Court Opinion

ID: 2664053
Source: CourtListenerOpinion
Date Created: 2014-04-04 03:12:42.897979+00
Date Added: 2024-06-11T13:04:17.096354
License: Public Domain

UNITED STATES DISTRICT COURT
                   FOR THE DISTRICT OF COLUMBIA

______________________________
                              )
UNITED STATES OF AMERICA,     )
                              )
               Plaintiff,     )
                              )
               v.             )      Civil Action No. 08-961 (RWR)
                              )
HONEYWELL INTERNATIONAL INC., )
                              )
               Defendant.     )
______________________________)

                   MEMORANDUM OPINION AND ORDER

     The government filed a complaint against defendant Honeywell

International Inc., alleging violations of the False Claims Act

(“FCA”), 31 U.S.C. §§ 3729-33, as well as a common law unjust

enrichment claim in connection with the sale of Zylon body armor

shields.   Honeywell has moved to dismiss the complaint for

failure to state a claim and sufficiently plead fraud.   Because

the government has sufficiently alleged its FCA and unjust

enrichment claims and pled fraud with sufficient particularity,

Honeywell’s motion to dismiss will be denied.

                            BACKGROUND

     The complaint alleges the following facts.    Honeywell

purchased the synthetic fiber “Zylon” for use in the manufacture

of Z Shields, panels of laminated fibers that are incorporated

into bulletproof vests.   (Compl. ¶¶ 2, 21-22.)   Armor Holdings,

Inc. paid more than fifteen million dollars for more than one
                                   - 2 -

hundred thousand pounds of Z Shield, which it used to manufacture

bulletproof vests.   (Id. ¶ 23.)     “Honeywell and Armor Holdings

marketed Z Shield vests as ‘groundbreaking’ technology that

offered the highest levels of ballistic protection and

represented the state of the art in ballistic performance.”     (Id.

¶ 24.)   Armor Holdings sold vests to federal agencies and to

state, local, and tribal law enforcement authorities under the

Bullet Proof Vest Grant Partnership Act Program, under which the

federal government reimbursed these authorities for up to fifty

percent of the costs of the body armor.     (Id. ¶¶ 13-16.)   The

National Institute of Justice (“NIJ”), which tests bulletproof

materials, certified that all Z Shield vests that Armor Holdings

sold met NIJ’s minimum ballistic standards.     (Id. ¶ 30.)   Armor

Holdings initially offered a five-year warranty on its vests.

(Id. ¶ 32.)   The federal government paid Armor Holdings more than

twenty million dollars for Z Shield vests.     (Id. ¶ 23.)

     The government alleges that “Honeywell knew that Armor

Holdings relied on Honeywell’s technical expertise regarding Z

Shield,” and Honeywell tested the tensile strength of the Z

Shield, interpreting the data for Armor Holdings.     (Id. ¶ 33.)

Beginning in April 2000, Honeywell learned from the company that

manufactured Zylon that the fiber’s strength deteriorated when

exposed to light.    (Id. ¶ 35.)    While Honeywell did not share

with Armor Holdings these findings, which showed a thirty-five to
                                 - 3 -

fifty percent drop in tensile strength, Honeywell did share data

from a test it performed which revealed a three percent drop in

strength after a shorter period of exposure to light.       (Id.

¶ 36.)

     Honeywell became concerned with other potential sources of

degradation, and it began testing Z Shield’s reaction to

moisture.    (Id. ¶ 37.)   After another producer of Zylon body

armor reported that one of its shield vests had failed and

expressed misgivings about using Zylon in bulletproof vests,

Armor Holdings –– without Honeywell’s input –– “issued a body

armor storage advisory warning its customers to store body armor

containing woven Zylon or Z Shield in a dry and cool place and

not to store it at temperatures above 120 degree F and 50%

humidity.”   (Id. ¶¶ 38-39, 41.)    Honeywell received additional

data from other producers of Zylon products suggesting Zylon was

not suitable for use in bulletproof armor (id. ¶¶ 43-47), but it

“continued to represent Z Shield as a safe and effective material

suitable for body armor.”    (Id. ¶ 44.)

     Additionally, Honeywell began performing its own

environmental exposure and ballistics tests on Z Shields.      This

included “accelerated aging” testing, which would determine

“whether Z shield would lose tensile strength over time” under

non-extreme, foreseeable conditions.     (Id. ¶¶ 33, 48.)

Honeywell’s initial testing “showed a 13.3% decline in the
                                - 4 -

ballistic integrity of Z Shield when exposed to 90 degrees C

(about 234 F) for one week.   The same testing showed that the

non-Zylon shield products of Honeywell that were tested as

controls lost little, if any, of their ballistic integrity.”

