How the Largest FCA Judgment in History Fell Apart (Hint: Gibson Dunn)
In a sweet win for lead counsel James Ho, a partner at Gibson, Dunn & Crutcher who was nominated last week by President Donald Trump for a seat on the Fifth Circuit, highway guardrail maker Trinity Industries dodged a $682 million bullet. What happened?
October 04, 2017 at 01:20 AM
5 minute read
In 2014, The Lit Daily named Boies Schiller Flexner partner Nick Gravante Litigator of the Week after he persuaded a federal jury in Marshall, Texas to award a massive False Claims Act penalty against a highway guardrail maker.
It was an undeniably impressive performance, and the $682 million judgment against Dallas-based Trinity Industries is reported to be the largest ever of its kind under the FCA.
That is, until the U.S. Court of Appeals for the Fifth Circuit un-did it on Friday, reversing the verdict and rendering judgment for Trinity.
It was a sweet win for lead counsel James Ho, a partner at Gibson, Dunn & Crutcher who was nominated last week by President Donald Trump for a seat on the Fifth Circuit.
The decision will also likely have implications for other whistleblower cases, making it more difficult for plaintiffs to prevail if the federal government declines to intervene on their side.
As for Trinity, it's quite a boon. Aside from the actual penalty, the company also faced three class actions and nine qui tam actions in state courts that were stayed pending the Fifth Circuit's decision.
But the publicly-traded company clearly had faith in its counsel. In its annual SEC report, it noted that it did not set aside extra money for the litigation, stating “We do not believe that a loss is probable.”
The decision by Judge Patrick Higginbotham, writing for a unanimous panel that also included Senior Judge E. Grady Jolly and Judge James Graves Jr., lays the conflict out neatly in the first two sentences:
“The trial in this case offers two narratives. One of a hardworking man who, angered by failures of guardrails installed across the United States—with devastating consequences—persuaded a Texas jury of a concealed cause of those failures,” Higginbotham wrote.
“The other,” he continued, “of the inventive genius of professors at Texas A&M's Transportation Institute, who, over many years of study and testing, developed patented systems including guardrails that, while saving countless lives, cannot protect from all collisions at all angles and all speeds by all vehicles—guardrails that have been installed throughout the United States with an approval from which the government has never wavered.”
Whistleblower Joshua Harman had worked installing guardrails made by Trinity, and at one point also tried unsuccessfully to compete against the company with his own product. Trinity previously sued him for patent infringement and defamation.
Harman determined that Trinity had changed aspects of its rails without informing the Federal Highway Administration—namely, by shrinking a “guide channel” from five inches to four. He told the feds about the modifications, and promptly filed a False Claims Act suit.
But here's the thing: The feds didn't actually care about the changes. They crash-tested the new guardrails and found they complied with safety standards. Even after the verdict, federal approval of the guardrails remained in place.
Which begs the question … how exactly did Trinity defraud the government then?
There was a clear hint early on that the case could have problems on appeal. The first go-round ended in mistrial, and Trinity, which was represented in district court by multiple firms including Akin Gump Strauss Hauer & Feld and Roach & Newton, asked for a writ of mandamus.
The Fifth Circuit said no, but cautioned the lower court that “a strong argument can be made that [Trinity's] actions were neither material nor were any false claims based on false certifications presented to the government.”
The case was re-tried. The plaintiff's strategy after polling the original jurors was “a little more Texas, a little less New York,” Gravante said after the win.
It worked. The jurors in the second trial found Trinity violated the FCA by failing to alert the Federal Highway Administration about the modifications, and socked the company with a $175 million verdict that was trebled, plus additional penalties.
On appeal, Trinity attracted impressive amici support: the U.S. Chamber of Commerce, the American Tort Reform Association and the National Association of Manufacturers—all represented by Neal Katyal of Hogan Lovells—as well as a group of former senior Justice Department officials, 11 state attorneys general, Washington Legal Foundation, the Cato Institute and even Mothers Against Drunk Driving.
Harman, who was represented in oral argument by Boies Schiller partner George Carpinello, had six amici backers too, including the Safety Institute, the Highway Safety Product Manufacturers and the Taxpayers Against Fraud Education Fund.
The Fifth Circuit zeroed in on exactly what it said was wrong with the case in the first place.
