United States ex rel. Westrick v. Second Chance Body Armor, Inc.

• Decision Date: 14 July 2017
• Docket Number: Civil Action No. 07–1144 (PLF),Civil Action No. 04–0280 (PLF)
• Parties: UNITED STATES of America, EX REL., Aaron J. WESTRICK, Ph.D., Plaintiffs, v. SECOND CHANCE BODY ARMOR, INC., et al., Defendants. United States of America, Plaintiff, v. Toyobo Company, Ltd., et al., Defendants.
• Court: U.S. District Court — District of Columbia

266 F.Supp.3d 110

UNITED STATES of America, EX REL., Aaron J. WESTRICK, Ph.D., Plaintiffs,

v.SECOND CHANCE BODY ARMOR, INC., et al., Defendants.

United States of America, Plaintiff,

v.Toyobo Company, Ltd., et al., Defendants.

Civil Action No. 04–0280 (PLF)

Civil Action No. 07–1144 (PLF)

United States District Court, District of Columbia.

Signed July 14, 2017

Stephen M. Kohn, David K. Colapinto, Kohn, Kohn & Colapinto, LLP, Washington, DC, Alicia J. Bentley, Albert Thomas Morris, Jeehae Jennifer Koh, Jennifer Lynn Chorpening, United States Department of Justice, Keith V. Morgan, U.S. Attorney's Office for the District of Columbia, Washington, DC, for Plaintiffs.

Christopher D. Barraza, Weil, Gotshal & Manges, LLP, Washington, DC, Diane P. Sullivan, Weil Gotshal & Manges, LLP, Princeton, NJ, Jed P. Winer, Pro Hac Vice, Konrad Lee Cailteux, Weil, Gotshal & Manges, LLP, New York, NY, for Defendants.

Thomas E. Bachner, Jr., Eastport, MI, pro se.

Richard C. Davis, Central Lake, MI, pro se.

OPINION

PAUL L. FRIEDMAN, United States District Judge

This matter is before the Court on the motion of the United States for reconsideration [Dkt. 450 in Civil Action No. 04–0280 and Dkt. 184 in Civil Action No. 07–1144] of the Court's September 4, 2015 Memorandum Opinion and Order granting in part and denying in part the parties' cross motions for partial summary judgment on the United States' common law claims and claims under the False Claims Act ("FCA"), 31 U.S.C. § 3729, etseq. (1994). See United States ex rel. Westrick v. Second Chance Body Armor Inc., 128 F.Supp.3d 1 (D.D.C. 2015), reconsideration denied in part sub nom. United States v. Second Chance Body Armor Inc., No. 04-0280, 2016 WL 3033937 (D.D.C. Feb. 11, 2016).¹ The United States contends that the Court erred in limiting its fraudulent inducement FCA claim because the Court failed to consider the declarations of General Services Administration ("GSA") Contract Specialist Kellie Stoker. It also argues that the Court's express and implied false certification analysis failed to address several warranties, assurances, or so-called "extra-contractual considerations" in the government's contracts with vest manufacturers other than Second Chance Body Armor, Inc. ("Second Chance"). Toyobo Company, Ltd. and Toyobo America, Inc. (collectively, "Toyobo") oppose the motion.² Upon consideration of the parties' written submissions, the relevant case law, the entire record in this case, and the oral argument held on May 11, 2016, the Court will grant reconsideration in part and deny it in part.³

I. FACTUAL AND PROCEDURAL BACKGROUND

Judge Richard W. Roberts, to whom these two related (but not consolidated) cases were previously assigned, fully recounted their factual and procedural history in several prior opinions. See, e.g., United States ex rel. Westrick v. Second Chance Body Armor Inc., 128 F.Supp.3d at 5–7 ; United States v. Toyobo Co., Ltd., 811 F.Supp.2d 37, 41–44 (D.D.C. 2011) ; United States ex rel. Westrick v. Second Chance Body Armor, Inc., 685 F.Supp.2d 129, 132–33 (D.D.C. 2010). Nonetheless, the Court sets forth here the facts and procedural posture relevant to the United States' FCA claims in an effort to clarify the issues for trial.

A. Factual Background

The United States' Second Amended Complaint in Civil Action No. 04–0280 alleges that Toyobo contracted with Second Chance to sell them defective Zylon fiber for use in bulletproof vests, which Second Chance then sold to the United States under both (1) the Bulletproof Vest Partnership Grant Act of 1998, 42 U.S.C. § 3796ll , etseq. ("BPVGPA"), and (2) the General Services Administration's Multiple Award Schedule ("GSA MAS"). Second Amended Complaint ¶¶ 1–5 (Dec. 30, 2013) [Dkt. 408 in Civil Action No. 04–0280].⁴

The United States' Amended Complaint in Civil Action No. 07–0144, by contrast, alleges the same conduct based on Toyobo's contracts with five vest manufacturers other than Second Chance: (1) Armor Holdings, Inc. and its subsidiaries American Body Armor, Inc., Safariland, Inc., and Pro–Tech; (2) Point Blank Body Armor, Inc. and its subsidiary Protective Apparel Corporation of America, Inc.; (3) First Choice Armor, Inc.; (4) Gator Hawk, Inc.; and (5) Protective Products International, Inc. (collectively, the "other vest manufacturers"). Am Compl. ¶¶ 1–5, 14–25; see also May 11, 2016 Hr'g Tr. at 12:19–13:11.

