United States v. TOYOBO CO. LTD
1:07-cv-01144
D.D.C.Jul 14, 2017Background
- Toyobo manufactured Zylon fiber and, beginning in 1995, promoted its high tensile strength to U.S. agencies; Second Chance (and other manufacturers) used Zylon in vests sold to the U.S. via GSA MAS and to state/local agencies via the BPVGPA.
- By mid-2001 Toyobo’s internal testing showed Zylon strength degradation under heat/humidity; December 2001 reports implicated residual phosphoric acid and noted ~7% loss in under two years for some Second Chance vests.
- Toyobo sent periodic, largely non‑urgent letters to customers and federal scientists from 2001–2005 that downplayed severity and cause; it did not fully disclose its December 2001 findings.
- Second Chance added a 6% “catalog guarantee” and sought a 2002 GSA MAS contract modification; other manufacturers’ contracts lacked that 6% guarantee but contained warranties and NIJ-related assurances.
- The United States brought FCA and common‑law claims (fraud, unjust enrichment) based on four theories: factual falsity, express false certification, implied false certification, and fraudulent inducement; summary judgment rulings narrowed which theories survived.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope/timing of Toyobo fraud | Toyobo’s nondisclosure of 2001 testing (heat/humidity degradation, phosphorus cause) fraudulently induced GSA and BPV purchases beginning July 2001 | No legal duty to disclose to GSA; Stoker declarations irrelevant; fraud cannot be earlier than March 2001 or only applies to Second Chance 2002 modification | Court: Earliest fraud date is July 2001; Toyobo had duty to disclose partial, misleading disclosures and omissions create genuine issues for trial |
| Reliance/materiality (fraudulent inducement) | GSA would have tested/removed Zylon vests if it had received Toyobo’s full data; Stoker declarations attest reliance and materiality | Defendants: GSA relied only on price/warranty and never had Toyobo statements in contracting files; no proof of actual reliance | Court: Stoker declarations create triable issues of materiality/reliance; deny summary judgment on fraudulent inducement as to GSA MAS and BPVGPA |
| Express/implied false certification under FCA (GSA MAS) | Multiple contract clauses and extra‑contractual assurances (warranty, workmanship, new materials, NIJ, protective properties, 6% catalog guarantee) imposed durability requirements | Only Second Chance’s 6% catalog language could plausibly impose durability; other clauses do not guarantee five‑year durability | Court: Limits express and implied FCA claims to alleged breach of Second Chance’s 6% catalog guarantee as a durability term; other clauses/assurances do not support FCA certification claims |
| Claims surviving to trial | United States seeks broad FCA/common law recovery against Toyobo and manufacturers | Defendants sought summary dismissal of many theories and time periods | Court: Surviving claims for trial — common law fraud & unjust enrichment (all defendants, BPV & GSA), FCA fraudulent inducement (all defendants, BPV & GSA), and FCA express/implied certification limited to Second Chance’s 6% catalog guarantee under GSA MAS |
Key Cases Cited
- United States ex rel. Westrick v. Second Chance Body Armor Inc., 128 F. Supp. 3d 1 (D.D.C. 2015) (prior summary judgment opinion resolving multiple FCA theories)
- United States v. Toyobo Co., Ltd., 811 F. Supp. 2d 37 (D.D.C. 2011) (earlier ruling on dismissal issues)
- Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016) (materiality in implied‑false‑certification FCA claims)
- United States ex rel. Bettis v. Odebrecht Contractors of Cal., Inc., 393 F.3d 1321 (D.C. Cir. 2005) (fraud in procurement/inducement liability under FCA)
- United States ex rel. Marcus v. Hess, 317 U.S. 537 (1943) (third‑party assistance in causing government to pay claims rooted in fraud)
- Astoria Fed. Sav. & Loan Ass'n v. Solimino, 501 U.S. 104 (1991) (use of established common‑law principles to interpret statutory terms)
- Schindler Elevator Corp. v. United States ex rel. Kirk, 563 U.S. 401 (2011) (statutory interpretation/context for FCA and related doctrines)
- D'Agostino v. ev3, Inc., 845 F.3d 1 (1st Cir. 2016) (fraudulent inducement requires causation showing)
- Keaveney v. SRA Int’l, Inc., 219 F. Supp. 3d 129 (D.D.C. 2016) (fraudulent inducement and initial false representations under FCA)