United States v. Second Chance Body Armor Inc.
128 F. Supp. 3d 1
| D.D.C. | 2015Background
- Government sued Second Chance, Toyobo, and individuals under the False Claims Act (FCA) and common law, alleging Zylon-containing body armor degraded unpredictably and that defendants concealed or misrepresented that degradation in sales to federal agencies.
- Two procurement streams at issue: (1) purchases via the GSA Multiple Award Schedule (MAS), including contract modifications in 1998 and a 2002 modification that incorporated Second Chance catalog materials; and (2) state/local purchases later partially reimbursed by the federal Bulletproof Vest Grant Partnership Act (BPVGPA).
- Key contested contract terms: Second Chance’s standard five-year commercial warranty, a workmanship/new-material clause, and a 6% V-50 performance guarantee appearing in the Second Chance catalog (incorporated after the 2002 modification).
- Government’s theories: factual falsity (defective goods), express and implied legal falsity (false certifications / withholding noncompliance with material contract terms), and fraudulent inducement (market misrepresentations induced purchases or contract modifications).
- Court held genuine disputes of material fact exist about post-2002 MAS sales and about whether Toyobo disseminated false market information affecting BPVGPA reimbursements; granted defendants summary judgment as to MAS vests sold before the 2002 modification; denied government summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Were GSA MAS invoices "factually false" because vests were defective? | Invoicing for vests that did not meet promised performance is factual falsity. | No: government received vests; dispute is about compliance with contract terms, not non-delivery. | Factual-falsity theory rejected for MAS counts; dispute characterized as legal falsity. |
| Did contractual terms (warranty, workmanship, new-material clause, 6% catalog guarantee) create express false-certification liability for MAS sales? | These terms created an explicit durability/performance obligation for five years; defendants knew vests would not meet it. | Warranty language does not guarantee perfect performance for five years; clauses do not impose the durability requirement alleged. | For vests sold pre-2002 (before catalog incorporation): defendants entitled to judgment (no express FCA liability). For vests sold post-2002 (catalog incorporated): ambiguity exists as to whether 6% guarantee imposed a durability obligation — jury issue; summary judgment denied. |
| Can the government proceed under an implied-certification theory for MAS claims? | Invoices impliedly certified compliance with material contract requirements (including durability/6% guarantee); withholding of noncompliance supports FCA liability. | Materiality and the existence of a durability requirement are disputed; no undisputed showing payment was conditioned on such compliance. | Whether a material contractual requirement imposing durability exists is disputed for post-2002 claims; implied-certification claim survives summary judgment for those vests. |
| Do BPVGPA reimbursements support FCA liability via fraudulent inducement or market dissemination by Toyobo? | Toyobo allegedly disseminated misleading/deceptive data and assurances about Zylon, causing agencies to buy vests later reimbursed by the federal program. | Toyobo contends only NIJ certification/reliance mattered and it did not make representations to the federal government that induced reimbursements; no direct contract with federal government. | Genuine factual disputes exist about whether Toyobo disseminated false market information and whether reimbursements were induced by such misinformation; Toyobo’s BPVGPA motion denied. |
Key Cases Cited
- United States v. Toyobo Co. Ltd., 811 F. Supp. 2d 37 (D.D.C. 2011) (discussing falsity standards and prior motions to dismiss)
- Sci. Applications Int'l Corp. v. [authority], 626 F.3d 1257 (D.C. Cir. 2010) (implied-certification test requiring withholding information about noncompliance with material contractual requirements)
- United States v. Bornstein, 423 U.S. 303 (1976) (express false certification where goods misrepresented to fail contract specs)
- United States v. National Wholesalers, 236 F.2d 944 (9th Cir. 1956) (counterfeit/regulatory mislabeling as fraud on government)
- United States ex rel. Bettis v. Odebrecht Contractors of Cal., Inc., 393 F.3d 1321 (D.C. Cir. 2005) (fraud-in-the-inducement theory under FCA)
- United States ex rel. Marcus v. Hess, 317 U.S. 537 (1943) (FCA liability for participants who caused the government to pay claims grounded in fraud despite no direct contract)
- Walsh v. Ford Motor Co., 588 F. Supp. 1513 (D.D.C. 1984) (limited warranty interpretation: warranty obligates repair/replace for defects discovered during warranty period; does not impose latent-durability guarantee)