City of Pomona v. Sup. Court

• Decision Date: 31 May 2001
• Court: California Court of Appeals Court of Appeals
• Parties: (Cal.App. 2 Dist. 2001) JAMES JONES COMPANY et al., Real Parties in Interest. CITY OF POMONA et al., Petitioners, v. SUPERIOR COURT, Respondent. B148045 SECOND APPELLATE DISTRICT DIVISION ONE Filed

107 Cal.Rptr.2d 710 (Cal.App. 2 Dist. 2001)

JAMES JONES COMPANY et al., Real Parties in Interest.

CITY OF POMONA et al., Petitioners, v. SUPERIOR COURT, Respondent.

B148045

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

Filed 5/31/01

Amended 6/29/01

(Super. Ct. No. BC173487)

ORIGINAL PROCEEDING; application for writ of mandate. Writ granted.

Phillips & Cohen, Eric R. Havian, Lisa A. Foster, Mary A. Inman; Irell & Manella, Gregory R. Smith, S. Thomas Pollack, Elizabeth A. Camacho and Stephen Hasegawa for Petitioners.

Bill Lockyer, Attorney General, Pamela Smith-Steward, Chief Assistant Attorney General, Christopher M. Ames, Senior Assistant Attorney General, and Anthony M. Bova, Deputy Attorney General, for the State of California as Amicus Curiae on behalf of Petitioners.

John M. Kaheny, City Attorney, for the City of Chula Vista as Amicus Curiae on behalf of Petitioners.

Office of the City Attorney, Louise H. Renne and Owen J. Clements for the City of San Francisco as Amicus Curiae on behalf Petitioners.

Office of the City Attorney, J. Richard Doyle and Malgorzata Laskowska for the City of San Jose as Amicus Curiae on behalf of Petitioners.

No appearance for Respondent.

Horvitz & Levy, Mitchell C. Tilner, Karen M. Bray; Beck, De Corso, Daly & Kreindler, Bryan D. Daly, Anthony A. De Corso, Suzanne E. Tracy; Stanzler, Funderburk & Castellon, Ruben A. Castellon and Willaim W. Funderburk, Jr. for Real Parties in Interest James Jones Company, Mueller Co. and Tyco International (US), Inc.

Weston, Benshoof, Rochefort, Rubalcava & MacCuish, David S. MacCuish, Kurt Osenbaugh and Todd Benoff for Real Party in Interest Watts Industries, Inc.

INTRODUCTION

CERTIFIED FOR PUBLICATION

SPENCER, P.J.

The City of Pomona and qui tam¹ plaintiff Nora Armenta (Armenta) petition for a writ of mandate commanding the trial court to reinstate the City's first cause of action, which alleges the violation of the California False Claims Act² (Gov. Code, 12650 et seq.)³ by real parties in interest James Jones Company, Mueller Co., Tyco International (US), Inc. and Watts Industries, Inc. We grant the writ petition.

STATEMENT OF FACTS⁴

James Jones Company and its parent companies, Mueller Co., Tyco International (US), Inc. and Watts Industries, Inc. (hereinafter collectively referred to as Jones), manufacture and supply pipes and other water distribution parts that are sold directly to municipalities for carrying drinking water or to contractors for eventual use in municipal water systems. Jones represented in its catalogues and sales literature that all of its pipes, valves, fittings, stops and ball valves comply with American Water Works Association (AWWA) standards. AWWA Standard C-800-89 requires all material that comes into contact with potable water to contain 85 percent copper and 5 percent each of tin, lead and zinc (85 metal). The permissible variance within the industry for each element is one percent. AWWA imposes this standard "[b]ecause of the potential for corrosion of high-zinc brasses."

A catalogue for Jones service saddles contains pipe-compatibility data, model numbers, size ranges and a recitation of the materials used and descriptions of 17 different service saddles. At the bottom of the page, the catalogue states, "Note: All bronze castings are 85-5-5-5." Following pages provide sizing information.

A catalogue for Jones corporation stops contains eight pages which provide the model numbers, descriptions and size ranges of 11 different corporation stops. An introductory page provides "general information." Number eight among the items of general information is that "[a]ll Jones corporation stops are manufactured in accordance with the AWWA Standard C-800-89. 85-5-5-5 alloy."

A catalogue for Jones curb stops follows the same format. A "general information" page precedes model numbers, descriptions and size ranges of nine different curb stops. Under the sub-heading "Trouble Free Operation," the catalogue's general information page states, "All James Jones waterworks products conform to AWWA specifications."