(Id. ¶ 49.)   However, Honeywell “emphasized other, more favorable

preliminary data” to Armor Holdings.     (Id. ¶ 50.)      Honeywell

tested Z Shield’s ballistic integrity in other hot and humid

environmental conditions, and these tests revealed substantial

declines in ballistic integrity as compared to that of control

products.   (Id. ¶¶ 51-52.)   In a conference call, Honeywell

“downplayed” the results to Armor Holdings.     (Id. ¶ 53.)

Honeywell conducted additional accelerated aging tests that also

revealed degradation in the fiber.      (Id. ¶¶ 54-55.)    A Honeywell

employee drafted a report accurately summarizing the negative

results of its accelerating aging tests, but Honeywell never

shared the report with Armor Holdings.     (Id. ¶¶ 56-60.)

     Representatives of Armor Holdings met with representatives

of Honeywell in January 2003.   At that meeting, Honeywell

informed Armor Holdings that none of its data should cause Armor

Holdings to reconsider marketing or selling Z Shield vests.           (Id.

¶ 62.)   At an internal Honeywell meeting prior to the meeting

with Armor Holdings, Honeywell instructed its personnel to

“provide some of the test data, but not the conclusions” to Armor

Holdings.   (Id. ¶ 63.)   In April 2003, Honeywell published a
                                - 5 -

technical paper that disclosed some favorable test data but

omitted all of the negative accelerated aging data.    (Id. ¶ 65.)

       In 2004, Armor Holdings performed its own testing on used

vests, which revealed a substantial decline in the strength of

used Z Shields as compared to new Z Shields.    (Id. ¶ 71.)     After

evaluating these data, Armor Holdings reduced the length of its

warranty from five years to thirty months.    However, Honeywell

expressed disagreement with Armor Holdings’ decision.    (Id.

¶ 72.)   After the NIJ performed its own ballistic testing, which

confirmed that Zylon quickly lost ballistics integrity, it

decertified all Zylon products in August 2005.    (Id. ¶¶ 78, 84-

85.)

       The government filed a complaint asserting claims against

Honeywell for FCA violations involving presenting fraudulent

claims and making false statements, and for common law unjust

enrichment.   (Id. ¶¶ 86-89, 90-93, 94-97.)    Honeywell has filed a

motion to dismiss under Federal Rule of Civil Procedure 12(b)(6),

arguing that the government failed to plead fraud with the

specificity required by Rule 9(b), failed to plead factual

allegations that Honeywell presented a false claim for payment or

made a false statement to the United States, and failed to plead

factual allegations that support its unjust enrichment claim.
                                 - 6 -

                             DISCUSSION

     In evaluating a Rule 12(b)(6) motion, a court “‘may consider

only the facts alleged in the complaint, any documents either

attached to or incorporated in the complaint and matters of which

[a court] may take judicial notice.’”      Trudeau v. FTC, 456 F.3d

178, 183 (D.C. Cir. 2006) (quoting EEOC v. St. Francis Xavier

Parochial Sch., 117 F.3d 621, 624 (D.C. Cir. 1997)).      A court

considering a Rule 12(b)(6) challenge must accept as true any

facts alleged by the plaintiff and grant all reasonable

inferences drawn from those facts.       Browning v. Clinton, 292 F.3d

235, 242 (D.C. Cir. 2002).   “To survive a motion to dismiss, a

complaint must contain sufficient factual matter, accepted as

true, to ‘state a claim to relief that is plausible on its

face.’”   Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)).      A

plaintiff must plead “factual content that allows the court to

draw the reasonable inference that the defendant is liable for

the misconduct alleged.”   Id.

     Rule 9(b) applies to FCA actions.      United States ex rel.

Totten v. Bombardier Corp., 286 F.3d 542, 551-52 (D.C. Cir. 2002)

(noting that every circuit to consider the issue has held that

Rule 9(b) applies to FCA complaints).      It provides that “[i]n

alleging fraud or mistake, a party must state with particularity

the circumstances constituting fraud or mistake.      Malice, intent,
                                - 7 -

knowledge, and other conditions of a person’s mind may be alleged

generally.”   Fed. R. Civ. P. 9(b).     Motions to dismiss for

failure to plead fraud with sufficient particularity are

evaluated in light of the overall purposes of Rule 9(b) to

“ensure that defendants have adequate notice of the charges

against them to prepare a defense[,]” United States ex rel.

McCready v. Columbia/HCA Healthcare Corp., 251 F. Supp. 2d 114,

116 (D.D.C. 2003), discourage “suits brought solely for their

nuisance value” or as “frivolous accusations of moral

turpitude[,]” United States ex rel. Joseph v. Cannon, 642 F.2d

1373, 1385 (D.C. Cir. 1981), and “‘protect reputations of . . .

professionals from scurrilous and baseless allegations of

fraud[.]’”    Id. at 1385 n.103 (alteration in original) (quoting

Felton v. Walston & Co., Inc., 508 F.2d 577, 581 (2d Cir. 1974)).

