Court Opinion

ID: 9554327
Source: CourtListenerOpinion
Date Created: 2023-08-08 17:12:47.524477+00
Date Added: 2024-06-11T15:22:44.037067
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

JOHN HENDRIX, Relator; ex rel.       No. 21-56276
United States of America,
                                        D.C. No.
      Plaintiff-Appellant,           5:06-cv-00055-
                                        GW-PJW
STATE OF NEVADA,

      Plaintiff-Appellant,             OPINION

THE COMMONWEALTH OF
VIRGINIA,

      Plaintiff-Appellant,

CALLEGUAS MUNICIPAL WATER
DISTRICT; PALMDALE WATER
DISTRICT; SOUTH TAHOE
PUBLIC UTILITY DISTRICT,

      Intervenor-Plaintiffs-
      Appellants,

and

UNITED STATES OF AMERICA,

      Plaintiff,
2            HENDRIX V. J-M MANUFACTURING CO., INC.

STATE OF CALIFORNIA,

         Plaintiff,

STATE OF DELAWARE; STATE OF
FLORIDA; STATE OF TENNESSEE;
COMMONWEALTH OF
MASSACHUSETTS,

         Plaintiffs,

    v.

J-M MANUFACTURING
COMPANY, INC., DBA JM Eagle,

         Defendant-Appellee,

and

FORMOSA PLASTICS
CORPORATION, U.S.A., a Delaware
corporation,

         Defendant.

JOHN HENDRIX, Relator; ex rel.               No. 21-56288
United States of America; THE
COMMONWEALTH OF VIRGINIA;                       D.C. No.
STATE OF NEVADA,                             5:06-cv-00055-
                                                GW-PJW
           HENDRIX V. J-M MANUFACTURING CO., INC.   3

       Plaintiffs-Appellees,

CALLEGUAS MUNICIPAL WATER
DISTRICT; PALMDALE WATER
DISTRICT; SOUTH TAHOE
PUBLIC UTILITY DISTRICT,

       Intervenor-Plaintiffs-
       Appellees,

and

UNITED STATES OF AMERICA;
STATE OF CALIFORNIA; STATE
OF DELAWARE; STATE OF
FLORIDA; STATE OF TENNESSEE;
COMMONWEALTH OF
MASSACHUSETTS,

       Plaintiffs,
  v.

J-M MANUFACTURING
COMPANY, INC., DBA JM Eagle,

       Defendant-Appellant,
and

FORMOSA PLASTICS
CORPORATION, U.S.A., a Delaware
corporation,

       Defendant.
4            HENDRIX V. J-M MANUFACTURING CO., INC.

         Appeal from the United States District Court
            for the Central District of California
          George H. Wu, District Judge, Presiding

             Argued and Submitted June 20, 2023
                    Seattle, Washington

                      Filed August 8, 2023

    Before: Diarmuid F. O’Scannlain, Andrew D. Hurwitz,
             and Bridget S. Bade, Circuit Judges.

                   Opinion by Judge Hurwitz

                          SUMMARY *

                        False Claims Act

    The panel affirmed the district court’s judgment after a
bifurcated jury trial in a qui tam action brought under the
federal False Claims Act and various state False Claims Acts
by relator John Hendrix and five public-agency exemplar
plaintiffs against J-M Manufacturing Co.
    Relator and plaintiffs alleged that J-M violated the False
Claims Acts by representing that its polyvinyl chloride pipes
were compliant with industry standards. In Phase One of the
bifurcated trial, the jury found that J-M knowingly made

*
 This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
           HENDRIX V. J-M MANUFACTURING CO., INC.           5

false claims that were material to the public agencies’
decisions to purchase J-M pipe for use in water and sewer
systems, and thus violated the False Claims Acts. After the
jury was unable to reach a verdict in Phase Two, the district
court granted J-M judgment as a matter of law on actual
damages and awarded one statutory penalty for each of the
twenty-six projects at issue.
    The panel held that sufficient evidence of falsity,
materiality, and scienter supported the Phase One verdict. A
reasonable jury could conclude that plaintiffs received some
pipe not meeting industry standards. Further, the jury
reasonably found that plaintiffs would not have purchased or
installed J-M pipe had they been told the truth that J-M knew
it had stopped producing pipes through processes materially
similar to those used at the time of compliance testing and
also knew that a significant amount of the pipe later
produced did not meet industry standards. Plaintiffs’ failure
to prove that any individual stick of pipe that they received
was non-compliant did not mean that they failed to establish
scienter.
    As to statutory penalties, plaintiffs conceded that the
California False Claims Act allows only one penalty per
project. The panel held that the district court also properly
awarded only one penalty per project under the Nevada and
Virginia
    False Claims Acts, which, like the federal Act, impose a
penalty for each act in violation of the statute. The panel
concluded that the Phase One jury’s finding of falsity and
materiality did not mean that every stick of pipe was non-
compliant, and plaintiffs therefore did not establish that the
stamp on each piece of pipe indicating compliance should
give rise to a separate penalty.
6           HENDRIX V. J-M MANUFACTURING CO., INC.

