First Choice Armor & Equip., Inc. v. Toyobo Am., Inc.

• Court: U.S. District Court — District of Massachusetts
• Writing for the Court: GORTON
• Citation: First Choice Armor & Equip., Inc. v. Toyobo Am., Inc., 839 F.Supp.2d 407 (D. Mass. 2012)
• Decision Date: 17 February 2012
• Docket Number: Civil Action No. 09–11380–NMG.
• Parties: FIRST CHOICE ARMOR & EQUIPMENT, INC., Plaintiff, v. TOYOBO AMERICA, INC. and Toyobo Co., Ltd., Defendants.

839 F.Supp.2d 407

FIRST CHOICE ARMOR & EQUIPMENT, INC., Plaintiff,

v.TOYOBO AMERICA, INC. and Toyobo Co., Ltd., Defendants.

Civil Action No. 09–11380–NMG.

United States District Court, D. Massachusetts.

Feb. 17, 2012.

David M. Cohen, W. Pitts Carr, Emory Palmer, Carr, Tabb & Pope, LLP, Atlanta, GA, Benjamin McCracken, James Parks, Mark Cooper, Jaffe, Raitt, Heuer and Weiss, Southfield, MI, Matthew C. Welnicki, Melick, Porter & Shea, LLP, Michael S. Appel, Sugarman, Rogers, Barshak & Cohen, P.C., Boston, MA, for Plaintiff.

Stephen Gibbons, Eric C. Lyttle, Michael Lyle, Weil, Gotshal & Manges, LLP, Washington, DC, Christopher D. Barraza, David Singh, Jed P. Winer, Jeremy T. Grabill, Keith B. Gibson, Konrad L. Cailteux, Natalie Blazer, Weil, Gotshal & Manges LLP, New York, NY, Patrick J. O'Toole, Jr., Thomas C. Frongillo, Weil, Gotshal & Manges, Boston, MA, for Defendants.

MEMORANDUM & ORDER

GORTON, District Judge.

This action arises from allegations of breach of warranty, fraud and deceptive acts and practices related to the sale of Zylon® fiber used in the manufacture of (purportedly) bulletproof vests.

I. Factual background

Between 2000 and 2005, Toyobo Co., Ltd. (“Toyobo Co.”), a Japanese corporation, and its North American subsidiary, Toyobo America, Inc. (“Toyobo America”), a New York corporation, manufactured and sold Zylon® fiber to various third-party weaving companies who, after converting it into woven ballistic fabric, sold that fabric to body armor manufacturers for use in bullet-proof vests. During that period, plaintiff First Choice Armor & Equipment (“First Choice”), a body armor manufacturer, purchased woven Zylon® fabric from Lincoln Fabrics (“Lincoln Fabrics”), a third-party weaving company to whom Toyobo supplied Zylon® fiber. For a time, business was booming and profits were high.

That all changed when, in the Summer of 2003, one police officer was killed and another was injured after bullets penetrated their Zylon® body armor in the line of duty. The shootings prompted a multi-year investigation into Zylon® body armor by the National Institute of Justice (“NIJ”), the federal agency responsible for testing and promulgating performance standards for body armor. In one ballistics test, over 58% of used Zylon® vests tested were penetrated by at least one round during a six-shot series. On August 24, 2005, the NIJ published its findings which revealed that Zylon® vests degrade at an unacceptable rate thereby preventing them from providing a safe level of ballistic resistance. The NIJ immediately revoked safety compliance certificates for Zylon® body armor and prohibited the future sale of all such armor in the United States.

II. Procedural history

On August 18, 2009, First Choice brought suit against Toyobo Co. and Toyobo America (collectively, “Toyobo”) alleging that the companies engaged in a pattern and practice of intentionally misrepresenting the quality, condition, safety and suitability of Zylon® and the vests in which it is used. According to First Choice, Zylon® degrades as a result of over-neutralization, the nature of the weaving process and exposure to light, heat and moisture. Despite allegedly knowing about those defects, Toyobo continued to manufacture, sell and promote Zylon® for ballistic protection applications. Those alleged misrepresentations and omissions include, inter alia, failing to disclose that Zylon® substantially degrades over time, falsifying the results of internal studies to cover up that degradation and representing that Zylon® was “the safest, lightest and best bullet resistant fiber available in the world” despite known information to the contrary.

The Amended Complaint asserts claims for breach of express warranty (Count I), breach of implied warranty (Count II), fraud (Count III), fraudulent inducement (Count IV) and unfair and deceptive trade practices in violation of M.G.L. ch. 93A (Count V). First Choice requests damages exceeding $8 million to compensate it for 1) costs associated with the recall and replacement of Zylon® vests, 2) litigation expenses incurred in defending against a federal probe into its use of Zylon® vests and 3) lost profits and damage to its business reputation.