     Rule 9(b) does not abrogate Rule 8, and must be read in

light of Rule 8's requirement that allegations be simple,

concise, and direct, and short and plain statements of each

claim.   Joseph, 642 F.2d at 1386; see also United States ex rel.

Pogue v. Diabetes Treatment Ctrs. of Am., Inc., 238 F. Supp. 2d

258, 269 (D.D.C. 2002) (“While . . . Rule 9(b) requires more

particularity than Rule 8, . . . Rule 9(b) does not completely

vitiate the liberality of Rule 8.”).     In an FCA action, Rule 9(b)

requires that the pleader “‘state the time, place and content of

the false misrepresentations, the fact misrepresented and what
                               - 8 -

was retained or given up as a consequence of the fraud[,]’ . . .

[and] individuals allegedly involved in the fraud.”1   United

States ex rel. Williams v. Martin-Baker Aircraft Co., Ltd., 389

F.3d 1251, 1256 (D.C. Cir. 2004) (quoting Kowal v. MCI

Communic’ns Corp., 16 F.3d 1271, 1278 (D.C. Cir. 1994)).    “In

sum, although Rule 9(b) does not require plaintiffs to allege

every fact pertaining to every instance of fraud when a scheme

spans several years, defendants must be able to ‘defend against

the charge and not just deny that they have done anything

wrong.’”   Id. at 1259 (quoting United States ex rel. Lee v.

SmithKline Beecham, Inc., 245 F.3d 1048, 1052 (9th Cir. 2001));

accord McCready, 251 F. Supp. 2d at 116 (reasoning that a court

“‘should hesitate to dismiss a complaint under Rule 9(b) if the

court is satisfied (1) that the defendant has been made aware of

the particular circumstances for which she will have to prepare a

     1
       Honeywell argues, citing In re XM Satellite Radio Holdings
Sec. Litig., 479 F. Supp. 2d 165, 183 (D.D.C. 2007), that Rule
9(b) requires a plaintiff to explain in its complaint why a
particular statement is fraudulent to survive a motion to
dismiss. (Def.’s Mem. of P. & A. in Supp. of Mot. to Dismiss at
10.) However, XM Satellite involved a claim under the Private
Securities Litigation Reform Act, 15 U.S.C. § 78u-4, which
“heightened the requirement for pleading scienter so that
plaintiffs must ‘state with particularity facts giving rise to a
strong inference that the defendant acted with the required state
of mind.’” Id. at 175 (quoting 15 U.S.C. § 78u-4(b)(2)). The
FCA contains no such heightened pleading requirement. See
Joseph, 642 F.2d at 1385-86; see also McCready, 251 F. Supp. 2d
at 118 (noting in an FCA case that “a plaintiff need not plead
his legal theory of fraud in the complaint; the complaint must
plead only the facts that form the basis for the fraud”).
                               - 9 -

defense at trial, and (2) that plaintiff has substantial

prediscovery evidence of those facts’” (quoting Harrison v.

Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir.

1999))).

I.   PRESENTING FALSE CLAIMS

     The FCA created a cause of action against anyone who

“knowingly presents, or causes to be presented, to an officer or

employee of the United States Government . . . a false or

fraudulent claim for payment or approval[.]”   31 U.S.C.

§ 3729(a)(1) (2000).2   See also United States ex rel. Siewick v.

Jamieson Sci. & Eng’g, Inc., 214 F.3d 1372, 1374 (D.C. Cir.

2000).   “[T]he elements of section 3729(a)(1) are (1) the

defendant submitted a claim to the government, (2) the claim was

false, and (3) the defendant knew the claim was false.”    United

States ex rel. Harris v. Bernad, 275 F. Supp. 2d 1, 6 (D.D.C.

2003).   A subcontractor may be liable under § 3729(a)(1) even

when it did not itself present any false claims to the government

if it engaged in a fraudulent scheme that induced the government

to pay claims submitted by the contractor.   See United States ex

     2
       Congress amended the FCA in the Fraud Enforcement and
Recovery Act of 2009 (“FERA”), altering slightly the language in
the presentment provision. The amendment of the presentment
provision took “effect on the date of enactment of this Act and
shall apply to conduct on or after the date of enactment[.]”
P.L. 111-21, § 4 at 1625. Since the alleged conduct here
occurred before 2009, the provision as amended in 2009 does not
apply here, and references in this opinion to § 3729(a)(1) are to
the pre-amendment version.
                               - 10 -

rel. Westrick v. Second Chance Body Armor, Inc., 685 F. Supp. 2d

129, 136 (D.D.C. 2010); Pogue, 238 F. Supp. 2d at 266 (“An

argument that the presentation of the claims was the work of

another is unavailing as a means to avoid liability under

[§ 3729(a)(1)].”).