    The panel held that the district court properly awarded J-
M judgment as a matter of law on actual damages under the
federal False Claims Act. Plaintiffs did not establish actual
damages by showing that they would not have bought the
pipe had they known the truth. Further, plaintiffs’ pipe had
not failed to operate as promised, and there was no evidence
that an actual failure was imminent or even likely. Even if
the testimony of plaintiffs’ experts were credited, the experts
did not provide evidence from which a jury could reasonably
determine the value of the pipe they received. And there was
no evidence that noncompliance with industry standards
calculably correlated to a loss of longevity.

                         COUNSEL

Eric R. Havian (argued), Constantine Cannon LLP, San
Francisco, California; Kirk D. Dillman, McKool Smith
Hennigan PC, Los Angeles, California; Elizabeth J. Sher,
Day Pitney LLP, Parsippany, New Jersey; for Plaintiffs-
Appellants John Hendrix and Commonwealth of Virginia
and Intervenor-Plaintiffs-Appellants Calleguas Municipal
Water District, Palmdale Water District, and South Tahoe
Public Utility District.
Susan K. Stewart, Deputy Attorney General, Attorney
General’s Office, Carson City, Nevada, for Plaintiff-
Appellant State of Nevada.
Paul D. Clement (argued) and Evelyn Blacklock, Clement &
Murphy PLLC, Alexandria, Virginia; David Bernick,
George W. Hicks, Jr., C. Harker Rhodes IV, and Mariel A.
Brookins, Kirkland & Ellis LLP, Washington, D.C.; Paul
Chan, Marc Masters, Ekwan E. Rhow, Shoshana E. Bannett,
           HENDRIX V. J-M MANUFACTURING CO., INC.           7

Bird Marella Boxer Wolpert Nessim Drooks Lincenberg &
Rhow PC, Los Angeles, California; for Defendant-Appellee
J-M Manufacturing Company Inc.
David Barrett, Assistant United States Attorney, United
States Department of Justice, Los Angeles, California, for
Plaintiff United States of America.

                         OPINION

HURWITZ, Circuit Judge:

    In this qui tam action, relator John Hendrix and five
public-agency exemplar plaintiffs claim that J-M
Manufacturing Co. (“J-M”) violated the federal and various
state False Claims Acts (“FCAs”) by representing that its
polyvinyl chloride (“PVC”) pipes were compliant with
industry standards. In Phase One of a bifurcated trial, a jury
found that J-M knowingly made false claims that were
material to the public agencies’ decisions to purchase J-M
pipe. After the jury was unable to reach a verdict in Phase
Two, the district court granted J-M judgment as a matter of
law (“JMOL”) on actual damages and awarded one statutory
penalty for each project involved in plaintiffs’ claims. Both
sides now appeal, and we affirm.
                     BACKGROUND
   J-M manufactures and sells PVC pipes used in water and
sewer systems. The plaintiffs bought and installed J-M PVC
pipe between 1996 and 2006.
    Three industry standards for PVC pipe are central to this
case: American Water Work Association (“AWWA”) C900
8           HENDRIX V. J-M MANUFACTURING CO., INC.

and C905 and Underwriters Laboratories (“UL”) 1285. The
bid specifications issued by the plaintiffs for their water and
sewer projects required use of PVC pipe compliant with
AWWA C900, AWWA C905, or UL 1285. 1 The successful
bids indicated that J-M pipe complying with those standards
would be used.
     J-M’s brochures during the relevant period, some of
which were attached to the successful bids, claimed that its
PVC pipe “MEETS AWWA C900; UNDERWRITERS
LABORATORIES”             and     “MEETS        ACCEPTED
STANDARDS: AWWA C905; Underwriters Laboratories.”
J-M placed a stamp with an industry standard on each stick
of its pipe (e.g., “C900”). The exemplar plaintiffs presented
testimony that their representatives checked each stick of
pipe before installation and would have rejected any pipe
without such a stamp.
     The AWWA and UL standards allow a manufacturer to
test its PVC pipe to determine compliance. If the pipe meets
the standards, the manufacturer can assert compliance and
can continue to do so for pipe later produced through
materially unchanged processes without further testing.
    AWWA C900 and C905 require hydrostatic design basis
(“HDB”) testing on pipe compound samples to measure
performance under high pressure for 10,000 hours; the
results are used to extrapolate the compound’s long-term
hydrostatic strength at 100,000 hours. The HDB test result
provides “the estimated long-term strength of a plastic pipe
material” based on a linear regression using individual data
points from another test. That result is multiplied by one of