That is, the government knew about the changes, it kept paying for the guardrails, and it never withdrew its approval. Moreover, guardrails aren't any old product. They can prevent “horrific loss of life and limb”—which means the feds had every reason to reject sub-par offerings.
But they didn't. As far as the government was concerned, it was not defrauded.
Why then was it appropriate for a jury to weigh in otherwise?
“Such decision making is policy making, not the task of a seven-person jury,” the panel wrote. “As revered as is the jury in its resolution of historical fact, its determination of materiality cannot defy the contrary decision of the government, here said to be the victim, absent some reason to doubt the government's decision as genuine.”
Contact Jenna Greene at [email protected]. On Twitter @jgreenejenna.
|This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View All'The Most Peculiar Federal Court in the Country' Comes to Berkeley Law
Litigators of the Week: The Eighth Circuit Knocks Out a $564M Verdict Against BMO in Ponzi Case
Litigator of the Week: Reversing a $2B Trade Secret Verdict, the Largest in Va. History
What the Decline in Jury Verdicts Means for Appellate Courts
Trending Stories
- 1The Law Firm Disrupted: Playing the Talent Game to Win
- 2GlaxoSmithKline Settles Most Zantac Lawsuits for $2.2B
- 3BD Settles Thousands of Bard Hernia Mesh Lawsuits
- 4Preparing Your Law Firm for 2025: Smart Ways to Embrace AI & Other Technologies
- 5Inside Track: Late-Career In-House Leaders Offer Words to Live by
Who Got The Work
Nicholas M. DePalma and Christian R. Schreiber of Venable have stepped in to represent CP Management Services, CRS RB4 Holdings and other defendants in a pending breach-of-contract lawsuit. The suit was filed Aug. 30 in Virginia Eastern District Court by Greenberg Traurig on behalf of Daito Kentaku USA. The case, assigned to U.S. District Judge Claude M. Hilton, is 1:24-cv-01538, Daito Kentaku USA, LLC v. Comstock Partners, LC.
Who Got The Work
Wyatt, Tarrant & Combs partner Andrew J. Pulliam has entered an appearance for Steve Jensen in a pending breach-of-contract lawsuit. The action, filed Aug. 30 in Tennessee Middle District Court by the Law Office of Perry A. Craft on behalf of Timothy Robins, accuses the defendant of writing a worthless check for over $94,000 for the sale of auctioned goods. The case, assigned to U.S. District Judge Eli J. Richardson, is 3:24-cv-01064, Robins v. Jensen et al.
Who Got The Work
Lane Powell shareholder Pilar C. French has entered an appearance for Penney OpCo LLC in a pending consumer class action. The complaint, filed Aug. 26 in Oregon District Court by Hattis & Lukacs, alleges that the company markets fictional discounts for certain products. The case, assigned to U.S. Magistrate Judge Mustafa T. Kasubhai, is 6:24-cv-01414, Gamble v. Penney OpCo LLC.
Who Got The Work
Donald L. Carmelite and Coryn D. Hubbert of Marshall Dennehey have stepped in to defend the City of York, Detective Roland Comacho and Detective Lisa Daniels in a pending civil rights lawsuit. The complaint, filed Aug. 27 in Pennsylvania Middle District Court by Levin & Zeiger on behalf of Noel Matos Montalvo, seeks damages for the amount of time that Montalvo was incarcerated over five years for the exonerated killing of his common law wife. The case, assigned to U.S. District Judge Jennifer P. Wilson, is 1:24-cv-01459, Montalvo v. City of York, et al.
Who Got The Work
Joseph M. Englert, Brian E. Pumphrey and M. Laughlin Allen of McGuireWoods have entered appearances for Bank of America NA in a pending class action. The action was filed Aug. 26 in Georgia Northern District Court by Podhurst Orseck; Webb, Klase & Lemond; Crabtree & Auslander; and Morrison + Associates on behalf of the representative of the beneficiaries of the Arthur N. Weinraub Trust, a trust which contains residential real property. The suit accuses the defendant of overcharging the trust by selecting unnecessary and/or excessively priced insurance for the property. The case, assigned to U.S. District Judge Thomas W. Thrash Jr., is 1:24-cv-03780, Weinraub v. Bank of America, N.A.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250