     A.     Falsity

     Honeywell argues that the government has not alleged

sufficiently the falsity of any claim that Armor Holdings

submitted to the government for payment.   (Def.’s Mem. of P. & A.

in Supp. of Mot. to Dismiss (“Def.’s Mem.”) at 10.)   A claim may

be false under the FCA if it is either factually or legally

false.    United States v. Sci. Applications Int’l Corp., 555 F.

Supp. 2d 40, 49 (D.D.C. 2008).   A claim can be “factually false

if it invoices for services that were not rendered” or

incorrectly describes goods or services provided.   United States

ex rel. Hockett v. Columbia/HCA Healthcare Corp., 498 F. Supp. 2d

25, 64 (D.D.C. 2007).   Alternatively, a claim is legally false if

it contains an express false certification –– that is, “a claim

that falsely certifies compliance with a particular statute,

regulation or contractual terms, where compliance is a

prerequisite for payment.”    Id. (internal quotations marks

omitted).   A claim also may be legally false under an implied

certification theory.   Id.   One way to plead a false claim under

this theory is to plead “that the contractor withheld information
                              - 11 -

about its noncompliance with material contractual requirements.”3

United States v. Sci. Applications Int’l Corp., 626 F.3d 1257,

1269 (D.C. Cir. 2010).   A contractual requirement can be

considered material if “both parties to the contract understood

that payment was conditional on compliance with the requirement

at issue.”   Id.; see also United States v. TDC Mgmt. Corp., Inc.,

288 F.3d 421, 426 (D.C. Cir. 2002) (noting that withholding

“‘information critical to the decision to pay’” is a false claim

(quoting Ab-Tech Constr., Inc. v. United States, 31 Fed. Cl. 429,

434 (Fed. Cl. 1994))).

     The government alleges that it believed it was purchasing

vests that met the industry-standard five-year warranty against

defects (see Compl. ¶¶ 18, 31-32), and that Honeywell failed to

disclose or selectively disclosed information to Armor Holdings

and to the public that revealed that the vests were defective and

that cast doubt on the vests’ ability to satisfy the warranty.

(See id. ¶¶ 3-5, 36, 50-51, 53, 55-60, 65.)   “Honeywell

understood that [Z Shield] degradation would negatively impact

the ballistic performance of bullet proof vests containing Z

Shield so that over a short period of time these vests would no

     3
       Another way is to plead that the government would not have
paid funds to a party had it known of a violation of a law or
regulation, and “the claim submitted for those funds contained an
implied certification of compliance with the law or regulation
and was fraudulent.” United States ex rel. Barrett v.
Columbia/HCA Healthcare Corp., 251 F. Supp. 2d 28, 33 (D.D.C.
2003).
                              - 12 -

longer be fit for use as body armor.”    (Compl. ¶ 4.)   Further,

“[h]ad the United States known of the defective nature of the Z

Shield Vests, it would not have purchased them for use in the

ballistic protection of law enforcement officers.    But Honeywell

did not inform the United States of the defects in Z Shield and

instead took affirmative steps to cover up those risks.”    (Id.

¶ 88.)   Because the government does not allege in the complaint

that Armor Holdings or Honeywell invoiced for services not

rendered or described incorrectly the goods Armor Holdings or

Honeywell provided, the government has not pled that Honeywell

submitted a factually false claim.     Nor has the government pled

an express false certification claim, since the complaint does

not allege that any of the relevant contracts contained express

provisions requiring five-year warranties against defects.

     Rather, the government has pled that it understood to be a

condition of payment the requirement that the vests satisfy the

five-year industry standard warranty by remaining fit for use as

body armor for five years.   (Id. ¶¶ 14, 87.)    Although the

government does not state directly in its complaint that

Honeywell also understood such requirements to be conditions of

payment, when construed in the light most favorable to the

government, the allegations that Honeywell took affirmative steps

to conceal from Armor Holdings and the United States the

available data on the vests’ performance are sufficient to plead
                                - 13 -

that Honeywell also understood payment to be conditioned upon

compliance with these requirements.      Thus, these allegations are

sufficient to state an implied certification claim with respect

to a contractual condition.   The government sets out in detail

the time, place, and content of the false representations and

identifies individuals allegedly involved in the fraud, such that

its allegations satisfy the requirements of Rule 9(b).

