UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

EASTERN DIVISION 

ARMORSOURCE, LLC,

Plaintiff,

v.

YOAV KAPAH, et al., 

Defendants.

:

:

Case No. 2:18-cv-905

Judge Sarah D. Morrison

Magistrate Judge Chelsey M. 

Vascura

OPINION AND ORDER

This case has an extensive procedural history. The operative pleading is 

Plaintiff ArmorSource, LLC’s Second Amended Complaint. (SAC, ECF No. 94.) 

Although the SAC names more than ten individuals and entities as Defendants, the 

only two remaining are Paul Garcia and M4 Consulting, LLC.1 The case is now 

before the Court on ArmorSource’s Motion for Summary Judgment against Mr. 

Garcia and M4.2 (Mot., ECF No. 169.) Garcia/M4 responded (Resp., ECF No. 172) 

and ArmorSource replied (Reply, ECF No. 174). For the reasons that follow, 

ArmorSource’s Motion is DENIED.

1 This Court entered a Consent Judgment as to Yoav Kapah (ECF No. 148) 

and an Agreed Judgment Entry as to Pro-Systems USA, LLC, Pro-Systems SpA, 

and Dott Fabrizio Montagna (ECF No. 108). ArmorSource voluntarily dismissed its 

claims against Daily Services LLC and Chad Postell (ECF No. 157) and Luna 

Kapah (ECF No. 162). Default has been entered against Ramona Sockerson (ECF 

No. 55) and Ballistic Sciences, LLC (ECF No. 130). 

2 Mr. Garcia is the President and sole member of M4. (Garcia Decl., ¶ 2, 

PAGEID # 2037–42.) Mr. Garcia and M4 consistently refer to themselves as 

“Garcia/M4.” (See Resp., generally.) The Court will do the same where applicable.

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I. BACKGROUND

A. The Parties’ Early Relationship

ArmorSource designs and manufactures ballistic helmets for military 

personnel and law enforcement. (Grunden Aff., ¶ 3, ECF No. 169-1.) Mr. Garcia 

began providing consulting services to ArmorSource (specifically, a company later 

acquired by ArmorSource) in 2005. (Garcia Decl., ¶¶ 7–8, PAGEID # 2037–42.) For 

a fee of $100 per hour, agreed to in a “handshake” deal, Mr. Garcia helped his client

secure government contracts for the sale of ballistic helmets. (Id.) In 2009, Mr. 

Garcia entered into a written Consulting Agreement with ArmorSource under 

which he would be paid $125 per hour, plus expenses. (2009 Consulting Agreement, 

1–2, PageID # 2043–50. See also Garcia Decl., ¶ 10.) 

B. The 2012 Consulting Agreement

Until the end of 2011, Mr. Garcia worked “full-time” for ArmorSource. 

(Garcia Decl., ¶ 11.) That year, ArmorSource began to experience financial 

difficulties due to the expiration of large contracts, a government investigation into 

a subcontractor’s manufacturing processes, and a decrease in demand.3 (Id., ¶ 12.) 

In early 2012, ArmorSource’s majority owner unexpectedly passed away and Yoav

Kapah was appointed President and CEO. (Grunden Aff., ¶ 5.) Shortly thereafter,

Garcia/M4 and ArmorSource entered into a superseding Consulting Agreement, 

under which Garcia/M4 would be paid a monthly retainer of $5,000, plus expenses 

and a $1.00 per unit commission on certain helmets sold. (2012 Consulting 

3 ArmorSource does not dispute Mr. Garcia’s characterization of its 2011 

financial position. (See Reply, generally.)

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Agreement, PAGEID # 1904–05, 1914, ECF No. 169-3.) The 2012 Consulting 

Agreement resulted in a reduction of Mr. Garcia’s compensation. (Garcia Decl., ¶ 

13.) 

The parties tell very different stories about what happened next.

C. ArmorSource’s Position

According to ArmorSource, Garcia/M4 and Mr. Kapah then devised and 

implemented a kickback scheme pursuant to which they defrauded ArmorSource 

and conspired to steal nearly $1 million from the company.4 (Mot., 1.) To support its 

theory, ArmorSource proffers various documents and affidavits showing that (i) 

between 2012 and 2017, Garcia/M4 submitted invoices requesting compensation in 

excess of that contemplated by the 2012 Consulting Agreement5 and (ii) in 2015 and 

2016, each time ArmorSource paid an “inflated” M4 invoice, M4 made a 

corresponding transfer into Mr. Kapah’s personal bank account. (Smith Aff., ¶ 6,

ECF No. 169-4.)

Mr. Kapah states in a sworn affidavit that Mr. Garcia approached him with 

4 Mr. Kapah has pled guilty to theft, tampering with records, and tax-related 

charges. (Mot., 6. See also State of Ohio v. Kapah, No. 2018 CR 00133 (Licking Cty. 