In 1995, Toyobo began to communicate with the United States about the use of Zylon fiber for government "ballistic" applications such as bulletproofs vests. US Supp., Ex. 23 at PDF page 143 [Dkt. 195]. In literature Toyobo sent to the United States at that time, Toyobo touted its testing data showing Zylon's "superior tensile strength," "high temperature abrasion resistance," low "moisture regain," and "stab[ility] against humidity." Id., Ex. 24 at PDF pages 147–48. Those conversations led the United States to contract with Second Chance to sell Zylon bulletproof vests on the GSA MAS from 1995 to 2001. See Declaration of Kellie Stoker in Support of United States' Response to Toyobo's Motion for Partial Summary Judgment ¶¶ 4–8 (March 15, 2012) [Dkt. 194–4] ("First Stoker Declaration").

On March 30, 2001, Toyobo began to learn—through its own internal testing—that Zylon "stored in a warehouse for one year showed a strength lowering of about 20%." US Supp., Ex. 90 at 1–2 [Dkt. 195–2]; see also May 11, 2016 Hr'g Tr. at 49:24–49:25 ("[W]e are willing to agree that the beginning of the fraudulent period is March 2001." (statement of government counsel)). In July 2001, notes from an internal Toyobo meeting show that Toyobo concluded that a "Zylon hydrolysis (?) problem [had] surfaced," that "[i]t is extremely regrettable that sufficient study was not done in the development stage and we feel responsible," and that Toyobo must "enlighten the bulletproof customers." US Supp., Ex. 52 at PDF pages 13–14 [Dkt. 195–2]. It was then that Toyobo created the "Zylon Strength Degradation Improvement Project," known as "ZKP," in order to "conduct an investigation to understand" why Zylon degraded under conditions of heat and humidity and "propose urgent measures" to address that degradation. Id., Ex. 95 at PDF page 167.

On July 5, 2001, Toyobo sent the first of quarterly (and later, semi-annual) letters to "valued customers" including vest manufacturers and "[f]ederal scientists," see US Supp. at 8, which described in very general terms Toyobo's Zylon so-called "aging test" under conditions of heat and humidity. See id., Exs. 6–22 at PDF pages 81–141 [Dkt. 195].⁵ The first of those letters frankly stated the result of Toyobo's preliminary testing—evidenced by attached graphical data—that "the strength of Zylon fiber decreases under high temperature and humidity conditions" of 80 and 60 degrees Celsius and 80% humidity, id., Ex. 6 at PDF page 82, but it also stated that Toyobo "expect[ed] almost no strength loss at about 40 degree C even at 80% humidity." Id. On July 19, 2001, Toyobo sent another letter to "valued customers," concluding that, despite that testing data, Toyobo "understand[s] that ZYLON fiber is a superior material for body armor[.]" Id., Ex. 100 at PDF page 195 [Dkt. 195–2]. Subsequent letters from Toyobo to Second Chance on July 25, 2001, and August 28, 2001, respectively, stated that Toyobo "ha[d] not reached [a] conclusion" about Toyobo's Zylon testing at 40 degrees Celsius and warned that any results were "provisional." Id., Exs. 7–8, PDF pages 87, 90 [Dkt. 195].⁶

By December 2001, Toyobo's internal ZKP project had compiled much more detailed and troubling findings about Zylon degradation than the anodyne data Toyobo communicated to vest manufacturers and federal scientists before and after that date. Toyobo and Second Chance convened a "crisis management meeting" on December 13, 2001, at which Toyobo researchers in the ZKP project produced data showing that Second Chance's bulletproof vests made with Toyobo's Zylon fiber degraded by 7% in less than two years, an amount of degradation which—according to the handwritten notes of Second Chance executive and pro se defendant in this case, Thomas Edgar Bachner, Jr.—would "put [defendants] out of express warranty before 5 years." See Declaration of Jennifer L. Chorpening in Support of United States' Opposition to Defendant's Motion for Partial Summary Judgment, Ex. 19 at PDF pages 3, 10 [Dkt. 111].⁷ Toyobo also compiled an internal report dated December 14, 2001, which cited "residual solvent (phosphoric acid)" as "the cause" of Zylon's degradation under conditions of heat and humidity, and suggested that "[i]t is important to reduce residual phosphorus amount" for "strength retention." US Supp., Ex. 49 at PDF pages 92, 94 [Dkt. 196]. A separate internal Toyobo report dated December 18, 2001, stated that, "[f]or the primary usage of Zylon in bulletproof vests, deterioration of strength under hot and humid conditions (in particular, deterioration of strength when the environment where it is used has temperatures near 40°C and is humid) is an extremely serious problem." Id., Ex. 65 at PDF page 159 [Dkt. 196]. In the months following the "crisis management meeting" and these internal reports, Toyobo offered and Second Chance accepted substantial rebates worth millions of dollars on its Zylon purchases. See, e.g., id., Ex. 138 at 23–24 [Dkt. 195–5].⁸

Despite the ZKP data regarding phosphorus and the 7% decline in Zylon performance over two years under conditions of heat and humidity, on June 5, 2002, Second Chance sent the GSA a letter enclosing a catalog for Zylon that "guarantee[d] its vests to perform at" the military's standard ballistics requirements "within normal statistical variation (+/–6%) during the five-year guaranteed life of the vest." US Supp., Ex. 1 at PDF page 51 [Dkt. 195]. On August 5, 2002, a federal scientist emailed Toyobo researchers for "assistance" in testing the presence of phosphorus in Zylon fiber, id., Ex. 47 at PDF page 119 [Dkt. 195–1], to which...