     Honeywell argues that the government has misconstrued the

relevant warranty as one that guaranteed service for five years

and that Armor Holdings warranted only that it would replace or

repair a defective shield within five years of its retail

purchase.   (Def.’s Mem. at 14.)   Honeywell cites in support of

its argument a warranty that it claims was standard for the sales

of all Armor Holdings’ vests.    (Id., Ex. B.)    The government did

not attach this warranty to its complaint.     See St. Francis

Xavier Parochial Sch., 117 F.3d at 624 n.3 (refusing to consider

materials not attached to the pleadings when reviewing district

court ruling on a motion to dismiss).     Moreover, Honeywell’s

argument raises questions of fact that are more appropriately

resolved after discovery closes, such as the scope of the

warranty and whether Armor Holdings issued that precise warranty

upon each sale of a Z Shield.    See Thompson v. Fathom Creative,

Inc., 626 F. Supp. 2d 48, 52-53 (D.D.C. 2009) (noting that pre-

discovery summary judgment motions are disfavored).     Cf. Benoit
                              - 14 -

v. U.S. Dep’t of Agric., 577 F. Supp. 2d 12, 22 (D.D.C. 2008)

(choosing not to exclude materials outside the pleadings and

converting a motion to dismiss to one for summary judgment under

Fed. R. Civ. P. 12(d) where both parties had an opportunity to

present all materials pertinent to a motion for summary

judgment).   Thus, these factual issues will not be resolved at

the motion to dismiss stage of the litigation, where the

plaintiff’s factual allegations are accepted as true.4

     Honeywell also argues that the complaint alleges that Armor

Holdings disclosed the defects to the government when it issued a

storage advisory in July 2001.   (Def.’s Mem. at 15-16.)   That

storage advisory warned the purchasers of Z Shields not to store

the armor in conditions above 120 degrees Fahrenheit and fifty

percent humidity.   (Compl. ¶ 41.)   Honeywell argues that this

storage advisory “disclosed the facts the Government now claims

were hidden.”   (Def.’s Mem. at 15 (emphasis omitted).)

     Evidence of the storage advisory on a motion for summary

judgment might be relevant to establishing the government’s

knowledge of “how Z Shield’s tensile strength reacted in hot and

     4
       Honeywell also cites an admission from the NIJ warning law
enforcement agencies that warranties from the manufacturers of
bullet-proof vests do not reflect the anticipated service life of
the product. (Def.’s Mem. at 15 (citing NIJ Guide 100-01 (Nov.
2001).) While such an admission may bear upon whether both
parties understood that payment was conditional on compliance
with a five-year warranty, here again Honeywell raises a factual
issue that is not resolved appropriately on a motion to dismiss.
                              - 15 -

humid conditions.”   (Compl. ¶ 33.)    However, Honeywell’s argument

fails to account for the multiple types of tests that Honeywell

performed on its Z Shields.   Honeywell also conducted

“accelerated aging” tests to determine “whether Z Shield would

lose tensile strength over time” under non-extreme, foreseeable

conditions.   (Id. ¶¶ 33, 48 (noting that a Honeywell technical

bulletin stated that “data taken at higher temperatures on a

rapid time scale can be used to determine data at lower

temperatures on a much slower time scale”).)    These test results,

which Honeywell either failed to disclose or obscured, suggested

that Z Shields would quickly lose tensile strength even under

typical use conditions and with proper storage.    (Id. ¶¶ 35-36,

43-73.)   Z Shield vests could not satisfy five-year warranties

because in typical conditions, their ballistic integrity

deteriorated much more quickly than did the ballistic integrity

of body armor made with other materials.    (Id. ¶ 49.)     The

storage advisory does not address such a defect.    Thus,

acknowledging the storage advisory does not void this claim

brought under an implied certification theory of falsity.         Cf.

Boisjoly v. Morton Thiokol, Inc., 706 F. Supp. 795, 809 (D. Utah

1988) (noting that the government’s complaint failed to satisfy

the falsity element under the FCA when “the complaint itself

[alleged the government’s] knowledge of the claimed defects in

the same sentences in which those defects [were] identified”).
                               - 16 -

     B.   Fraudulent inducement

     “[E]ven in the absence of evidence that the claims were

fraudulent in themselves,” claims that were submitted under a

contract procured by fraud can be actionable.    United States ex

rel. Bettis v. Odebrecht Contractors of Cal., Inc., 393 F.3d

1321, 1326 (D.C. Cir. 2005) (further stating that Congress

intended that “‘each and every claim submitted under a contract

. . . or other agreement which was originally obtained by means

of false statements or other corrupt or fraudulent conduct . . .

constitutes a false claim” under § 3729(a) (quoting S. Rep. No.

