by Ben Vernia | February 24th, 2010
On February 23, District Judge Richard Roberts of the District of Columbia ruled against Toyobo Co., and its American subsidiary, Toyobo America, Inc., in a qui tam suit in which the US has intervened. The company manufactured Zylon fiber which co-defendant Second Chance Body Armor, Inc., used to make bulletproof vests sold to the federal government and to state and local law enforcement in federally-funded sales.
The company argued that the government’s complaint failed to satisfy the heightened particularity requirement under Fed. R. Civ. P. 9(b) and failed to adequately plead the company’s presentation of a false or fraudulent claim, the existence of a conspiracy, and the company’s knowledge of false claims.
The Court agreed with the company that the US had not alleged that Toyobo itself presented false claims to the government, but it concluded that the government had “factually alleged a fraudulent scheme in which Toyobo played a part.” Even though the company never warranted the material (and, it claimed, had refused when Second Chance asked that it do so), the Court nevertheless found sufficient the government’s allegations that the Toyobo had acted in concert with Second Chance.
The Court likewise rejected Toyobo’s particularity argument, finding that the complaint’s allegations – that the company had retracted negative data when it offered a rebate or discount program for purchase of Zylon, and promised Second Chance that data showing the fibers’ degradation would “level out” – could constitute underlying fraudulent conduct which led to Second Chance’s submission of false claims. Similarly, the Court found the government adequately pleaded the time frame of the conduct, and specific meeting times, places and participants, and that the complaint alleged “that Toyobo knew of and participated in making Second Chance’s warranty to the government.”
The Court also found that the US had adequately pled a violation of the False Claims Act’s prohibition against making, using (or causing) a false record or statement.” Applying the 2009 amendments in the Fraud Enforcement and Recovery Act, the Court held that the government’s allegations that Toyobo misrepresented and concealed facts that caused Second Chance to submit a false claim was more than sufficient to meet the FCA’s materiality standard.
Judge Roberts likewise found the Government’s FCA conspiracy and common law claims were well-pleaded.
The case is one of a series which have resulted in substantial settlements in the past several months, and is being handled by DOJ’s Civil Fraud Section, by Trial Attorneys Alicia Bentley, Michael Friedman, Albert Morris, and Callie Owen, and by DC AUSA Keith Morgan.