1
  A City of Calleguas project required either UL 1285–compliant or
“Factory Mutual Approved” pipe.
           HENDRIX V. J-M MANUFACTURING CO., INC.           9

two design factors “so that the hydrostatic design stress
obtained provides a service of life for an indefinite period
beyond the actual test period.” AWWA C900 and C905 also
require that samples undergo quick burst (“QB”) testing to
determine whether they can sustain a pressure of 6,400 psi
before bursting. UL 1285 requires a longitudinal tensile
strength (“LTS”) test, which involves pulling on the ends of
a pipe specimen until failure.
    At trial, plaintiffs provided evidence that J-M
(1) continued to assert compliance for its PVC pipe after
changing its manufacturing process and (2) knew that its
pipe no longer satisfied the three standards. For example, J-
M’s research and development chief, William Fassler, had
reported in 2006 that “[i]n recent years, the HDB test success
rate is below 50%” for J-M pipe. Fassler also noted in a 2003
internal email that the processing of the pipe “has changed
dramatically” since it passed UL certification in 1992. J-M’s
former head of quality assurance, K.C. Yang, had informed
management since 1998 that much of the PVC pipe
produced by J-M was not capable of passing the UL 1285
test. He was told, “[D]on’t worry about it, and don’t tell
UL.” J-M conducted UL 1285 testing at all its PVC plants
in 2006 and found that “pipe at all facilities is [now] below
the desired level” necessary to pass UL requirements.
               PROCEDURAL HISTORY
     I. Pre-Trial Proceedings and Trial Bifurcation
    Relator John Hendrix filed this action in 2006, alleging
violations of the federal FCA, 31 U.S.C. § 3729, and
multiple state FCAs. Numerous states and municipalities
subsequently intervened as plaintiffs.
10          HENDRIX V. J-M MANUFACTURING CO., INC.

    The federal FCA provides the government a right of
action against anyone who “knowingly presents, or causes to
be presented, a false or fraudulent claim for payment or
approval” to the government. 31 U.S.C. § 3729(a)(1)(A).
The statute allows a civil penalty up to $10,000 for each
violation and an award of “3 times the amount of damages
which the Government sustains because of the” false claim.
Id. § 3729(a)(1). “A claim under the FCA requires a
showing of: (1) a false statement or fraudulent course of
conduct, (2) made with scienter, (3) that was material,
causing (4) the government to pay out money or forfeit
moneys due.” Godecke v. Kinetic Concepts, Inc., 937 F.3d
1201, 1208 (9th Cir. 2019) (cleaned up).
    Plaintiffs designated the State of Nevada by the City of
Reno, the commonwealth of Virginia by the City of Norfolk,
the Calleguas Municipal Water District, the City of
Palmdale, and South Tahoe Public Utility District as
exemplar plaintiffs. Their claims arise under the Nevada
False Claims Act, Nev. Rev. Stat. § 357.040 (2007); the
Virginia Fraud Against Taxpayers Act, Va. Code Ann.
§ 8.01-216.3 (2007); and the California False Claims Act,
Cal. Gov’t Code § 12651 (West 2007). The courts in those
states treat federal FCA cases as precedential because their
statutes are modeled after the federal law. See, e.g.,
Simonian v. Univ. & Cmty. College Sys. of Nev., 128 P.3d
1057, 1060 (Nev. 2006); Lewis v. City of Alexandria, 756
S.E.2d 465, 479 n.4 (Va. 2014); City of Pomona v. Superior
Court, 107 Cal. Rptr. 2d 710, 716 (Ct. App. 2001). We do
the same.
   The district court bifurcated the trial, with the first phase
addressing falsity, materiality, and scienter—in short,
whether J-M violated the FCAs—and the second addressing
whether the plaintiffs suffered any damages as a result. In
            HENDRIX V. J-M MANUFACTURING CO., INC.           11

describing the Phase One issues, the bifurcation order stated
that plaintiffs had alleged that J-M had represented that “all
(not just some) J-M pipe satisfied . . . the various standards”
and that “all (not just some) of the pipe was manufactured in
a substantially identical manner to the pipe that was
originally determined to comply with the standards,” but that
J-M “manufactured or tested its pipe in a manner that did not
comply with the foregoing industry standards,” resulting in
plaintiffs having “no assurance that the pipe was made and
tested in the manner represented.”
    J-M moved for summary judgment before Phase One,
arguing that plaintiffs had no evidence that any individual
stick of pipe they received did not comply with industry
standards. The district court denied the motion because
plaintiffs “adduced evidence that, if believed, a rational trier
of fact could take to indicate that J-M’s practices essentially
systematically ran afoul of manufacturing and testing
requirements.”
                       II. Phase One
    After a seven-week Phase One trial, the jury returned a
unanimous verdict against J-M. For each of the twenty-six
projects at issue, the jury was asked: (1) whether J-M
presented or caused to be presented “a claim for payment or
approval that was false or fraudulent”; (2) whether J-M
“made or used a false record or statement in order to get a
false or fraudulent claim paid or approved by” the plaintiff;
(3) whether J-M acted “‘knowingly’ in regards to the false
or fraudulent claim”; (4) whether “the false or fraudulent
aspect of the claim” was “material to [the plaintiff’s]
decision-making”; and (5) to “identify/describe why the
claim was false and/or fraudulent.” The jury answered “yes”
to the first four questions for each project and described each
12            HENDRIX V. J-M MANUFACTURING CO., INC.

