Lawsuit against plastic pipe manufacturer JM Eagle suffers more apparent setbacks

Following on the heels of the state of Delaware’s withdrawal from the qui tam lawsuit against global plastic pipe manufacturer JM Eagle in early October, U.S. District Court Judge George H. Wu issued rulings on Dec. 7, granting various motions to dismiss, making it more difficult for the plaintiff’s lawyers, Phillips & Cohen LLP, to pursue its whistleblower case against the company. 
   
Regarding Delaware’s decision to withdraw from the lawsuit, JM Eagle issued a statement saying the “state’s decision was welcomed” by the company “as yet another step toward what it believes will be an ultimate dismissal of the faulty case against the company.”
   
Since the federal government’s decision not to intervene in this lawsuit earlier this year, “this latest development further demonstrates the unraveling of the case initiated by a former employee who was terminated in 2005 for soliciting a kickback from a customer of the plastic pipe manufacturer,” said the company in a prepared statement.
   
Judge Wu dismissed hundreds of common law claims sought to be included by various states and municipalities, a setback for the plaintiff’s counsel as the firm was seeking to “pile on extraneous claims in the hope that it would make their baseless lawsuit against JM Eagle appear more credible.”
   
A release from Phillips & Cohen LLP, issued on Dec. 7, stated that Judge Wu found “sufficient legal basis for most of the fraud claims in the qui tam (whistleblower) lawsuit against JM Eagle to proceed. In a procedural ruling, the federal judge said claims brought under state ‘common’ would need to proceed in state court, rather than federal court. That decision doesn’t affect the claims central to the case brought under the False Claims Act and similar state false claims laws, however, which make up the bulk of the case against JM Eagle.
   
Mary A. Inman, a San Francisco attorney for Phillips & Cohen, which is representing the whistleblower and most of the states and municipalities that have joined the case, said, “Clearly, the judge rejected JM Eagle’s spin on the case. In making his decision that the case may go forward, not only did the judge review our evidence but also the strong evidence of fraud by JM Eagle that the federal government found in its own investigation.”
   
In the latest development, JM Eagle on Dec. 8 announced that it had obtained a sworn statement from a contractor who performs work for Calleguas Municipal Water District that a pipe break there was caused by an installation error, not a manufacturing defect. (You can catch up on the story here, "JM Eagle saga takes another curious turn," and here, "Massachusetts declines to intervene in JM Eagle lawsuit."

“After years of experience in inspecting pipe, I was able to determine that the rupture that this pipe experienced was the result of an installation error and not anything to do with the quality of the pipe,” according to the contractor, who asked not to be named for fear of retaliation. “Specifically, the pipe had clearly been ‘over stabbed,’ meaning it was pushed past the insertion mark.” The first break of the 16-inch water pipe in Calleguas occurred in 1999, some six or seven years after the pipe’s installation.
   
In this most recent court ruling, the judge threw out most of Phillips & Cohen’s claims, dismissed all of the claims of the states of New York and New Mexico, and dismissed an entire class of claims, including those in which JM Eagle sold pipe to private developers who later deeded their developments—subdivisions, for example—to local governments.
   
“These rulings significantly gut this bogus lawsuit,” said Neal Gordon, JM Eagle’s VP of marketing. “Phillips & Cohen’s attempt to spin a victory out of an almost across-the-board defeat demonstrates again that they are operating with the same level of deception reflected in the filing of this lawsuit in the first place.”
   
Phillips & Cohen’s Inman responded, “JM Eagle’s claim that the judge’s decision is a victory is ridiculous. We look forward to the trial, where we will present evidence that JM Eagle’s pipe was neither made nor tested in conformity with industry standards.”
  
Judge Wu set a trial date of Dec. 6, 2011 for the fraud case. —Clare Goldsberry