Ct. C.P.).) He was sentenced to serve four years and nine months in prison and 

ordered to pay $1.7 million in restitution to ArmorSource. (Id.)

5 Brad Grunden, current President of ArmorSource, states in a sworn 

affidavit that, aside from the 2012 Consulting Agreement, “[t]here were no other 

agreements between ArmorSource and M4, or any entity or individual associated 

with M4.” (Grunden Aff., ¶ 6.) Mr. Grunden’s statement is contrary to other 

evidence in the record, including an August 1, 2017 letter agreement, signed by Mr. 

Grunden, setting forth the scope and terms of services to be provided by Garcia/M4 

during the period of August and September 2017. (Aug. 1, 2017 Letter, PageID 

# 2141.)

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an offer to pay Mr. Kapah kickbacks in exchange for approving higher fees and 

commissions for Garcia/M4. (Kapah Aff., ¶ 10, ECF No. 169-2.) Mr. Kapah goes on 

to state: 

I agreed to this scheme and approved the increase. My bank records 

from 2015, 2016, and 2017 reflect that the kickbacks paid by Garcia 

and M4 to me totaled $239,141. I used my influence as President and 

CEO to approve the increased payments to M4. I did not disclose to 

any officer, director, manager, or employee of ArmorSource that I was 

receiving a kickback from the increased payments to M4. I provided no 

services to Garcia or M4. This scheme was orchestrated for the sole 

purpose of enriching Garcia, M4, and me at the expense of 

ArmorSource. 

(Id., ¶¶ 11–16.) Mr. Kapah was terminated from his position in July 2017, after 

which time ArmorSource discovered the scheme. (Grunden Aff., ¶ 7.)

D. Garcia/M4’s Position

Garcia/M4 deny ArmorSource’s allegations and maintain that “every penny of 

the compensation ArmorSource paid” to Garcia/M4 properly reflected the parties’ 

agreed-upon compensation structure at the time of the payment. (Garcia Decl.,

¶¶ 34–35.)

Garcia/M4 assert that they entered into a number of agreements with 

ArmorSource both before and after the 2012 Consulting Agreement. In his sworn 

declaration, Mr. Garcia states that he approached ArmorSource in December 2012 

“about restoring [his] contractual arrangement to terms identical to the 2009 

Consulting Agreement. . . .—i.e., $125 per hour, expenses reimbursed[.]” (Id., ¶ 15.) 

Mr. Garcia presented his proposal in a meeting with Mr. Kapah and ArmorSource 

HR Manager, Mary Byers. (Id.) Although Garcia/M4 do not proffer a fully-executed 

agreement, Mr. Garcia testifies that ArmorSource accepted his proposal. (Id., ¶ 15.)

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He notes that invoices for the period of January 2013 through February 2014 are 

consistent with that compensation structure. (Id., ¶ 16. See also ECF No. 110-1, 

PAGEID # 1459–74.) 

Mr. Garcia states that Garcia/M4 proposed another contract modification in 

March 2014, and that Mr. Kapah, “in his capacity as an officer of ArmorSource,”

accepted those terms.6 (Garcia Decl., ¶ 17. See also 2014 Consulting Agreement, 

PAGEID # 2128–33.) According to Mr. Garcia, the 2014 Consulting Agreement 

entitled Garcia/M4 to payment on the same terms as the 2009 Consulting 

Agreement, plus commissions to be negotiated on a contract-by-contract basis. 

(Garcia Decl. ¶¶ 17–18. See also 2014 Consulting Agreement, § 3.) Mr. Garcia 

further testifies that every commission paid under the 2014 Consulting Agreement 

was negotiated with and approved by ArmorSource’s then-CFO Dustin Wissinger. 

(Garcia Decl., ¶¶ 21–25, 30. See also Feb. 23, 2017 Email, PAGEID # 2137.)

A final modification was agreed upon in 2017 after ArmorSource notified 

Garcia/M4 of their intent to terminate the contract. (Garcia Decl., ¶ 32–33.) The 

resulting letter agreement, dated August 1, 2017 and signed by Brad Grunden,

provided for payment at a rate of $125 per hour, plus certain expenses and 

commissions on units sold. (Aug. 1, 2017 Letter, PageID # 2141.)

To rebut ArmorSource’s claims, Garcia/M4 emphasize that several 

ArmorSource employees other than Mr. Kapah were involved in their dealings. 