claim as false because “JM falsely represented uniform
compliance with AWWA [C900 and C905] and UL 1285.”
    J-M moved for JMOL, again arguing that there was no
evidence that any plaintiff “actually received pipe that
violated any of [the] standards.” 2 The district court denied
the motion.
                       III. Phase Two Trial
    Before the Phase Two trial, the district court clarified
that “the Phase One jury found a lack of a compliance based
on manufacturing and testing shortcomings. The Phase Two
jury will be charged with determining what effect, if any, this
lack of compliance had on Plaintiffs apart from influencing
their decision to buy the pipe in the first place.” The court
stated that (1) “the Phase One jury determined that [J-M’s]
piping did not uniformly comply with certain industry
standards,” (2) J-M’s “representations to that effect were
false,” and (3) its “misrepresenting compliance with the
standards was material.” The court stressed, however, that
“the Phase One jury did not make factual findings as to the
physical state of the pipe purchased by Plaintiffs, such as
reduced life span.”
    During the Phase Two trial, plaintiffs “attempted to
establish that the value of the pipe they received from J-M
during the 1996-2006 period was worth less than what they

2
  Although plaintiffs proffered evidence about various J-M pipe failures
during Phase One, the district court only allowed evidence of a single
incident in Reno, and plaintiffs do not challenge the court’s exclusion of
evidence about other failures on appeal. The Reno failure occurred
immediately after installation during a pressure test of the line. J-M
offered evidence that the contractor improperly performed post-
installation testing. J-M replaced the entire line of pipe at no cost to
Reno, and there have been no failures since.
            HENDRIX V. J-M MANUFACTURING CO., INC.          13

paid for it because it would not last as long as pipe that was
compliant with the three standards litigated in the Phase One
trial.” Because the Phase One jury found “that Plaintiffs
would not have bought pipe from J-M had they known that
statements of compliance were false,” plaintiffs also argued
that they were entitled to recover either the entire “contract
price” or the “total cost of replacing the offending pipe with
compliant pipe.” Plaintiffs also sought statutory penalties
for the stamps on each individual stick of pipe.
    To show actual damages, plaintiffs offered expert
testimony attempting to connect the industry standards with
expected longevity of PVC pipe. Although plaintiffs’
experts opined generally that the relevant test results “bear a
relationship to long-term strength and durability,” and that
any “sort of significant change in the . . . short-term
mechanical and strength properties is typically going to also
result in a change in the long-term strength,” none could
opine about “specific longevity in terms of years of a
particular pipe,” present a mathematical correlation between
these tests and longevity, or estimate a failure date for non-
compliant pipe.
    After the close of evidence, the district court found that
plaintiffs were not entitled to recover the costs of removing
and replacing the installed J-M pipes. The court also held
that the “stamping of each pipe with a C900/C905 mark
cannot serve as a basis to impose [ ] civil penalties” for each
stick of pipe under Nevada and Virginia law. The jury was
unable to reach a verdict on damages, and a mistrial was
declared.
14          HENDRIX V. J-M MANUFACTURING CO., INC.

             IV. Judgment as a Matter of Law
   After the mistrial, the district court granted J-M JMOL
on actual damages. It also granted J-M’s renewed Daubert
motions to strike the opinions of plaintiffs’ experts. 3
    The JMOL order rejected plaintiffs’ contention that they
were entitled to the full purchase price of the pipe because
that would “impose a strict liability standard for FCA actual
damages which would mean that, in every case, the losing
defendant would always be obligated to refund the contract
price regardless of any evidence of actual damages.” Rather,
quoting United States v. Science Applications International
Corp., 626 F.3d 1257, 1279 (D.C. Cir. 2010), the court said
that the full purchase price is the measure of damages “only
where the government proves that it received no value from
the product delivered.” The court rejected the contention
that the received pipe was “valueless,” finding no evidence
“that [plaintiffs] have removed or contracted for the
replacement of all (or any portion) of the J-M pipe in the
ground; and it is undisputed that they have not ceased the use
of that pipe and thereby have obtained, retained (for many
years), and continue to receive value from it.”
    The court also rejected plaintiffs’ argument that non-
compliant pipe was less valuable than compliant pipe
because it would “fail early,” noting that plaintiffs failed to
establish a “usable longevity figure” for either compliant
pipe or non-compliant pipe. The court also noted the
absence of industry consensus on how long PVC pipe is
expected to last and concluded that compliance with the

