WASHINGTON - The American Tort Reform Association is cheering the recent reversal of a record-setting $663 million False Claims Act verdict in a case that helped land the Eastern District of Texas on ATRA’s Judicial Hellhole list two years ago.
The U.S. Court of Appeals for the Fifth Circuit issued its opinion in the case of United States ex rel. Harman v. Trinity Industries on Sept. 29.
Justices found the trial of the case, which made national headlines, offered two narratives.
Joyce
“One of a hardworking man who, angered by failures of guardrails installed across the United States—with sometimes devastating consequences—persuaded a Texas jury of a concealed cause of those failures,” the opinion states.
“The other 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 as it reimbursed states for the installation of a device integral to the system.”
The case arose in 2012 when plaintiff Joshua Harman purported to “blow the whistle” on his once and future competitors at Trinity Industries, alleging that Trinity had knowingly and fraudulently sold to the federal and state governments elements of a highway guardrail system that had been modified in 2005 but not subsequently tested and approved by the Federal Highway Administration.
Trinity defended the claim by showing that the design modification was recommended by the system’s engineers at the Texas A&M Transportation Institute to “improve the product,” and that the modification was so “insignificant” it did not need to be disclosed.
Trinity also pointed out that the FHWA had already investigated for a potential FCA violation and promptly affirmed that the modified product was compliant with the agency’s standards. The federal government declined to join the plaintiff’s FCA lawsuit.
Writing for a unanimous Fifth Circuit panel and citing the U.S. Supreme Court’s 2016 decision in Escobar, Justice Patrick Higginbotham explained that a successful FCA claim must show that a defendant’s knowingly false or fraudulent conduct materially caused or could have caused a government loss.
And since relevant FHWA regulations allowed TTI engineers to use their judgment to determine that additional testing was not needed to assure the safety of the modified product, Trinity sold the government only the sound, lifesaving guardrail system it had contracted to sell.
“Disagreement over the quality of that [engineering] judgment is not the stuff of fraud,” the court said.
The appellate court also found that Harman had signaled to potential investors his intention to use the proceeds from the lawsuit to recapitalize his business and begin manufacturing competing guardrail elements.
“That’s a rather polite way of saying that Mr. Harman’s manipulative abuse of the FCA and our civil justice system was aided and abetted by the trial judge in the Eastern District of Texas,” said ATRA President Tiger Joyce.
“It’s encouraging that the reputation of an upstanding company, which provides a reliable and affordable product protecting Americans all along our nation’s roads and highways, has appropriately been restored.
“But even more important, perhaps, is this long-awaited Fifth Circuit decision’s blunt reiteration of the FCA’s original purpose.”
Noting that the number of new FCA claims filed annually by private individuals and their lawyers has grown nearly 300 percent from 1994 through 2015, and that the percentage of government-initiated claims is shrinking, Joyce pointed to the the opinion:
“Congress enacted the FCA to vindicate fraud on the federal government, not second guess decisions made by those empowered through the democratic process to shape public policy.”
ATRA’s amicus brief to the Fifth Circuit pointed out that 80 percent of FCA claims now proceed without the government joining private relators in their allegations against defendants.
“When the government concludes it has not been defrauded, false claims cases should end and there should be no awards for damages made to relators and their attorneys,” Joyce said.
“They are the profiteers of today. Trinity should never have had to appeal such a verdict, much less endure roughly five years of costly, meritless litigation. All judges must ensure that such FCA travesties are not repeated.”