On September 14, 2009, and December 1, 2009, Toyobo America, Inc. and Toyobo Co., Ltd., respectively, moved to dismiss the Amended Complaint on an assortment of grounds. Toyobo asserted, inter alia, that plaintiff failed to plead its claims with particularity, that such claims were time-barred and that Toyobo did not owe a duty to provide information about Zylon®. On May 25, 2010, 717 F.Supp.2d 156 (D.Mass.2010), the Court denied defendants' motions to dismiss.

On June 3, 2011, defendants filed a motion for summary judgment and motions to exclude the testimony of plaintiff experts Alan Lesser, Donald McLemore and Carter Lord. On that same date, plaintiff filed a motion for partial summary judgment. Those motions have been opposed and are currently pending before the Court.

III. Summary Judgment MotionsA. Standard

The role of summary judgment is “to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial.” Mesnick v. Gen. Elec. Co., 950 F.2d 816, 822 (1st Cir.1991) (quoting Garside v. Osco Drug, Inc., 895 F.2d 46, 50 (1st Cir.1990)). The burden is on the moving party to show, through the pleadings, discovery and affidavits, “that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c).

A fact is material if it “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). “Factual disputes that are irrelevant or unnecessary will not be counted.” Id. A genuine issue of material fact exists where the evidence with respect to the material fact in dispute “is such that a reasonable jury could return a verdict for the nonmoving party.” Id.

Once the moving party has satisfied its burden, the burden shifts to the non-moving party to set forth specific facts showing that there is a genuine, triable issue. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The Court must view the entire record in the light most favorable to the non-moving party and indulge all reasonable inferences in that party's favor. O'Connor v. Steeves, 994 F.2d 905, 907 (1st Cir.1993). Summary judgment is appropriate if, after viewing the record in the nonmoving party's favor, the Court determines that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law.B. Application

Toyobo moves for summary judgment on the grounds that all of plaintiff's claims are time-barred and that plaintiff's breach of warranty claims are legally insufficient because First Choice has failed to establish the requisite privity between the parties. First Choice, in turn, moves for partial summary judgment on its breach of warranty and Chapter 93A claims on the ground that the undisputed facts entitle it to judgment as a matter of law on those counts.

1. Breach of warranty (Counts I and II)

According to Toyobo, First Choice has failed to establish the requisite privity between the parties to support its breach of warranty claims because it purchased Zylon® fiber and fabric from Lincoln Fabrics, a third-party weaving company, and not directly from Toyobo. First Choice responds that it need not establish privity of contract because the parties were engaged in a significant business relationship.

First Choice cites the right rule but in the wrong context. The cases First Choice references establish the rule, not applicable to breach of warranty claims, that contractual privity is not required for Chapter 93A claims “so long as the parties are engaged in more than a minor or insignificant relationship.” E.g., Baker v. Goldman Sachs & Co., 656 F.Supp.2d 226, 239 (D.Mass.2009).

Breach of warranty claims are governed by a different standard. Section 2–318 of the UCC provides, in relevant part:

Lack of privity between plaintiff and defendant shall be no defense in any action brought against the manufacturer, seller, lessor or supplier of goods to recover damages for breach of warranty, express or implied, or for negligence, although the plaintiff did not purchase the goods from the defendant if the plaintiff was a person whom the manufacturer, seller, lessor or supplier might reasonably have expected to use, consume or be affected by the goods.

M.G.L. ch. 106, § 2–318. For a time, Massachusetts courts assumed that § 2–318 eliminated the privity requirement for all breach of warranty actions regardless of the kind of injury involved. See, e.g., Burnham v. Mark IV Homes, Inc., 387 Mass. 575, 441 N.E.2d 1027, 1031 (1982); Cameo Curtains, Inc. v. Philip Carey Corp., 11 Mass.App.Ct. 423, 416 N.E.2d 995, 998 (1981).

More recently, however, Massachusetts has fallen in line with the majority of states in recognizing that § 2–318 was intended to apply only to product-liability actions and, therefore, eliminates the vertical privity requirement only for tort-based breach of warranty claims by consumers, not for contract-based breach of warranty claims by commercial retailers. See, e.g., Bay State–Spray & Provincetown S.S., Inc. v. Caterpillar Tractor Co., 404 Mass. 103, 533 N.E.2d 1350, 1353–56 (1989) (pointing out the distinction), Jacobs v. Yamaha Motor Corp., U.S.A., 420 Mass. 323, 649 N.E.2d 758, 763 (1995) (mentioning that “contract-based warranty claims involving commercial transactions may generally call for different treatment than tort-based warranty claims”); Sebago, Inc. v. Beazer E., Inc., 18 F.Supp.2d 70, 99 (D.Mass.1998) (construing Massachusetts law to require that commercial plaintiffs prove privity of contract to maintain breach of warranty actions against manufacturers); Irish Venture, Inc. v. Fleetguard, Inc., 270...