3
    J-M’s pre-trial challenges under Daubert v. Merrell Dow
Pharmaceuticals, Inc., 509 U.S. 579 (1993), to the proposed expert
testimony were denied.
            HENDRIX V. J-M MANUFACTURING CO., INC.          15

AWWA and UL standards does not “result in any specific
longevity figures for the compliant PVC pipe.” The court
held that, even if their testimony were credited, plaintiffs’
experts “still failed to proffer sufficient evidence” to show a
measurable reduction in pipe longevity. Absent evidence to
“show the difference in terms of longevity between
compliant PVC pipe and non-compliant PVC pipe,” the
court saw “no way for a reasonable jury to reach an amount
for actual damages in this case.”
    But the court also struck the expert testimony concerning
longevity, focusing on the four Daubert factors concerning
the reliability of a methodology: (1) “whether it can be (and
has been) tested”; (2) “whether the theory or technique has
been subjected to peer review and publication”; (3) “the
known or potential rate of error and the existence and
maintenance of standards controlling the technique’s
operation”; and (4) “general acceptance,” noting that “a
known technique which has been able to attract only
minimal support within the community may properly be
viewed with skepticism.” Daubert, 509 U.S. at 593–94
(cleaned up).
   JURISDICTION AND STANDARD OF REVIEW
    The district court had jurisdiction over the federal claims
in the operative fifth amended complaint under 28 U.S.C.
§ 1331 and over the state claims under 31 U.S.C. § 3732(b).
The district court’s final judgment was timely appealed by
plaintiffs, and cross-appealed by J-M. We have jurisdiction
under 28 U.S.C. § 1291. We “review de novo the granting
of a motion for JMOL” and “must review all of the evidence
in the record, drawing all reasonable inferences in favor of
the non-moving party.” City Sols. Inc. v. Clear Channel
Commc’ns, Inc., 365 F.3d 835, 839 (9th Cir. 2004).
16         HENDRIX V. J-M MANUFACTURING CO., INC.

                       DISCUSSION
                   I. Phase One Verdict
     J-M argues that the Phase One verdict cannot stand
because plaintiffs failed to show that any individual stick of
pipe that they received did not comply with industry
standards. J-M also asserts that the industry standards do not
require “that all J-M pipe had to be exactly the same as the
pipe material submitted for testing” and that it was “not
uncommon” for some certified pipe manufactured after
initial testing to fail to meet industry standards.
    The district court correctly rejected these arguments. As
an initial matter, given the evidence that J-M’s success rate
on the HDB test for AWWA certification was below 50%
and that by 2006, none of its facilities was producing pipe
that met UL standards, a reasonable jury could surely
conclude that plaintiffs received some pipe not meeting
industry standards.
    But more importantly, J-M misconstrues plaintiffs’
claim. It is not that J-M occasionally produced pipe that was
not “exactly the same” as the pipe originally tested. Rather,
plaintiffs assert that J-M knew that it had stopped producing
pipes through processes materially similar to those used at
the time of compliance testing—something required by
industry standards to claim continued compliance—and also
knew that a significant amount of the pipe later produced did
not in fact meet industry standards. And they contend that
they would not have purchased or installed J-M pipe had
they been told the truth. Plaintiffs’ representatives so
testified, and the Phase One jury reasonably so found.
    J-M’s argument about scienter is similar: because
plaintiffs could not prove that any individual stick of pipe
           HENDRIX V. J-M MANUFACTURING CO., INC.         17

that they received was non-compliant, they also cannot show
that J-M knowingly lied. J-M also argues that because the
industry standards do not forbid “occasional non-
compliance,” its claims of compliance therefore could not
have been knowingly false.
    These arguments fail for the same reason as J-M’s
contentions about falsity. The industry standards do not
require that every stick of pipe be tested to ensure
compliance, but they do require manufacturers to continue
producing product with materially similar processes as those
used when the pipe was first certified before claiming
continued compliance. There was ample evidence not only
that J-M knew that its processes had materially changed but
also that its pipe could no longer pass the tests.
                  II. Statutory Penalties
    For each violation of the state FCAs, the district court
was authorized to impose a statutory penalty. See Nev. Rev.
Stat. § 357.040(2) (2007); Va. Code Ann. § 8.01-216.3(A)
(2007); Cal. Gov’t Code § 12651(a) (West 2007). The
district court awarded one penalty for each of the twenty-six
projects at issue. Plaintiffs concede that the California FCA
allows only one penalty per project. Cal. Gov’t Code
§ 12651(a) (West 2007). But they argue that because the
Nevada and Virginia FCAs—like the federal FCA, 31
U.S.C. § 3729(a)(1)—impose a penalty for each act in
violation of the statute, see Nev. Rev. Stat. § 357.040(2)
(2007); Va. Code Ann. § 8.01-216.3(A) (2007), the stamp on
each piece of pipe indicating compliance should give rise to
a separate penalty. Plaintiffs also argue that because the
Phase One jury found that J-M made false statements in its
brochures and those statements were materially identical to
18           HENDRIX V. J-M MANUFACTURING CO., INC.

