United States ex rel. Harman v. Trinity Indus. Inc.

Decision Date29 September 2017
Docket NumberNo. 15-41172.,15-41172.
Citation872 F.3d 645
Parties UNITED STATES of America, EX REL., Joshua HARMAN, Plaintiff-Appellee v. TRINITY INDUSTRIES INC.; Trinity Highway Products LLC, Defendants-Appellants
CourtU.S. Court of Appeals — Fifth Circuit

872 F.3d 645

UNITED STATES of America, EX REL., Joshua HARMAN, Plaintiff-Appellee
v.
TRINITY INDUSTRIES INC.; Trinity Highway Products LLC, Defendants-Appellants

No. 15-41172.

United States Court of Appeals, Fifth Circuit.

September 29, 2017


George F. Carpinello, Albany, NY, Nicholas A. Gravante, Jr., Esq., New York, NY, Christopher Molloy Green, Armonk, NY, Boies, Schiller & Flexner, L.L.P., for Plaintiff-Appellee.

James C. Ho, Esq., Bradley G. Hubbard, Rebekah Ricketts, Gibson, Dunn & Crutcher, L.L.P., Dallas, TX, Nina Cortell, Jeremy Daniel Kernodle, Haynes & Boone, L.L.P., Dallas, TX, Robert Salcido, Akin Gump Strauss Hauer & Feld, L.L.P., Washington, DC, Elizabeth Marie Dulong Scott, Akin Gump Strauss Hauer & Feld, L.L.P., Dallas, TX, for Defendant-Appellant.

Before JOLLY, HIGGINBOTHAM, and GRAVES, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

The trial in this case offers two narratives. One of a hardworking man who, angered by failures of guardrails installed across the United States—with sometimes devastating consequences—persuaded a Texas jury of a concealed cause of those failures. The other of the inventive genius of professors at Texas A&M's Transportation Institute, who, over many years of study and testing, developed patented systems including guardrails that, while saving countless lives, cannot protect from all collisions at all angles and all speeds by all vehicles—guardrails that have been installed throughout the United States with an approval from which the government has never wavered as it reimbursed states for the installation of a device integral to the system.

Despite a formal statement issued on the eve of trial from the government affirming that approval and a caution from this court that the case ought not proceed, seven jurors in a six-day trial in Marshall, Texas, found that the government had been defrauded. We will describe, but not decide, the substantial challenges to the jury's findings of liability and damages as an essential backdrop to the challenge we ultimately sustain, one that ends this litigation. We hold that the finding of fraud cannot stand for want of the element of materiality. Therefore, we reverse and render judgment as a matter of law for Trinity.

I.

Early highway guardrail systems helped prevent drivers from running off the road, attended by a lesser but significant risk—in a head-on collision with an automobile, the blunt ends of the guardrails could "spear" or penetrate vehicles' passenger compartments. Attempts to mitigate this risk by burying the end of the guardrail were successful, but created a different risk; guardrails ceased to spear automobiles, but proved to act as a launch ramp,

872 F.3d 648

rolling out-of-control vehicles, sometimes back into traffic. As part of its many years of ongoing research and testing aimed at improving highway safety, engineers at the Texas A&M Transportation Institute ("TTI") developed a guardrail "end terminal" system known as the ET-2000, which, with modification in 1999, became the ET-Plus.1 In a head-on collision, the ET-Plus' terminal (or extruder) head flattens and extrudes the guardrail away from the vehicle while simultaneously "gating" the vehicle by the sequential failures of the pre-drilled posts carefully laced and spaced to meet design specifications for the system, all to slow speeding vehicles to survivable stops and substantially lessen the risk posed by the rails. Trinity Highway Products, LLC, a subsidiary of Trinity Industries, Inc. ("Trinity"), manufactures the ET-Plus system under an exclusive licensing agreement with Texas A&M University—in short, TTI engineers the product and Trinity manufactures it according to TTI's design. ET-Plus systems are sold to highway contractors and installed along many highways throughout the country.

