United States v. First Choice Armor & Equipment, Inc.
808 F. Supp. 2d 68
D.D.C.2011Background
- The government sues First Choice Armor & Equipment, Inc. and related entities over sale of Zylon-based vests and related payments.
- First Choice allegedly knew Zylon degraded and failed to disclose this, despite warnings to add protective layers and despite marketing still touting protection and thinness.
- First Choice participated in BPVGPA program and also sold vests to federal and state/local/tribal buyers with government reimbursements up to 50%.
- First Choice ceased selling 100% Zylon vests in 2004 and all Zylon vests in 2005 after the investigation began; funds were later moved to purchase luxury items by Dovner and Herman.
- The government asserts FCA Counts for presenting false claims and false statements, plus common-law claims (breach of contract, payment by mistake, unjust enrichment) and fraudulent conveyances under the FDCPA.
- Defendants moved to dismiss under Rule 12(b)(6) and 12(b)(1); the court addresses sufficiency of FCA and conveyance claims and relation to contract-based claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| FCA falsity: whether claims were factually or legally false | First Choice knowingly billed for compliant vests under warranty. | Allegations do not show factually false invoicing or express warranty violations. | FCA claims plausibly pled as implied certification. |
| FCA false statements: viability of § 3729(a)(1)(B) post-FERA | Counts plead false statements used to obtain payment; retroactivity not fatal. | Post-June 7, 2008 text cannot apply to pre-2009 conduct; mislabeling warrants dismissal. | False statements claim adequately pled under amended/unamended provisions; notice given. |
| Equitable claims vs. express contract: whether unjust enrichment and payment-by-mistake claims survive where an express contract exists | No express contract for BPVGPA purchases, so equitable claims survive there. | Express contract exists for GSA/direct purchases; unenforceable otherwise. | Dismissed for GSA/direct purchases; allowed for BPVGPA purchases; unjust enrichment as to Dovner/Herman survives where no express contract is alleged. |
| Fraudulent conveyances: sufficiency of debt, particularity under FDCPA | Defendants incurred debts related to FCA claims; transfers improper and deceptive. | Lack of debt or lack of particularity; information and belief insufficient. | Debt properly alleged; particularity satisfied for conveyance claims. |
| Subject-matter jurisdiction: CDA exclusivity vs. fraud exception for breach of contract claim | Breach claim intertwined with FCA fraud; no CDA bar due to fraud exception. | CDA preempts breach claims against the United States absent fraud exception. | CDA does not bar breach of contract claim where fraud-based allegations exist; jurisdiction preserved. |
Key Cases Cited
- United States ex rel. Totten v. Bombardier Corp., 380 F.3d 488 (D.C. Cir. 2004) (a(a)(2) liability extends to those who prepare false records even if not submitted to government)
- United States v. Honeywell Int'l Inc., 798 F. Supp. 2d 12 (D.D.C. 2011) (materiality and implied certifications in FCA analysis)
- SAIC I, 555 F. Supp. 2d 40 (D.D.C. 2008) (initial framework for factually vs. legally false claims; implication for certification)
- SAIC III, 626 F.3d 1257 (D.C. Cir. 2010) (implied certification theory and materiality refined)
- Purcell v. MWI Corp., 254 F. Supp. 2d 69 (D.D.C. 2003) (Rule 8 allows alternatives; no unjust enrichment where express contract exists)
- United States ex rel. Barrett v. Columbia/HCA Healthcare Corp., 251 F. Supp. 2d 28 (D.D.C. 2003) (implied certification of compliance as fraud theory)
- Thompson v. Fathom Creative, Inc., 626 F. Supp. 2d 48 (D.D.C. 2009) (pre-discovery motions; fault lines in contract scope)