the stamps, it necessarily found that each of the stamps were
false.
    The district court did not err in awarding only one
penalty per project. The Phase One jury’s finding of falsity
and materiality did not mean that every stick of pipe was
non-compliant. That jury found only that J-M did not
uniformly comply with industry standards and could have
delivered some non-compliant pipe. Plaintiffs did not
establish how much non-compliant pipe they received nor
were they able to identify any specific piece of non-
compliant pipe.
     The Supreme Court has held that collusive bidding on
fifty-six projects gave rise to only fifty-six FCA penalties,
not one “for every form submitted by respondents in the
course of their enterprise.” United States ex rel. Marcus v.
Hess, 317 U.S. 537, 552 (1943), superseded by statute on
other grounds, Act of Dec. 23, 1943, 57 Stat. 609. Our cases
are in accord. See United States v. Woodbury, 359 F.2d 370,
378 (9th Cir. 1966) (holding that documents attached to
applications for funds do not give rise to separate penalties);
United States v. Nat’l Wholesalers, 236 F.2d 944, 950 (9th
Cir. 1956) (holding that when seventeen invoices were
attached to ten vouchers for payment, “the number of claims
should be computed on the number of vouchers rather than
the number of invoices”). 4 Similarly, when determining

4
  Numerous out-of-Circuit cases are to the same effect. See, e.g., United
States v. Grannis, 172 F.2d 507, 515–16 (4th Cir. 1949) (holding that
only the “ten vouchers covering the fictitious claims” constituted
violations and not the 130 schedules attached to the vouchers); United
States v. Rohleder, 157 F.2d 126, 127, 130–31 (3d Cir. 1946) (holding
that a penalty was appropriate for the fraud associated with respect to
each of sixteen contracts but not for each of the ninety purchase orders
submitted with the contracts); Miller v. United States, 550 F.2d 17, 23–
              HENDRIX V. J-M MANUFACTURING CO., INC.                       19

penalties for false claims associated with goods, courts
applying the federal FCA have awarded penalties based on
the number of contracts or invoices but not on each good.
See, e.g., United States v. Bornstein, 423 U.S. 303, 311–13
(1976) (awarding three penalties for three separately
invoiced shipments rather than a penalty for each falsely
marked tube); see also United States v. Aerodex, Inc., 469
F.2d 1003, 1011 (5th Cir. 1972) (awarding a penalty for each
of three invoices but not for each of the mislabeled bearings).
The district court thus did not err in declining to award a
statutory penalty for the stamp on each piece of pipe. 5

24 (Ct. Cl. 1977) (agreeing with the Ninth Circuit’s decision in
Woodbury); BMY—Combat Sys. Div. of Harsco Corp. v. United States,
44 Fed. Cl. 141, 150 & n.4 (1998) (holding that “false records in support
of [ ] false claims . . . do not equate to separate penalties when the records
and the claim support the same false demand for money” (cleaned up)).
5
  It has long been settled that a statutory penalty may be imposed for
violation of the federal FCA even absent proof of actual damages. See,
e.g., Rex Trailer Co. v. United States, 350 U.S. 148, 152–53 (1956)
(citing United States ex rel. Marcus v. Hess, 317 U.S. 537 (1943)); Bly-
Magee v. California, 236 F.3d 1014, 1017 (9th Cir. 2001) (“[A] qui tam
plaintiff need not prove that the federal government will suffer monetary
harm to state a claim under the FCA.”); United States ex rel. Hagood v.
Sonoma Cnty. Water Agency, 929 F.2d 1416, 1421 (9th Cir. 1991) (“No
damages need be shown in order to recover the penalty.”); see also
Rohleder, 157 F.2d at 127 (affirming the award of penalties where “[t]he
government offered no evidence of actual damage at the trial and sought
only to recover the statutory forfeitures”).
   FCA plaintiffs who cannot prove actual damages do not lack
Article III standing under the rule in TransUnion LLC. v. Ramirez, 141
S. Ct. 2190 (2021). The common law provides a cause of action for fraud
to the target of a material misrepresentation made with scienter. There
is an obvious close relationship between a FCA cause of action and
common law fraud. See id. at 2208; see also Vt. Agency of Nat. Res. v.
United States ex rel. Stevens, 529 U.S. 765, 781 n.10 (2000) (noting “that
20           HENDRIX V. J-M MANUFACTURING CO., INC.

