Trinity Industries Inc. faces a potential liability of $1 billion after a jury found the company defrauded the U.S. by deliberately withholding information about cost-saving changes to its highway guardrail system that potentially made it more dangerous.
Jurors in Marshall, Texas, federal court today deliberated for about 3 1/2 hours before finding the guardrail maker cheated the government of $175 million by wrongly passing off the product as eligible for federal funding.
Damages to be awarded against the company will be tripled and added to a penalty to be determined by the judge, with total liability possibly reaching $1 billion, according to company attorneys. Trinity shares fell as much as 13 percent, before closing down 12 percent in New York trading in the biggest one- day drop in more than five years.
The jury’s verdict, the third biggest in the U.S. this year after the tripling, comes as scrutiny of the highway safety product, called the ET-Plus, increases across the country. Earlier this month, the Federal Highway Administration asked all states to start submitting information on crashes involving the ET-Plus to the agency’s safety office.
Four states have banned new installations of it on their highways, citing ongoing investigations. And the company faces more than a dozen personal injury and wrongful death lawsuits in which plaintiffs allege the product behaved defectively in car crashes.
Trinity plans to appeal the jury verdict.
“The company respects the jury’s decision,” Trinity said in an e-mailed statement. “However, Trinity believes the decision cannot and will not withstand legal scrutiny.”
This is the second time the case has been tried. The first ended in a mistrial in July after the judge said both sides created an environment in which the jury couldn’t reach a fair verdict.
The product in question is a 175-pound steel mechanism that mounts onto the end of a guardrail and is meant to cushion the impact of a crashing car. Instead of acting like a shock absorber, Trinity’s secretly revised version locks up and can impale oncoming vehicles, according to the lawsuit.
Joshua Harman, a maker and installer of guardrail systems in Virginia, sued in 2012 after he observed multiple instances of the product jamming up during car accidents, at crash sites from Tennessee to New Mexico. Since then, he has road-tripped around the country to document more accidents and find victims who might have been injured by an ET-Plus.
Last year, the 45-year-old spent more than 300 days on the road away from his wife and two school-age daughters.
Harman is eligible for as much as 30 percent of any judgment.
“He has spent the last couple years of his life trying to get some action done,” Sam Baxter, one of Harman’s lawyers, told the jury during closing arguments earlier today. “He is the hero in this case.”
Although the original ET-Plus was crash-tested and federally approved, the modified version was never properly tested or disclosed to the government, lawyers for Harman argued during the trial. The federal government helps state transportation departments purchase approved products, including the ET-Plus, for use on highways across the country.
“We are pleased the jury recognized what has been overlooked for three years and saw the plain truth” that the government was defrauded, Nicholas Gravante Jr., a plaintiffs’ lawyer with Boies, Schiller & Flexner LLP, said in an e-mail. The money will “go to the just pursuit of saving lives and recalling and replacing each and every secretly modified Trinity product still on our nation’s roads and highways.”
The case is Harman, on behalf of the U.S. v. Trinity Industries Inc., 12-cv-00089, U.S. District Court, Eastern District of Texas (Marshall).
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