A Texas jury in federal court decided Monday that highway guardrail maker Trinity Industries had defrauded the U.S. government by selling guardrail systems that could malfunction during crashes and slice through cars. The award of $175 million in damages will be trebled to $525 million, and the final award could go higher. Retired U.S. District Judge Walter D. Kelley, Jr., now a partner in Hausfeld LLP, discusses the case in this exclusive report.
Trinity Industries makes many of the safety guardrails across the country. Guardrail failures have already caused dozens of gruesome injuries and deaths nationwide. The lawsuit brought by Joshua Harman claimed that Trinity deceived the government by failing to disclose small but critical changes made to the original design.
Kelley explains that the litigation began when Trinity sued Harman for patent infringement. In the course of that case, Harman discovered the secret modification by Trinity of a critical part of the guardrail system that made the guardrail unsafe and non-conforming to federal standards. The jury decided that this was fraud.
Kelley points out that, per a memo revealed at trial, the design change produced a cost saving of $2 per unit, a total saving of $250,000 after five years. [Note: the modest cost saving brings to mind the Ford Pinto and the cost-benefit analysis that led to the production of that car in a form that was prone to cause burn deaths.] Judge Kelley notes that, in addition to the $175 million damages, trebled, the trial court will award an additional sum of $5,500-$11,000 per fault certification to the government, and the number of such certifications was estimated to be 16,000.
Kelley says that Trinity had plenty of notice that its guardrails were defective. There was evidence that there was testing by Trinity, and “these tests failed five different times.” Trinity knew that there were no problems until they made the changes, and then they began to get lawsuits for injuries and deaths.
What will happen next, Judge Kelley explains, will be several months of “legal wrangling” as Trinity moves to set aside the verdict and the plaintiffs will move for the court to impose the penalties and award attorneys’ fees. That will be followed by an appeal to the Fifth U.S. Court of Appeals.
Walter D. Kelley Jr. is a former United States District Judge for the Eastern District of Virginia and a partner in Hausfeld LLP. He has extensive experience representing both plaintiffs and defendants in disputes between businesses, particularly in the areas of antitrust, intellectual property and securities. As a lawyer, he has tried more than 25 jury cases to verdict. As a judge, he presided over thousands of cases encompassing all areas of the law and authored 50 published opinions. In addition to maintaining an active trial docket, he serves as a mediator and arbitrator for business related disputes. Among other organizations, he serves on the International Trade Commission’s panel of mediators for Section 337 (patent infringement) cases. The Legal Broadcast Network is a featured network of the Sequence Media Group.