Submitted by Jeffrey Hark, Personal Injury Lawyer
Originally published by the New York Times here.
Trinity Industries, the highway guardrail maker accused of selling systems that can malfunction during crashes and slice through cars, was found by a jury on Monday to have defrauded the federal government.
The case was brought under the False Claims Act by Joshua Harman, a competitor who discovered that the company made changes in 2005 to its rail head — the flat piece of steel at the front of the system — without telling the Federal Highway Administration, as is required. The company sold the guardrails to state governments that, in turn, received federal reimbursement.
A Texas jury on Monday awarded $175 million that will, under federal law, be tripled to $525 million. The money will be split between the United States Treasury and Mr. Harman, who, although a competitor to Trinity, is considered a whistle-blower. After discovering the design change during litigation in 2011, he filed the case on behalf of the government.
“We are pleased the jury recognized what has been overlooked for three years,” said Nicholas Gravante of Boies, Schiller & Flexner, one of the lawyers representing Mr. Harman.
In a statement, Trinity suggested it would appeal. “Trinity believes the decision cannot and will not withstand legal scrutiny,” the statement said.
Beyond the jury verdict itself, the judge hearing the case will determine exactly how many “false claims” apply in the case to Trinity. Statutory penalties for each instance of a false claim range from about $5,000 to $12,000, and Trinity would be responsible for such payments.
At the heart of the dispute was a design change Trinity made in 2005 to its ET-Plus rail head, which could cause a guardrail system to fail, according to some state regulators and the federal lawsuit. Those changes were not disclosed to the Federal Highway Administration for seven years, despite requirements that any such changes be reported immediately. Trinity has said that the failure was inadvertent.
While states are ultimately responsible for their highway equipment, the federal agency plays a crucial role, providing guidance on which products are eligible for federal reimbursement dollars. The agency has continued to approve the ET-Plus even as state officials have raised concerns.
The guardrail system works by collapsing when hit head-on, absorbing the impact of a vehicle and guiding the railing out of its path. The rail head or end terminal, which is often marked with yellow and black stripes, is supposed to slide along the guardrail itself, pushing it to the side.
But the redesigned Trinity product narrowed the channel behind the head, which can cause it to jam instead of sliding along the rail, some state officials said. When that happens, the rail can pierce an oncoming vehicle like a harpoon, endangering occupants.
At least 14 other lawsuits blame the guardrails for five deaths and more injuries. Trinity is a major guardrail supplier nationwide. According to internal company documents, the change was expected to save about $2 on every rail head. And Mr. Harman said that the change made the guardrails impossible to reuse.
Trinity has said that it does not believe the guardrails pose a threat to safety and that the failure to disclose the design changes to the Federal Highway Administration was accidental.
But three states — Missouri, Massachusetts and, most recently, Virginia — have banned further purchase of the ET-Plus, citing safety concerns. A fourth, Nevada, prohibited them in January, citing Trinity’s failure to disclose the change when it was made.
During the trial, it emerged that Trinity may have misled some states about its product. In a February 2006 letter, for example, Trinity told the state of Vermont that the design of the ET-Plus was identical to the system that had been approved by the state agency and the Federal Highway Administration, according to court documents. Gregg Mitchell, president of Trinity’s highway products subsidiary, testified that while at the time the company thought that statement was correct, he now considered it inaccurate.
Richard M. Tetreault, chief engineer at the Vermont Agency of Transportation, said the agency was reviewing the verdict and would consider “all our options.”
Legal experts in False Claims Act cases say the $175 million verdict is on the higher end of recent judgments.
“There’s no denying it’s a big number,” said Erika A. Kelton, a whistle-blower lawyer with Phillips & Cohen who is not involved in the Trinity litigation.
Ms. Kelton said that the government usually joins the fray in successful False Claims Act cases. But in the Trinity case, the Federal Highway Administration did not participate.
The federal agency, which said it learned of the design changes from Mr. Harman in 2012, has so far accepted the company’s explanation about the lack of disclosure. The agency said that it reviewed crash tests from 2005 and 2010, which helped it determine the guardrails were eligible for federal reimbursement. The New York Times reported a week ago that federal highway officials had expressed doubts about the guardrails before providing public assurances that they were acceptable.
“The Federal Highway Administration will evaluate the findings of the Trinity case and consider whether it affects the continued eligibility of the ET-Plus,” said Brian Farber, a spokesman for the Transportation Department.
Darius Williams, a 24-year-old who said he was injured by a guardrail in a crash in North Carolina in February, said the federal agency should investigate the issue more seriously than it previously has. “They should take immediate action,” said Mr. Williams, who has not filed a lawsuit. “This verdict should be an eye-opener for them.”