According to Mr. Garcia, Garcia/M4 submitted detailed invoices to ArmorSource 

6 Again, Garcia/M4 are unable to proffer a fully-executed agreement.

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Controller Mary Binkley, with copies to Mr. Kapah and the CFO (Mr. Wissinger or

his predecessor, Tim Tallentire). (Garcia Decl., ¶¶ 19, 26, 28.) In addition, although 

“numerous employees and officers at ArmorSource were provided with, or had 

access to, [the Garcia/M4] invoices”—including Mr. Grunden, Mr. Wissinger, Mr. 

Tallentine, Ms. Byers, Ms. Binkley, and the company’s founders—none ever 

questioned Garcia/M4’s charges. (Id., ¶ 27.) 

Finally, Mr. Garcia does not dispute that he made regular payments to Mr. 

Kapah. Instead, he argues that he, too, was “swindled.” (Id., ¶ 37.) Mr. Garcia and 

Mr. Kapah had partnered “50/50” on a venture called Ballistic Sciences.7 (Id., ¶ 38.) 

Ballistic Sciences “developed business for military equipment manufacturers” and 

had only one client. (Id.) When Ballistic Sciences made member distributions, they

“ran payments through the M4 bank account.” (Id., ¶ 39.) In other words, some of 

the M4 transfers to Mr. Kapah were not connected to ArmorSource’s business, but 

to Ballistic Sciences’. (Id., ¶ 39.) Mr. Garcia asserts that the remaining transfers to 

Mr. Kapah were “essentially loans.” (Id., ¶ 40.) Mr. Garcia explains that Mr. Kapah 

was “in financial trouble,” and “helping [him] seemed like a risk worth taking. (Id.) 

So, Mr. Garcia agreed to “transfer 50% of [his] commissions from ArmorSource until 

[Mr. Kapah] got on his feet.” (Id.) Those amounts have never been repaid. (Id.,

¶ 41.)

7Mr. Kapah’s affidavit details a separate kickback arrangement involving Mr. 

Garcia, Ballistic Sciences, Mr. Montagna, and the Pro-Systems entities. (Kapah Aff., 

¶¶ 18–29.) 

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II. ANALYSIS

Summary judgment is appropriate when “there is no genuine dispute as to 

any material fact and the movant is entitled to judgment as a matter of law.” Fed. 

R. Civ. P. 56(a). The movant has the burden of establishing there are no genuine 

issues of material fact, which may be achieved by demonstrating the nonmoving 

party lacks evidence to support an essential element of its claim. Celotex Corp. v. 

Catrett, 477 U.S. 317, 322–23 (1986); Barnhart v. Pickrel, Schaeffer & Ebeling Co., 

12 F.3d 1382, 1388–89 (6th Cir. 1993). The burden then shifts to the nonmoving 

party to “set forth specific facts showing that there is a genuine issue for trial.” 

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986) (quoting Fed. R. Civ. P. 

56). When evaluating a motion for summary judgment, the evidence must be viewed 

in the light most favorable to the non-moving party. Adickes v. S.H. Kress & Co., 

398 U.S. 144, 157 (1970).

A genuine issue exists if the nonmoving party can present “significant 

probative evidence” to show that “there is [more than] some metaphysical doubt as 

to the material facts.” Moore v. Philip Morris Cos., 8 F.3d 335, 339–40 (6th Cir. 

1993). In other words, “the evidence is such that a reasonable jury could return a 

verdict for the non-moving party.” Anderson, 477 U.S. at 248; see also Matsushita 

Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (concluding that 

summary judgment is appropriate when the evidence could not lead the trier of fact 

to find for the non-moving party).

ArmorSource’s remaining claims—for fraud, racketeering, and conspiracy—

are all premised on the alleged illegal kickback scheme between Garcia/M4 and 

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Yoav Kapah. ArmorSource argues that it is entitled to summary judgment because 

there is no genuine dispute as to any material fact. The Court disagrees. The record, 

summarized above, reveals a number of genuine disputes, including as to (i) the 

existence of a coordinated kickback scheme, (ii) the legitimacy of the payments 

made by ArmorSource to Garcia/M4, and (iii) the legitimacy of the payments made 

by M4 to Mr. Kapah. Resolution of these disputes will require a determination on 

the credibility of Messrs. Garcia, Kapah, and Grunden, and their competing 

testimony. That is the province of a jury. Anderson, 477 U.S. at 255 (“Credibility 

determinations, the weighing of the evidence, and the drawing of legitimate 

inferences from the facts are jury functions, not those of a judge[.]”). The evidence is 

not “so one-sided that one party must prevail as a matter of law,” id., 477 U.S. at 

252—far from it.

Accordingly, ArmorSource’s Motion for Summary Judgment (ECF No. 169) is 

DENIED. 

IT IS SO ORDERED.

/s/ Sarah D. Morrison 

SARAH D. MORRISON

UNITED STATES DISTRICT JUDGE

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