law firm, Sheppard, Mullin, Richter & Hampton, was disqualified after one of the exemplary plaintiffs, the South Tahoe Public Utility District, claimed it was also one Sheppard Mullin Customer on an unrelated matter and requested the disqualification of the company. Sheppard Mullin knew about the conflict but did not disclose it when he was hired by JM Eagle.

    "Our company trusted Sheppard Mullin To help us dismiss this frivolous lawsuit, "said Mr. Wang, president and CEO of JM Eagle." Shortly before the case was brought to trial, South Tahoe was successfully disqualified Sheppard Mullin to represent us. That's how we first learned about the conflict. We felt so betrayed and couldn't believe that the lawyers allowed it. "

    After the emergence $ 4 million in legal fees with Sheppard MullinJM Eagle had to hire a new law firm to prepare for the Phase I trial.

    "It was a disadvantage to update another law firm for the Phase I trial," said Wang. "We didn't get the fair start that our justice system promised."

    The judgment of phase I.

    Although it was found that none of the pipes in question did not meet industry standards, in November 2013The Phase I jury came to the conclusion that JM Eagle had incorrectly represented the uniform compliance with selected industry standards.

    The ruling was another surprising blow to the company, as witnesses from certification bodies, including Underwriters Laboratories, the global safety certification body, testified during the trial that JM Eagle had always kept its pipe certifications in good condition and there was no evidence of the company ever attempted to mislead the agencies.

    Certification bodies such as Underwriters Laboratories and NSF International had performed unannounced inspections an average of 400 times a year at JM Eagle's facilities. Since the company was founded in 1983, a total of more than 10,000 inspections have been carried out. During this period, JM Eagle Pipe had been continuously certified under the American Water Works Association ("AWWA"), American Society for Testing and Materials ("ASTM") and UL standards from UL and NSF.

    Plaintiffs' lawyer: "JM Eagle must suffer billion damages"

    After the Phase I judgment, the plaintiffs' lawyers issued the press release, which said, "JM Eagle is at risk of billions in damage." The press release incorrectly claimed that the ruling meant that JM Eagle "made and sold faulty water pipes," despite plaintiffs' lawyers repeatedly arguing in court that the plaintiffs did not have to prove that a single piece of pipe was faulty.

    "JM Eagle was incredulous when the plaintiffs' lawyer made false statements and misrepresented the facts in both their press release and to the media. We believe in the effort to force our company to locate," he said Chuck Clark, JM Eagle Vice President of Operations. "We worked every day to produce a good pipe. We couldn't believe that some news media gave the lies credibility."

    JM Eagle immediately asked the judge to reject the verdict. "Interrogated under oath," argued JM Eagle, "the plaintiffs admitted that the pipe that J-M was selling may be fully in line with industry standards; in fact, two of them bought J-M's pipe long after this lawsuit was filed."

    In later trials, Judge Wu said the first verdict was "unclear." To the plaintiffs, he said: "I understood – and of course I was wrong – that you made a false certification claim. Now you have told me that you have not tried, although during the process I thought you would have tried … so I had a misunderstanding of what the plaintiffs were doing. "

    The judge then decided that the judgment in the first trial would only apply to the five exemplary plaintiffs who would have to demonstrate in the second trial that they had suffered actual damage and the amount of such damage. The ruling prohibited all other plaintiffs from claiming damages based on the Phase I judgment.

    The phase II process before another jury ended in November 2018 The jury announced twice that it could not make a judgment. Judge Wu declared a mistrial and on June 5, 2020 issued the JMOL command.

    JM Eagle tries to recover legal fees

    But history has more to offer. In 2012, even after his inappropriate disqualification earlier, Sheppard Mullin sued JM Eagle before a state court to recover the outstanding balance of attorney fees that JM Eagle had billed during his conflictual representation.

    JM Eagle countered on the grounds that there was no need to pay $ 1.3 million in fees that Sheppard Mullin claimed it was owed, and also that the law firm should return it $ 2.7 million in fees that JM Eagle had already paid, plus interest. JM Eagle continued to believe that Sheppard Mullins Misconduct justified the imposition of punitive damages.

