Four companies pay $39 million to settle California whistleblower case involving water supply system parts

Latest settlement brings total recovered to nearly $60 million

SAN FRANCISCO, CALIF., Nov. 24, 2009 -- Four manufacturing companies paid a total of $39 million last week to dozens of California municipalities and water districts to settle a whistleblower lawsuit brought by Phillips & Cohen LLP and a related civil complaint that allege the companies provided substandard parts for water supply systems and that some of those parts contained levels of lead that exceeded industry standards.

The settlement agreement was reached through mediation between the four companies -- James Jones Company LLC, Mueller Co. Ltd., Tyco International and Watts Water Technologies - and 54 municipalities and water districts as well as lawyers for the whistleblower.

With this latest settlement, recoveries that have resulted from the case total nearly $60 million. The total includes two previous settlements reached with the companies and San Francisco, Los Angeles, Santa Monica and the East Bay Municipal Utility District.

"The James Jones Company ignored the advice of its own engineers and increased the amount of lead in its valves and fittings beyond what was allowed by industry standards, customer specifications, and Jones's own catalogs and marketing material," said Stephen S. Hasegawa, a San Francisco attorney with Phillips & Cohen LLP, which represented the whistleblower as well as the municipalities and water districts. "To save a few pennies, Jones added lead to its parts at a time when the rest of the industry was looking for ways to take lead out."

James Jones, the main defendant, is a privately held company that manufactures valves and other components for water systems. Watts, Mueller and Tyco were Jones's parent companies at various relevant times.

A number of cities and water districts will get more than $1 million each from the settlement based on their purchases and receipts of Jones parts, including Irvine Ranch Water District, the City of San Diego, the City of Oceanside, Rancho California Water District, Moulton Niguel Water District, and the City of Corona.

The case began as a "qui tam" (whistleblower) lawsuit 12 years ago brought under the California False Claims Act. It cost James Jones and the other defendants $7.6 million to resolve the Los Angeles Department of Water and Power's (LADWP) portion in 2001. LADWP used the funds to replace parts in its water supply system with parts that have little or no lead.

Two years later, James Jones and Watts paid a total of $13 million to San Francisco, the East Bay Municipal Utility District and Santa Monica to settle their share of the case.

After that settlement, East Bay Municipal Utility District supported a bill in the California legislature that reduced the amount of lead allowed in water distribution parts to 0.25 percent. That law will take effect in 2010.

The litigation resulted in three ground-breaking California Court of Appeal opinions in favor of the whistleblower and the other plaintiffs. One opinion confirmed that misstatements in catalogs could form the basis of a California False Claims Act action. Another held that "passive" beneficiaries of fraud who fail to disclose to the government the existence of false claims after learning of them are liable under the state law.