(Reuters) - A federal appeals court on Friday overturned a $663.4 million judgment against Trinity Industries Inc, which had been accused of misleading the government by selling highway guardrails that could impale vehicles.
The 5th U.S. Circuit Court of Appeals in New Orleans said a jury’s 2014 finding that Trinity had defrauded the government could not stand, and that the Dallas-based company was entitled to prevail as a matter of law.
Trinity shares rose $2.88, or 9 percent, to $34.78 in after-hours trading, following the decision by a unanimous three-judge panel.
The whistleblower case had been brought by Joshua Harman, a competitor who accused Trinity of failing to tell the government about a design change it made in 2005 to its ET-Plus guardrails that could cause vehicles to be speared when struck, potentially causing severe injury or death to occupants.
“We believe the jury properly assessed the evidence in this case and reached the right verdict,” Karen Dyer, a partner at Boies, Schiller & Flexner representing Harman, said in a statement. “We’re disappointed with the decision of the appellate court and we’re assessing the options.”
Jurors had found Trinity liable for defrauding the Federal Highway Administration and awarded $175 million, which was tripled to $525 million under the federal False Claims Act.
The next year, U.S. District Judge Rodney Gilstrap in Marshall, Texas added $138.4 million in civil penalties, or $8,250 for each of 16,771 alleged false certifications to obtain payments.
Harman was awarded $199 million, or 30 percent, of the total judgment.
But in Friday’s decision, Circuit Judge Patrick Higginbotham said the highway agency, which reimburses states for installing guardrails meeting its standards, continued reimbursements for the ET-Plus even with “full knowledge” of Harman’s claims.
The judge said this meant Harman could not show that Trinity’s alleged misstatements materially affected the government’s payment decisions.
“When the government, at appropriate levels, repeatedly concludes that it has not been defrauded, it is not forgiving a found fraud -- rather it is concluding that there was no fraud at all,” Higginbotham wrote.
Trinity spokesman Jeff Eller said the company was pleased with the decision, which “affirms our longstanding belief that the ET-Plus system is safe and no fraud was committed.”
The case is U.S. ex rel Harman v Trinity Industries Inc et al, 5th U.S. Circuit Court of Appeals, No. 15-41172.
Reporting by Jonathan Stempel in New York; Editing by Lisa Shumaker and David Gregorio