    In this case, six Amicus briefs were submitted from a total of 51 law firms, legal associations and other supporting parties Sheppard Mullins Position that it acted ethically because its engagement with JM Eagle included an "advanced waiver" clause. Despite the arguments of the other law firms in these Amicus Briefs, the California Supreme Court ruled Shephard Mullin had violated the state's professional code.

    After a six-year struggle, the California Supreme Court ruled unanimously (7-0) that the law firm's lawyer-client contract was invalid and "unenforceable overall". The court referred the matter back to the district court to resolve the fee issues without the applicable contract.

    In a groundbreaking statement, the state's Supreme Court wrote: "The transaction was closed under conditions that undermine an ethical rule designed to protect the client and maintain public confidence in the legal profession. (I) fa Conflict of Interest known to a law firm at the time she applied for a waiver, and the lawyer must not hide this conflict. "Noting that clients do not need to examine their lawyers, the court independent of the law firm's size or sophistication directly charged with the disclosure.

    in the December 2019The parties reached an agreement in non-binding mediation with a fixed negotiation date. The terms of the settlement have not been announced. However, Mr. Fletcher from JM said the company was very happy with the deal. He also said the company is pleased that the Supreme Court's victory is a warning to major US law firms that they need to be more transparent about disclosing known conflicts with potential clients.

    JM Eagle's victory at the California Supreme Court was called a "milestone."

    Legal scholars agree that the Supreme Court's decision, which precisely defined lawyers' duty of loyalty to their clients, is a "trailblazing" case in legal ethics and is being discussed for years in law schools and at bar association meetings.

    UCLA Law professor Adam WinklerA US constitutional law specialist said: "The decision of the California Supreme Court in Sheppard, Mullin against JM Manufacturing, is a milestone in legal ethics and has clarified the lawyers' obligations to their clients to avoid conflicts of representation. The case is being investigated in legal Faculties across the country, as well as lawyers and law firms, will seek guidance to ensure early resolution of potential conflicts in the decision. "

    After the settlement agreement was reached, a former U.S. magistrate Leo S. PapasThe head of the mediation process said, "A lawyer's loyalty to clients is nothing new, but the Supreme Court's decision really referred to law firms' responsibility to deal with client conflicts quickly and directly."

    "It was a landmark decision in terms of legal ethics," said Judge Papas. "The Supreme Court decision made it clear that the duty of customer loyalty is paramount."

    Judge Papas praised JM Eagle Walter Wang for his courage and determination to pursue the case for years. "I found that he is someone who is guided by honor and principle," said Judge Papas. "He has a moral compass to track what he thinks is right. He has to be commended for that."

    When he thought about the California Supreme Court winners in terms of legal conflicts of interest and the United States District Court in connection with the Qui Tam case, Fletcher said, "I am very proud to work for a company that is committed to this struggle decides to conclude, not because it was economical to do so, but because it was the right thing to do to ensure that the same abuses did not occur in the future. "

    "If you want to fight so long and hard, you have to trust that there is justice," said Mr. Wang. "Of course there were risks and setbacks along the way. But we had set our course and the key was that we would hold out and not give up."

    Lawyers who represented JM Eagle in the litigation include: David M. Bernick by Paul, Weiss, Rifkind, Wharton & Garrison LLP Paul S. Chan and Ekwan E. Rhow by Bird, Marella, Boxer, Wolpert, Nessim, Drooks, Lincenberg & Rhow, P.C. James R. Rosen by Rosen & Saba, LLP James R. Rosen by Rosen & Saba, LLP and Kent Richland and Jeffrey Raskin Martin, Stein & Richland LLP from Greines represented the company in a conflict of interest.

    With 20 production sites North AmericaJM Eagle manufactures the broadest range of high quality, high performance polyvinyl chloride and high density polyethylene pipes for a variety of industries and applications, including utilities, solvent welding, electrical wiring, natural gas, irrigation and water / wastewater. More information is available at www.jmeagle.com

    Contact: Marcus Min
    Marketing communication
    (310) 693-8200 ext: 7417

    SOURCE JM Eagle

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