A False Claims Act lawsuit has been revived involving the materials supplier Toyobo and the now-defunct Second Chance Body Armor Inc., which produced bulletproof vests that they knew could be defective. The federal General Services Administration brought a fraudulent inducement claim against the companies in 2015, but a prior federal judge had granted summary judgment (a decision without trial) to the manufacturers and then ruled again in their favor in 2016.
On a motion for reconsideration, a new federal judge ruled that the case can go forward. What the previous judge had failed to appreciate, the new judge ruled, was that the GSA would never have purchased the defective bulletproof vests if the companies had disclosed known defects as required by law. This is the essence of fraudulent inducement to enter into a contract.
There is evidence that both Toyobo and Second Chance were aware that the material Zylon, a plastic fiber used to make the vests bulletproof, can degrade when exposed to heat and humidity. Toyobo had begun talking up the virtues of Zylon to the government as early as 1995.
As early as 2001, however, Toyobo apparently knew this was an “extremely serious problem,” according to the judge. Apparently, Zylon fibers can degrade by as much as 7 percent over two years, depending on the conditions.
Neither Toyobo nor Second Chance disclosed the defect to the GSA, however, according to the allegations. In fact, Second Chance affirmatively guaranteed their performance for a full five years.
As late as 2005, Toyobo denied the degradation and continued to state that Zylon could be used in safely in bulletproof vests.
“Toyobo’s omission or omissions therefore constituted false representations for the purposes of the United States’ fraudulent inducement FCA claim,” the opinion reads.
The judge ruled that there was sufficient evidence to allow the government’s False Claims Act lawsuit for fraud, fraudulent inducement and unjust enrichment to move forward.
It is unclear whether the government’s claim in this case was revealed as the result of someone blowing the whistle. However, in many cases of alleged government procurement fraud, an insider at a private company notices the fraud and notifies the government. In such cases, the whistleblower can earn a percentage of whatever money is returned to government coffers as a result of their doing the right thing.