99-345, at 9 (1986))).   In United States ex rel. Schwedt v.

Planning Research Corp., 59 F.3d 196, 197 (D.C. Cir. 1995), the

defendant contracted to design software for an agency within the

Department of Labor.   The court of appeals noted that the

plaintiff could have pled a § 3729(a)(1) claim by alleging that

the defendant “made an initial misrepresentation about its

capability to perform the contract in order to induce the

government to enter into the contract[,] and . . . this original

misrepresentation tainted every subsequent claim made in relation

to the contract[.]”    Id. at 199.   The government’s complaint here

alleges –– just as the court in Schwedt hypothesized that a

complaint could –– that Honeywell’s misrepresentations about

Zylon’s accelerated deterioration induced Armor Holdings to sell

Z Shields to the government (see Compl. ¶ 33 (“Honeywell knew
                                - 17 -

that Armor Holdings relied on Honeywell’s technical expertise

regarding Z shield[.]”); id. ¶ 36 (“Honeywell knew that Armor

Holdings lacked the technical expertise to assess” test results

Honeywell shared with Armor Holdings)), and these

misrepresentations tainted all of Armor Holdings’ claims for

payment from the government.    Thus, the complaint also states a

§ 3729(a)(1) claim under a fraudulent inducement theory.

     C.    Knowledge

     A person acts knowingly if he “(1) has actual knowledge of

the information; (2) acts in deliberate ignorance of the truth or

falsity of the information; or (3) acts in reckless disregard of

the truth or falsity of the information[.]”5   31 U.S.C. § 3729(b)

(2000).6   Because Rule 9(b) permits knowledge to be pled

generally, there is no basis for dismissal for failure to plead

knowledge with particularity.    However, “the practical

difficulties of proving scienter do[] not absolve plaintiffs of

their duty to plead some facts from which the court may

reasonably infer knowledge[.]”    Elemary v. Philipp Holzmann A.G.,

533 F. Supp. 2d 116, 132 (D.D.C. 2008).   The government’s

     5
       The FCA does not require proof of a specific intent to
deceive when a defendant presents false or fraudulent claims to
the government. 31 U.S.C. § 3729(b) (2000); United States v. TDC
Mgmt. Corp., Inc., 24 F.3d 292, 296 (D.C. Cir. 1994).
     6
       FERA amended this provision, altering the definition of
knowledge in a fashion not material here. In any event, the
amended provision does not apply to the conduct at issue. See
supra n.2.
                              - 18 -

awareness at the time it paid a claim of the circumstances it

later pleads as a basis for asserting a false claim is relevant

to determining the defendant’s scienter on a motion for summary

judgment, see United States ex rel. Bettis v. Odebrecht

Contractors of Cal., Inc., 297 F. Supp. 2d 272, 285 n.22 (D.D.C.

2004), but not on a motion to dismiss.   See United States ex rel.

Hagood v. Sonoma Cnty. Water Agency, 929 F.2d 1416, 1421 (9th

Cir. 1991).

     Honeywell argues that the complaint does not plead

sufficiently that Honeywell knew the claims Armor Holdings was

submitting were false because “the sum of the Government’s

allegations that might pertain to knowledge reduce to a

disagreement with Honeywell’s scientific judgment about which

. . . datasets . . . best predicted Z Shield’s real-world

performance.”   (Def.’s Mem. at 25.)   “[M]ere disagreements over

scientific opinion, methodology, and judgments do not amount to

claims under the FCA.”   Harris, 275 F. Supp. 2d at 6.    However,

the complaint alleges that “at the time Honeywell manufactured

and sold Z Shield, it possessed a wealth of scientific data

showing that Z Shield degraded quickly over time in hot and humid

environmental conditions” and that “Honeywell understood that

this degradation would negatively impact the ballistic

performance of bullet proof vests containing Z Shield[.]”

(Compl. ¶ 4.)   Moreover, “Honeywell discouraged Armor Holdings
                                - 19 -

from taking steps to notify the end users about problems with Z

Shield or to mitigate the risk . . . due to a concern with the

negative market impact[.]”   (Id. ¶ 5.)    No matter how Honeywell

chooses to characterize these allegations, the government has

pled that Honeywell intentionally obscured its Z Shield data, as

it “understood” that the negative data could have a detrimental

impact upon its market share.    These allegations allow for the

reasonable inference that Honeywell had actual knowledge of the

falsity of its representations.

II.   FALSE STATEMENTS

      The government alternatively pleads a claim under 31 U.S.C.

§ 3729(a)(2) (2000), which created a cause of action against

anyone who “knowingly makes, uses, or causes to be made or used,

a false record or statement to get a false or fraudulent claim

paid or approved by the Government.”     Section 3729(a)(2) attaches

FCA liability to a defendant who prepares in support of a claim a

statement it knows to be a misrepresentation, even if that

defendant did not actually submit either the claims or the

statement to the government.7    United States ex rel. Totten v.

