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Fraud Case Asserting Substandard Pipe Strength Moves Forward Despite Delaware Withdrawal

Delaware recently withdrew its intervention in a False Claims Act case filed against J-M Manufacturing. Whistleblower John Hendrix, a former engineer for J-M Manufacturing in New Jersey, filed the suit against the manufacturer in 2006. Virginia, Tennessee, and Nevada remain in the suit, as well as 47 municipalities and water districts. In his complaint, Hendrix asserted that he was fired in retaliation less than two weeks after writing a memo alerting the company to substandard pipe strength.

Delaware’s Attorney General acknowledged that he believed there to be substantial evidence to support the whistleblower’s allegations, but stated that Delaware was forced to withdraw due to a lack of necessary resources. Although many in the legal community take cues from the government as to the merits of a case, intervention decisions are not always based on the merits of a case, but on the extent to which an attorney general’s resources are tapped by other cases. In addition, the False Claims Act only allows for 60 days for the government to decide whether to intervene before the case is served.  The 60 day period is often extended for several years by motion, but because the decisions on whether to grant extensions are made by a wide array of federal judges, uncertain time frames and hurried decisions are often the result.

The case brought by Hendrix highlights the importance of picking a law firm poised to see a False Claims Act case through to its end, as the federal government and states like Delaware may choose to essentially hand off the costs of litigation to private firms. Because the Hendrix case is still brought on behalf of Delaware, the state would share in any recovery — but Hendrix is likely to receive a greater portion of that share.