JM Eagle Pays $2.5 million to Settle False Claims Allegations


On November 14, 2013, a federal jury in California found that JM Eagle (formerly J-M Manufacturing Company, Inc.) defrauded several states and municipalities by selling them defective plastic pipe in violation of the federal and several state false claims acts. A former JM Eagle quality assurance engineer initiated the qui tam action, United States of America, et al., v. J-M Manufacturing Company, Inc., Case No. 5:06-CV-00055, alleging that JM Eagle used inadequate manufacturing and testing processes and faulty materials to produce polyvinyl chloride (“PVC”) pipe. As a result of JM Eagle’s practices, the PVC pipe sold to the plaintiffs allegedly had only a fraction of the strength and endurance JM Eagle represented the pipe to have, requiring the plaintiffs to replace the pipe. The case went to trial after the court denied JM Eagle’s motion for summary judgment. A discussion of the court’s decision is available here.

Three states and 42 municipalities participated in the trial, and dozens of other states and municipalities who were named in the suit as “real parties in interest” as a result of their purchases of the defective pipe, but were not actively involved in the litigation, may also be eligible to recover damages from JM Eagle. The total amount of damages will be determined in a separate trial.

The former owner of JM Eagle, Formosa Plastics, has agreed to pay $22.5 million to settle claims in the qui tam lawsuit for its role in the fraud. The court must approve the settlement before it becomes final.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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