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JM Eagle, the world's largest maker of plastic pipe according to the company, said in a release that it would immediately appeal the Nov. 14 jury verdict in a lawsuit brought by "a former disgruntled employee" who alleged that the company made false claims in relation to its production of PVC pipe he claimed to be substandard. The appeal will be based on the fact that the jury was not permitted to see all of the evidence.

Clare Goldsberry

November 25, 2013

4 Min Read
Updated: JM Eagle will appeal jury verdict in false claims act case

The lawsuit, originally filed by former JM Eagle employee John Hendrix in 2006 was unsealed Feb. 8, 2010 in Los Angeles in the U.S. District Court. A federal jury unanimously agreed that JM Eagle knowingly manufactured and sold to government entities substandard plastic pipe that was used in water and sewer systems in various states around the country.

"While we respect and thank the jury members for their service, we disagree strongly with the verdict," said Neal Gordon, JM Eagle's VP of marketing and waterworks sales. "We believe we have valid grounds for an appeal, which we will file as immediately as possible, and we look forward to having this verdict reviewed and set aside."

According to a release from Phillips & Cohen LLP, attorneys representing Hendrix in the "qui tam" (whistleblower) lawsuit, said that as a result of the decision, JM Eagle, formerly known as J-M Manufacturing, will have to pay an as yet-undetermined amount of damages to three states - Nevada, New Mexico and Virginia and 42 cities and water districts that bought the JM Eagle pipe did join the lawsuit.

"States and water districts that are covered by this lawsuit spent $2.2 billion to buy JM Eagle during the 10-year period JM was lying about the long-term strength of the pipe," said Eric Havian, an attorney with Phillips & Cohen LLP, who argued the case on behalf of the plaintiffs. "Those entities now are entitled to recover a substantial portion of that cost plus the costs to replace the shoddy pipe much sooner than expected. This likely will mean damages could total billions of dollars because it's expensive and disruptive to replace water pipe."

While 11 states were originally named in the lawsuit and invited to join as "real parties of interest" - a listing that essentially invited those states and the District of Columbia to join, or "intervene" in the lawsuit, a news story in PlasticsToday on Sept. 8, 2010, noted that Indiana became the latest state to join California, Florida and Massachusetts which declined to join the lawsuit. Three other states were still considering the matter at that time. The U.S. government conducted its own intensive three-year investigation of JM Eagle's products and quality control processes and also declined to join the case.

The release from JM Eagle noted that since the case was filed, the federal government, District of Columbia, State of California and seven other states withdrew from the case or declined to join it. "The District of Columbia and the Los Angeles Department of Water and Power found that they didn't even have any plastic pipe in their municipal systems," stated the release.

One of the exemplar plaintiffs, the City of Reno (Nevada) claimed that three pipe breaks in a waste water reclamation project supported the false claim allegations, however, evidence presented during the trial revealed that Reno had nominated that very same project involving JM Eagle pipe for a 2002 Outstanding Achievement in Civil Engineering award, after the two breaks had occurred and were promptly repaired by JM Eagle.

In April 2010, JM Eagle announced that it had introduced a retroactive 50-year warranty to all pipe sold since original inception as proof of its commitment to the company's quality. "JM Eagle is so confident that its pipe will not fail that it has guaranteed it for 50 years, which is unprecedented in the industry," said Gordon in the latest release.

JM Eagle retained the former head of the U.S. Army Corps of Engineers to review its quality control and quality assurance systems, including visiting JM Eagle plants and meeting with the director of a nationally recognized independent testing laboratory that has conducted more than 1,000 tests on JM Eagle products submitted by not only the company but third parties such as regulatory agencies, pipe installers, owners of piping systems, and municipal water utilities, JM Eagle explained in the release.

"Based on everything I personally observed and learned while conducting my review, I do not believe that any allegations of poor quality products from JM Eagle could be credible or have merit," Major General (Ret.) Merdith W.B. Temple, concluded in his report.

Gordon commented, "During a seven-week trial with over 20 witnesses, JM Eagle presented irrefutable evidence that our products meet and even exceed national standards based on hundreds of independent tests and audits by outside certifying agencies," adding that the company has received claims from its vast customer base on less than 0.1% of 11.4 billion feet of pipe sold in the last 10 years. "[That] is clear and convincing evidence that our pipe meets industry standards," he said.

JM Eagle noted that the whistleblower has demonstrated an unquestionable lack of integrity, and that the plaintiff's attorneys didn't call him to the witness stand during the trial, "which speaks volumes as to the fundamental weakness of their case."

Formosa Plastics, which was formerly the owner of JM Eagle, has agreed to pay $22.5 million to those same government entities to settle claims in the qui tam lawsuit about its role in the fraud, said the Phillips & Cohen release. The settlement was reached shortly before the JM Eagle trial began in September but wasn't announced at that time. The court must approve the settlement before it is final. A hearing is scheduled for Dec. 19.

About the Author(s)

Clare Goldsberry

Until she retired in September 2021, Clare Goldsberry reported on the plastics industry for more than 30 years. In addition to the 10,000+ articles she has written, by her own estimation, she is the author of several books, including The Business of Injection Molding: How to succeed as a custom molder and Purchasing Injection Molds: A buyers guide. Goldsberry is a member of the Plastics Pioneers Association. She reflected on her long career in "Time to Say Good-Bye."

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