      7
       FERA amended § 3729(a)(2). The amended provision, 31
U.S.C.A. § 3729(a)(1)(B) (West 2011), creates a cause of action
against anyone who “knowingly makes, uses, or causes to be made
or used, a false record or statement material to a false or
fraudulent claim[.]” FERA provided for § 3729(a)(1)(B)’s
retroactive application “to all claims under the False Claims Act
. . . that are pending on or after” June 7, 2008. P.L. 111-21,
§ 4 at 1625. The word “claims,” as it applies in the relevant
provision, refers to “a defendant’s request for payment” and not
                              - 20 -

Bombardier Corp., 380 F.3d 488, 501 (D.C. Cir. 2004) (noting that

“(a)(2) is complementary to (a)(1), designed to prevent those who

make false records or statements . . . from escaping liability

solely on the ground that they did not themselves present a claim

for payment or approval”); see also Harris, 275 F. Supp. at 6

(noting that “the main purpose of section 3729(a)(2) is to remove

any defense that the defendants themselves did not submit false

claims to the government”).   To prove a violation of the false

statements provision, “a plaintiff must show that (1) the

defendant created a record and used this record to get the

government[] to pay its claim, (2) the record was false, and

(3) the defendants knew that the record was false.”   Harris, 275

F. Supp. 2d at 6.

     A.    Falsity

     Honeywell argues that the government has not alleged a false

record or statement that Honeywell made to get the government to

pay a false or fraudulent claim; the complaint pleads merely the

existence of scientific disagreement as to the efficacy of the Z

Shield.   (Def.’s Mem. at 20-21.)   In many instances, a court

cannot determine whether the false statements alleged in a

complaint constitute a non-actionable scientific disagreement or

to “civil actions for FCA violations.” United States v. Sci.
Applications Int’l Corp., 653 F. Supp. 2d 87, 107 (D.D.C. 2009).
Because the complaint does not allege that any requests for
payment were pending after August 2005, the unamended false
statements provision applies.
                                - 21 -

difference in interpretation without also considering the

complaint’s allegations regarding the defendant’s knowledge of

the falsity.   See United States ex rel. Lamers v. City of Green

Bay, 998 F. Supp. 971, 986 (E.D. Wis. 1998) (noting that

“[a]lthough discussing ‘falsity’ as a distinct element in an FCA

violation has a certain heuristic appeal, in practice courts have

found it impossible to give meaning to the term without also

implicating the third element, the requirement that the defendant

had ‘knowledge’ of the alleged falsity”).   Here, the complaint

alleges that Honeywell cherry-picked the data it disclosed to

Armor Holdings and to the public so that it could continue to

sell Z Shields.   (Compl. ¶¶ 4-5.)   Thus, the complaint alleges

not merely objective scientific disagreement as to the findings

of the various tests Honeywell conducted, but Honeywell’s bad

faith in selectively disclosing those findings.   See supra I(C).

Moreover, the complaint alleges that Honeywell did so

“knowingly.”   (Compl. ¶ 91.)   Pleading that a defendant

“knowingly misrepresented and concealed facts” satisfies the

falsity requirement under 29 U.S.C. § 3729(a)(2).8   United States

     8
       To the extent that Honeywell argues that the data did not
establish conclusively that the Zylon fiber degraded more quickly
than expected, this is a factual issue inappropriate for
resolution at this stage of the litigation, before either of the
parties has moved for summary judgment. When the complaint is
construed in the light most favorable to the plaintiff, the
government’s allegations that the concealed data show that the
Zylon degraded more quickly than expected pleads sufficient
falsity to survive a motion to dismiss.
                                - 22 -

ex rel. Westrick v. Second Chance Body Armor, Inc., 709 F. Supp.

2d 52, 56 (D.D.C. 2010) (holding that the complaint pled a claim

under the unamended § 3729(a)(2) in part because it tracked the

language of the statute); see also Fed. R. Civ. P. 9(b)

(providing that knowledge may be “alleged generally”).

     B.   Intent

     In Allison Engine Co., Inc. v. United States ex rel.

Sanders, 553 U.S. 662, 668-69 (2008), the Supreme Court held that

the phrase “to get” requires that a person has the “purpose of

getting a false or fraudulent claim ‘paid or approved by the

Government’ in order to be liable under § 3729(a)(2).”    “[A]

subcontractor violates § 3729(a)(2) if the subcontractor submits

a false statement to the prime contractor intending for the

statement to be used by the prime contractor to get the

government to pay its claim.”    Id. at 671.   The Court interpreted

the provision to make a defendant “‘answerable for . . . the

natural, ordinary and reasonable consequences of his conduct’”

but not more.   Id. at 672 (quoting Anza v. Ideal Steel Supply

Corp., 547 U.S. 451, 470 (2006)).

