Court supports whistleblower in fraud case against JM Eagle

LOS ANGELES – A federal judge has rejected an attempt by JM Eagle to convince the court to dismiss a whistleblower lawsuit that alleges the company defrauded its customers by selling substandard pipe used in water and sewer systems. The case will proceed to trial next year, he said.

After reviewing documents filed by both sides, Los Angeles District Court Judge George H. Wu said in an order filed yesterday there is sufficient legal basis for most of the fraud claims in the “qui tam” (whistleblower) lawsuit against JM Eagle to proceed.

In a procedural ruling, the federal judge said claims brought under state “common law” would need to proceed in state court, rather than federal court. That decision doesn’t affect the claims central to the case brought under the False Claims Act and similar state false claims laws, however, which make up the bulk of the case against JM Eagle.

“Clearly, the judge rejected JM Eagle’s spin on the case,” said Mary A. Inman, a San Francisco attorney for Phillips & Cohen LLP, which is representing the whistleblower and most of the states and municipalities that have joined the case. “In making his decision that the case may go forward, not only did the judge review our evidence but also the strong evidence of fraud by JM Eagle that the federal government found in its own investigation.”

Judge Wu issued the order in response to a motion by JM Eagle to dismiss the case. He set a trial date of Dec. 6, 2011 for the fraud case.

The State of Nevada, the Commonwealth of Virginia, and 47 municipalities and water districts in California have joined the whistleblower lawsuit to recover damages caused by the alleged fraud.

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