In its catalogues and sales literature, Jones emphasized the corrosion-resistant properties of 85 metal, stating that it is "highly corrosion resistant." Jones's products are made of 85 metal "for long, long, life," "to insure long life in the harshest soils," or "for corrosion protection."

Jones offered its water distribution parts for sale in catalogues that were "circulated . . . to potential customers and to distributors through whom Jones sold its products with the expectation that Jones's potential customers would refer to those catalog[ues] in ordering water distribution parts." "In order to enable the City to purchase Jones parts through Jones's authorized distributors, Jones provided catalog[ues] describing Jones's products to the City, and to Jones's distributors. . . . The statements were intended and had the natural tendency to induce Jones's potential customers (including the City) to purchase Jones parts."

One metal with a higher zinc content than 85 metal is popularly known as 81 metal, or "Copper Alloy UNS No. 84400." It is comprised of 81 percent copper, 9 percent zinc, 3 percent tin and 7 percent lead. "Not only is the zinc content nearly double that of 85 metal, but the lead content, of significant concern to water customers," is 40 percent greater than in 85 metal. Another metal of less durability is known as 360 metal, or "free cutting brass." This metal is comprised of 60 percent copper and 40 percent zinc. It corrodes approximately five times faster than 85 metal.

Due to the higher zinc and lead content of 81 metal and the higher zinc content of 360 metal, the City "require[s] vendors to provide valves and other components that are fabricated with bronze conforming to or exceeding the metal content standards described in AWWA [S]tandard C-800. Thus, at a minimum, any part that comes into contact with water must be made of 85 metal. Those parts include valves, which control the flow of water from the main water line to a residence; balls, the component of a valve that either blocks or permits the flow of water through the valve; saddles; connections; and couplings."

Beginning in 1991, Jones's president instructed Armenta, who was Jones's purchasing manager, to purchase raw metal with less copper and more lead or zinc. Jones manufactured and sold pipes and valves using 81 metal rather than 85 metal as it continued to represent in its catalogues and sales materials that the pipes and other parts either complied with AWWA standards or were made of 85 metal. Jones also manufactured or purchased from suppliers certain sizes of balls for valves made from 360 metal while continuing to represent that these parts were made of 85 metal. From 1991 through 1993, the City made six purchases of Jones ball valves from Jones's distributors.

Jones manufactured or purchased other plumbing parts from its suppliers knowing they were made of 81 metal while representing that these parts met AWWA requirements of 85 metal. Jones consciously determined as a cost-saving measure that it "no longer [would] use 85 metal for certain sizes of the ball component of its valves." A Jones internal memorandum recited that "many parts were being manufactured from 81 that should be 85." Moreover, Jones rebuffed Armenta's concerns about the failure to use 85 metal.

In 1997, Jones discovered that an overseas supplier, Wu Feng Enterprise Co., Ltd., distributed a catalogue showing that Jones parts were made of 81 metal. Jones complained that a competitor was showing the Wu Feng catalogue to Jones customers, thereby "exposing us to scrutiny . . . . The next step . . . our customer might take is testing metallurgy which they would not have done if not shown your advertisement." The customer then would discover that the metal was not 85-5-5-5 as Jones had represented.

The City of Pomona purchased Jones products from Jones's distributors from 1991 through 1997. The City had a long history of buying water works products. It usually dealt with the same set of distributors when doing so. The City sent a request for quotation, which specified a Jones pipe or part by its part number, to a distributor. Throughout the bidding and purchasing process, the City used Jones catalogue numbers to identify the parts it sought. Based on their long history with the City, the distributors understood that the part was to conform to the description given in the Jones Catalogue and to AWWA standards. That is, "[t]he City and the selling distributor shared an understanding that the description of those parts as set forth in Jones's catalog and sales literature formed one of the terms of agreement between the City and the distributor for the City's purchase of Jones parts." In the past, the City returned parts that did not conform to the specifications set forth in the Jones Catalogue.

Jones made false claims in the catalogues and sales materials it provided to its distributors in the knowledge that the distributors would provide the parts to the City. By providing these "patently false" catalogue representations to the City, Jones intended to and "very natural[ly]" did induce the City to contract with the distributors for purchase of Jones parts. Had the City known that the catalogue statements were false, it would not have made these contracts. Jones thereafter "knowingly caused distributors to deliver parts to the City that did not conform to the descriptions of those parts in Jones's" catalogues. Had the City known the parts did not conform to those descriptions, it would not have paid the distributors.

CONTENTION

Petitioners contend the trial court abused its discretion in sustaining without leave to amend real parties' demurrer to petitioners' causes of action alleging violations of the California False Claims Act, in that they have alleged adequately the specifications of the parts...