Formosa Plastics pays $22.5 million to settle its liability in whistleblower case that former subsidiary JM Eagle lost at trial

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Apr 04, 2014, 05:36 ET

LOS ANGELES, April 4, 2014 /PRNewswire/ -- Formosa Plastics Corp. USA will pay $22.5 million to settle its liability in a whistleblower lawsuit involving PVC pipe manufactured by a former subsidiary, JM Eagle, under the terms of a settlement agreement approved this week by a federal judge.

The settlement by Formosa Plastics doesn't cover JM Eagle's liability. Meanwhile, the lawsuit against JM Eagle continues. The lawsuit alleges that JM Eagle "falsely represented to its customers . . . that the PVC pipe products sold to them conformed to applicable industry standards when in fact the products were made using inferior materials, processing, and tooling that resulted in their having substandard tensile strength, as measured by various tests."

Last fall, the court held the first phase of the trial. JM Eagle lost on every issue the jury considered in that seven-week trial, including whether JM Eagle falsely represented that certain brands of J-M pipe uniformly complied with certain industry standards when it sold that pipe over a ten-year period to municipalities and water districts that participated in the trial.

Formosa Plastics Corp. USA, a privately held company based in Livingston, NJ, is affiliated with the petrochemical and plastics giant Formosa Plastics Group, based in Taiwan. Formosa Plastics was the former owner of JM Eagle, then known as J-M Manufacturing, for part of the time that the fraud allegedly occurred.

JM Eagle has filed a motion for a new trial. In addition, a second, related trial will be held to determine damages and the amount JM must pay. No date for that trial has been set.

The qui tam lawsuit against JM Eagle and Formosa Plastics was filed in 2006 in federal district court in Los Angeles and was "unsealed," or made public, in 2010. Funds from the Formosa Plastics settlement will be distributed to various governmental entities that purchased JM pipe. A judge approved the settlement -- which was worked out with a mediator -- over the objections of JM Eagle.

The plaintiffs are represented by Phillips & Cohen and two other law firms, McKool Smith and Day Pitney LLP.

SOURCE Phillips & Cohen LLP