The Federal Government subsidizes many state highway improvements, reimbursing states for the installation of guardrail end terminal systems meeting its standards. At times relevant here, acceptance by the Federal Highway Administration ("FHWA") was a prerequisite to eligibility for federal reimbursement. FHWA could require testing of products, unless they "are nearly certain to be safe" or "so similar to currently accepted features that there is little doubt that they would perform acceptably." And changes to approved systems must also be submitted for approval unless an exercise of good engineering judgment finds they were not significant.2

The original ET-Plus system was successfully tested by TTI, and on January 18, 2000, FHWA accepted the ET-Plus for use on the National Highway System. At that time, the ET-Plus was designed for 273//4-inch high guardrails. By 2005, the increase of vehicles with higher centers of gravity—e.g., SUVs—turned the research to taller guardrails. Trinity and TTI developed a modified ET-Plus system for use with 31-inch guardrails. TTI crash tested the new ET-Plus at the 31-inch height and prepared a report on the tests, which Trinity sent to FHWA. On September 2, 2005, FHWA approved the modified ET-Plus for the 31-inch guardrail height.

Before testing the new guardrail height, Trinity changed the guide channel width in the ET-Plus' terminal head from five inches to four inches, accompanied by necessary fabrication changes ("2005 changes"). Trinity contends that a modified version of the extruder head was included in the 31-inch guardrail system when it was crash tested in 2005. Trinity also maintains that it prepared and sent a detailed drawing of the ET-Plus head with the 2005 changes to TTI to be included in the report sent to FHWA. TTI did not include the drawing when it prepared the crash test report that Trinity later forwarded to FHWA. The body of the 2005 crash test report discussed the changes made to accommodate the 31-inch guardrail height, but not the changes in guide channel width or the related fabrication changes.3

872 F.3d 649

Joshua Harman had been a customer of Trinity, purchasing their products and installing them in the eastern United States. Harman was also a one-time competitor of Trinity, manufacturing his own end terminal heads through SPIG and Selco, businesses he owned with his brother.4 SPIG and Selco failed. And Trinity sued Harman, once for patent infringement related to SPIG-manufactured heads in 2011 and twice for defamation related to his campaign against the ET-Plus.5

Harman hoped to compete with Trinity and "with the entire industry" again in the future, admitting on cross-examination that he intended to use the proceeds from this litigation to recapitalize his business and begin manufacturing competing end terminals. Trinity presented evidence to the jury that an investment manager prepared a prospectus to pitch to potential SPIG investors in February 2014, advertising that a "[r]ecall of Trinity's modified end terminals would mean removal and replacement of approximately one million units in the [United States], a one-billion-dollar revenue opportunity windfall for SPIG" and noting that SPIG had "[p]lans to capture 20 percent of the U.S. end terminal market in 18 to 24 months, then continue rapid growth to take market share from an exposed Trinity."

Harman testified that he set out on a cross country trip looking for accidents involving guardrails; that he acquired between six and eight ET-Plus heads; and that he found five changes that he believed were causing the accidents. The primary change was the narrowing of the guide channel from five inches to four inches. Harman also noted a shortened guide channel and feeder chute; a narrower exit gap; a change from a flush "butt weld" to a "fillet weld," diminishing the height of the extruder throat; and a steeper angle of the side plates.6 At trial, Harman claimed that all of these changes resulted in "a complete[ly] new product." Unable to find records of FHWA approval for these changes, Harman presented his findings to FHWA in January 2012 via an extensive PowerPoint presentation that included explanations of the 2005 changes and accident scene photographs.7

It is undisputed that, at that meeting, Harman discussed the change from a five- to four-inch guide channel, the shortening of the guide channel, the change in the exit gap from one and a half inches to one inch, the diminished height of the extruder chamber, and that "in [his] view, there had

872 F.3d 650

to be significant other changes as well." Nicholas Artimovich, an FHWA representative, took photographs and measurements of the heads Harman provided at the meeting.

FHWA then met with Trinity in February 2012 to discuss Harman's allegations. Trinity explained that, while the change in the guide channel width was inadvertently omitted from the report sent to FHWA, the May 2005 crash test was of an ET-Plus system with a modified terminal head. FHWA met twice more with Harman and his counsel. Around that same time, FHWA responded to inquiries about the ET-Plus from various state departments of transportation by confirming that the ET-Plus was eligible for reimbursement.

On March 6, 2012, Harman filed a sealed False Claims Act ("FCA") suit in the Eastern District of Texas. The government reviewed the complaint and declined to intervene ten months later. The court then unsealed the complaint and discovery began....

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