     Honeywell argues that “the Complaint fails to allege that

Honeywell’s express purpose in making any alleged false statement

or record was to obtain payment from the . . . Government itself”

(Def.’s Mem. at 28 (internal quotation marks omitted)), and that

“the Complaint nowhere alleges and could not allege that
                               - 23 -

Honeywell intended for the Government to rely on any statement or

record.”   (Id. at 29 (emphasis omitted).)    The first argument

incorrectly assumes that a complaint must allege that the

defendant’s express purpose in making a false statement is for

the defendant to obtain payment directly from the government

itself.    However, it is sufficient to allege that a subcontractor

intended for the prime contractor to receive payment from the

government.   See Sanders, 553 U.S. at 671.    The second argument

misconstrues the government’s theory of § 3729(a)(2) liability,

which rests on Honeywell manipulating the data it communicated to

Armor Holdings so that the government would rely on the lack of

available definitive data about Zylon’s loss of fiber strength

when determining whether to continue purchasing Z Shield vests.

(See Compl. ¶ 92 (“Had the United States known of the defective

nature of the Z Shield Vests it would not have purchased them for

use in the ballistic protection of law enforcement officers.”).)

Cf. Sanders, 553 U.S. at 671-72 (“If a subcontractor . . . makes

a false statement to a private entity and does not intend the

Government to rely on that false statement as a condition of

payment, the statement is not made with the purpose of inducing

payment of a false claim ‘by the Government.’”).    Thus, the

government has alleged adequately that the natural consequences

of Honeywell misrepresenting and concealing unfavorable data

about Zylon’s degradation caused Armor Holdings to submit to the
                                 - 24 -

government false claims for payment.      See Westrick, 709 F. Supp.

2d at 56.

III. UNJUST ENRICHMENT

     To state a claim for unjust enrichment, a plaintiff must

allege that a benefit was conferred upon a defendant, the

defendant accepted the benefit, and it would be unjust for the

defendant not to pay the plaintiff the value of the benefit.

Miller v. Holzmann, Civil Action No. 95-1231 (RCL), 2007 WL

710134, at *7 (D.D.C. Mar. 6, 2007).      “[U]njust enrichment must

be determined by the nature of the dealings between the recipient

of the benefit and the party seeking restitution, and those

dealings will necessarily vary from one case to the next.”     4934,

Inc. v. D.C. Dep’t of Employment Servs., 605 A.2d 50, 56 (D.C.

1992); see also In re Lorazepam & Clorazepate Antitrust Litig.,

295 F. Supp. 2d 30, 51 (D.D.C. 2003).     The In re Lorazepam court

refused to dismiss a claim for unjust enrichment brought by a

group of plaintiffs, including insurance companies, against drug

manufacturers for payments made to reimburse subscribers for

prescriptions.   295 F. Supp. 2d at 51.    The court held that the

theory of unjust enrichment could apply to indirect payments

because plaintiffs had properly alleged defendants’ enrichment to

the plaintiffs’ own detriment and not just to the detriment of

plaintiffs’ subscribers.   Id.
                               - 25 -

     Honeywell argues that the government has not stated an

unjust enrichment claim because “Armor Holdings received the

benefit of its bargain with Honeywell, and the Government

received the benefit of its bargain with Armor Holdings.”

(Def.’s Mem. at 30.)   However, the government alleges that “the

United States paid for defective Z Shield vests due to false

statements and omissions by Honeywell” and that Honeywell

“received money, . . . indirectly, to which they were not

entitled.”   (Compl. ¶¶ 95, 97.)   Honeywell does not dispute that

it retained all the monies from its sales to Armor Holdings, and

the government amply has stated a claim for unjust enrichment.

See Westrick, 685 F. Supp. 2d at 142.    Whether Honeywell actually

performed its contract in full, such that Armor Holdings and the

government each received the benefit of their bargains, is a

question of fact that is inappropriate for resolution at the

motion to dismiss stage.

                       CONCLUSION AND ORDER

     The government has stated FCA and common law unjust

enrichment claims, and it has pled its allegations regarding

fraud with sufficient particularity to meet the standards

articulated under Rule 9(b).   Accordingly, it is hereby

     ORDERED that Honeywell’s motion [10] to dismiss be, and

hereby is, DENIED.
                         - 26 -

SIGNED this 8th day of July, 2011.

                         __________/s/_______________
                         RICHARD W. ROBERTS
                         United States District Judge