                      III. Actual Damages
    The federal FCA imposes not only penalties but also
liability for “the amount of damages which the Government
sustains because of the” false claim. 31 U.S.C. § 3729(a)(1).
FCA plaintiffs must “prove all essential elements of the
cause of action, including damages, by a preponderance of
the evidence.” 31 U.S.C. § 3731(d). The proper measure of
damages when a “defendant agreed to provide goods or
services to the government, . . . is the difference between the
value of the goods or services actually provided by the
contractor and the value the goods or services would have
had to the government had they been delivered as promised.”
Sci. Applications Int’l Corp., 626 F.3d at 1278.
                                  A.
    Plaintiffs contend that because they would not have
bought the pipe had they known the truth, their damages are
the “entire amount paid.” The district court correctly
rejected this theory because it would “impose a strict liability
standard” under which J-M would “be obligated to refund
the contract price regardless of any evidence of actual
damages” and because it conflates “the materiality element
of the FCA claim” with “actual damages.”
    Plaintiffs also argue that they “bargained for the
confidence that comes from compliance with industry
standards; they did not receive it, and so they did not receive
what they bargained for at all.” But in the cases that they
cite, the goods were either plainly unusable, not used, or
returned.

the FCA was intended to cover all types of fraud” (emphasis omitted)).
And, both the common law and statutory actions are designed to address
the same injury: reliance on an intentional, material misrepresentation.
              HENDRIX V. J-M MANUFACTURING CO., INC.                   21

    United States ex rel. Compton v. Midwest Specialties,
Inc., 142 F.3d 296 (6th Cir. 1998), involved a contract
between Midwest and the U.S. Army for jeep brake-shoe kits
that had undergone specified quality-assurance testing,
which Midwest failed to conduct. Id. at 297–98. When the
brakes failed, the Army tested a sample of the kits and found
that 78% and 60% of the brake shoes failed the contracted-
for quality-assurance tests. Id. at 298. In response, the Army
removed all Midwest brake shoes from its jeeps. Id. The
court awarded the full contract price as damages, finding that
the “the brake shoe kits delivered . . . were completely
valueless” and stressing that “all Midwest-manufactured
jeep brake shoes were taken out of service and placed in
storage.” Id. at 304.
    In United States v. Aerodex, Inc., 469 F.2d 1003 (5th Cir.
1972), the Fifth Circuit held that the proper measure of
damages was the full contract price, $27,000, when Aerodex
contracted to sell one type of bearing, P/N 171815, to the
Navy and instead delivered an interchangeable bearing,
which it had reworked to be indistinguishable from the P/N
171815. Id. at 1007, 1011. Upon learning about the deceit,
the Navy removed and replaced the installed bearings. Id. at
1006. 6
   Here, plaintiffs’ pipe has not failed to operate as
promised, and there is no evidence that an actual failure is

6
  Similarly, in FTC v. Figgie International, Inc., 994 F.2d 595 (9th Cir.
1993) (per curiam), a case brought under the Federal Trade Commission
Act, the Court held that consumers could either keep the products at issue
or “return[ ] them for refunds.” Id. at 606.
22            HENDRIX V. J-M MANUFACTURING CO., INC.

imminent or even likely. 7 Nor has the pipe been returned;
indeed, it remains in use today.
     Plaintiffs also cite United States v. Mackby, 339 F.3d
1013 (9th Cir. 2003), to argue that when the evidence shows
that the defendant lied about a fact that would have
prevented the government from paying for a product or
service had it known the truth, the damages include the entire
amount paid even if the defendant provided a valuable
product or service. See id. at 1018–19. But that case is easily
distinguished. In Mackby, a layperson who ran a physical
therapy clinic used his father’s Medicare personal
identification number to charge the government for services.
Id. at 1015. However, Medicare can pay for physical therapy
only if provided by a certified therapist. Id. at 1014 (citing
42 C.F.R. § 410.60(a) (1996)). Because Mackby lacked
such certification, the United States was legally barred from
paying anything for his service. Id. at 1017. 8 In contrast,
plaintiffs were not legally constrained from paying for non-
compliant pipe.
                                   B.
    Plaintiffs also contend that the pipe they received had no
value, or indeed a “negative value,” because “the risk of

