In-house lawyers at Trinity Industries Inc. worked closely with Trinity's outside counsel to overturn a more than $663 million False Claims Act judgment against the Dallas-based company after it was accused of defrauding the government over its highway guardrail system.

Trinity is a diversified industrial company that owns businesses providing products and services to the energy, chemical, agriculture, transportation and construction sectors. Sarah Teachout, a Trinity vice president and the deputy general counsel, said the company has about a dozen lawyers in its legal department.

The company had been accused of fraud for failing to disclose to regulators that it had made changes in its guardrails that critics argued made them more dangerous when cars hit them at certain angles. Joshua Harman, a competitor, had sued Trinity on behalf of the government under the qui tam provisions of the FCA. The suit, which Harman filed in 2012, was tried in the U.S. District Court for the Eastern District of Texas in Marshall.

In September 2017, the U.S. Court of Appeals for the Fifth Circuit threw out the judgment in United States ex rel. Harman v. Trinity Industries, which Trinity lawyers said was the largest in the history of the FCA in which there was no settlement.

“It was really a joint effort with our outside counsel,” Theis Rice, a Trinity vice president and its chief legal officer, said of the case.

Lawyers from Gibson, Dunn & Crutcher, Akin Gump Strauss Hauer & Feld and Bartlit Beck Herman Palenchar & Scott represented Trinity in Harman. James Ho, who led Gibson Dunn's appellate practice and now sits on the Fifth Circuit, argued the case on appeal.

Rice said that Teachout had managed the outside counsel and the in-house lawyers working on Harman on the day-to-day basis, as well as in the strategic planning.

Scott Ewing, associate general counsel at Trinity, worked on Harman and said the Fifth Circuit found his company had not made a false claim about its guardrail system in that the guardrails had been installed throughout the United States with the government's approval.

“When the government, at appropriate levels, repeatedly concludes that it has not been defrauded, it is not forgiving a found fraud—rather it is concluding that there was no fraud at all,” Senior Judge Patrick Higginbotham wrote for the three-judge panel that heard the case.

The Fifth Circuit based its decision on the strict materiality requirements that the U.S. Supreme Court set out in Universal Health Services v. United States ex rel. Escobar in 2016. The appeals court concluded that Trinity had no liability under the FCA because the government had continued to pay for the company's guardrails, showing that any deviations in the rails were not material.

If Harman had not been reversed by the Fifth Circuit, it could have had implications for other companies.

“In our view, it would be a very negative precedent, not just for Trinity but for others,” Teachout said.

Michael Warnecke, a litigation partner in Akin Gump in Dallas, offered the following comments about the in-house lawyers involved in the Harman case in an email:

“Trinity's in-house legal team didn't set out to win a landmark victory, to be heralded in the press or even to set a precedent surely to be cited in False Claims Act cases for years to come. Rather, they came to work every day with a singular focus on doing what they believed was the right thing to do for their team, their employees and their shareholders: proving that no fraud was committed in this case.

“That the Trinity team showed an amazing degree of fortitude under circumstances that may have caused others to back down. The resulting victory is a testament of that commitment. “That the Trinity team never loses sight of the big picture while zooming in on the important details is particularly impressive. This is true no matter how many matters they juggle in multiple jurisdictions.”

The 2014 adverse judgment in Harman was part of a massive legal juggernaut that the company and its lawyers faced, including a federal criminal investigation, multiple purported securities class actions, multiple shareholder derivative suits, purported class actions by government purchasers in three states and Canada, and products liability cases across the country, to name a few of the problems.

“There was a lot of copycat litigation that took place after that jury verdict,” Teachout said. Rice said that while the legal department was handling the Harman litigation, it also had to cope with its normal transactional work and other more routine litigation.

“We continued to run our business,” he said.