7
  Although Reno experienced a failure immediately after installation, it
occurred during testing—not during normal operation—and the pipe was
replaced. See supra n.2.
8
  The same is true for the other Medicare cases plaintiffs cite. See Yates
v. Pinellas Hematology & Oncology, P.A., 21 F.4th 1288, 1295 (11th
Cir. 2021); United States ex rel. Drakeford v. Tuomey, 792 F.3d 364,
370–71 (4th Cir. 2015); United States v. Rogan, 517 F.3d 449, 451–53
(7th Cir. 2008).
            HENDRIX V. J-M MANUFACTURING CO., INC.          23

premature pipe failure and the cost of replacement dwarfed
any value obtained through some period of use of that pipe.”
    In general, a “jury may make a just and reasonable
estimate of the damage based on relevant data” and is
“allowed to act on probable and inferential as well as (upon)
direct and positive proof.” Bigelow v. RKO Radio Pictures,
Inc., 327 U.S. 251, 264 (1946) (cleaned up). However, “the
jury may not render a verdict based on speculation or
guesswork,” “even where the defendant by his own wrong
has prevented a more precise computation.” Id. And,
although FCA damages “need not be calculated by
mathematical precision,” United States v. Killough, 848 F.2d
1523, 1531 (11th Cir. 1988), FCA plaintiffs must still
present some evidence to establish the difference in value
between the goods as actually provided and as promised, see
Sci. Applications Int’l Corp., 626 F.3d at 1278. See also
United States v. Collyer Insulated Wire Co., 94 F. Supp. 493,
498–99 (D.R.I. 1950) (awarding only statutory damages
when the rate of non-compliance was established for less
than one-third of the contracted-for wire, none of the wire
was returned, and there were no complaints as to its quality).
     Even if the testimony of their experts is credited,
plaintiffs did not provide evidence from which a jury could
reasonably determine the value of the pipe that they
received. The district court correctly noted that the pipe
clearly had value because plaintiffs have received years, if
not decades, of use from it. And to establish damages based
on a “risk of premature pipe failure,” plaintiffs were required
to provide at least an approximation of how much non-
compliant pipe was received, whether that pipe was in fact
inferior in longevity to compliant pipe, and some measure of
its longevity. They failed to do so.
24         HENDRIX V. J-M MANUFACTURING CO., INC.

    Nor do any of the plaintiffs’ contracts have a
specification about longevity. The AWWA and UL
standards do not contain any estimate of longevity, and the
certification tests are not intended to measure long-term
performance. Plaintiffs assumed that there was an industry
expectation that PVC pipe will last at least 100 years,
although they also presented estimates of 50 and 150 years.
But J-M’s express warranty for its pipe was one year, the
industry standard at the time. And PVC pipes have only
been used in civic water systems since the 1950s, and
industry standards were not developed until the 1960s, so no
PVC pipes—compliant or not—have yet been in use for 100
years. More importantly, as the district court noted,
plaintiffs’ experts “merely assume [100 years] for purposes
of this litigation.”
    Even accepting 100 years as the expected longevity of
compliant pipe, there was no evidence that noncompliance
with industry standards calculably correlated to a loss of
longevity. Plaintiffs’ experts conducted no experiments or
studies to ascertain the relationship between the standards
and longevity, nor could they point to studies or reports by
others. Nor did they articulate any damages figure arising
from non-compliance with the three standards at issue.
    In any event, plaintiffs do not challenge on appeal the
district court’s eventual Daubert ruling excluding their
experts’ opinions. Absent that testimony, there was no basis
at all for a finding as to decreased longevity.
                             C.
    Plaintiffs are also not entitled to seek recovery for the
cost of replacing all their J-M pipe. We need not today
resolve the parties’ debate about whether replacement costs
             HENDRIX V. J-M MANUFACTURING CO., INC.                 25

are recoverable under the FCA. 9 Plaintiffs have not replaced
any pipe nor provided sufficient evidence that any of the pipe
that they received will not last as long as compliant pipe, so
no matter how replacement costs are categorized, the district
court was correct not to award them.
                                  D.
    We also reject plaintiffs’ argument that the district
court’s JMOL on actual damages conflicts with the Phase
One jury’s findings. As the district court correctly noted,
“the Phase One jury did not make factual findings as to the
physical state of the pipe purchased by Plaintiffs, such as
reduced life span.”
                         CONCLUSION
    The district court did not err in finding that J-M violated
the relevant state FCAs and in awarding only one statutory
penalty for each project at issue. We therefore AFFIRM.

9
  Compare Bornstein, 423 U.S. at 313–14 (permitting recovery for “the
per unit cost to replace” the misrepresented good), with Cook County v.
United States ex rel. Chandler, 538 U.S. 119, 131 & n.9 (2003) (noting
that the FCA does not “provide for the consequential damages that
typically come with recovery for fraud” because the “treble damages
provision” serves “as a substitute for consequential damages” (emphasis
added)).