Court Opinion

ID: 2666434
Source: CourtListenerOpinion
Date Created: 2014-04-04 08:56:35.894215+00
Date Added: 2024-06-11T13:23:37.021503
License: Public Domain

UNITED STATES DISTRICT COURT
                  FOR THE DISTRICT OF COLUMBIA

_____________________________
                              )
UNITED STATES, ex rel.        )
WESTRICK,                     )
                              )
          Plaintiffs,         )
                              )
          v.                  )    Civil Action No. 04-280 (RWR)
                              )
SECOND CHANCE BODY ARMOR,     )
INC., et al.,                 )
                              )
          Defendants.         )
_____________________________ )

                  MEMORANDUM OPINION AND ORDER

     The government, by relator Aaron J. Westrick, filed a

complaint against defendants Second Chance Body Armor, Inc., and

related entities (collectively “Second Chance”), Toyobo Co.,

Ltd., Toyobo America, Inc. (collectively “Toyobo”), and

individual defendants Thomas Bachner, Jr., Richard Davis, Karen

McCraney, and James “Larry” McCraney, alleging violations of the

False Claims Act (“FCA”), 31 U.S.C. §§ 3729-33, as well as common

law claims in connection with the sale of Zylon body armor.

Toyobo moved to dismiss the suit by the government for failure to

state a claim and sufficiently plead fraud.   Because the

government has sufficiently alleged its FCA and common law

violations, Toyobo’s motion to dismiss will be denied.

                           BACKGROUND

     In May 1996, corporate defendants Second Chance and Toyobo

contracted for Toyobo to supply Second Chance with the synthetic
                                 - 2 -

fiber "Zylon" for use in the manufacture of Second Chance

bulletproof vests.    (Am. Compl. ¶ 32.)   Zylon was believed to be

highly durable, have a long life cycle, and resist heat,

prompting Second Chance to promote its new Ultima/Ultimax

bulletproof vests as the “world's thinnest, lightest, and

strongest armor" featuring the "world's strongest fiber, PBO

Zylon."    (Id. ¶¶ 39-40.)   Second Chance sold over 66,000 vests

between 1998 and 2004 to law enforcement agencies throughout the

United States, including over 40,000 to the United States

government.    Each vest carried a five-year warranty.    (Id. ¶¶ 27,

30.)

       Beginning in July 1998, Toyobo and Second Chance discovered

and exchanged communications about the degradation of Zylon

fibers resulting from the exposure to light, heat and humidity.

However, Toyobo continued to supply Zylon to Second Chance,

which, in turn, sold the vests containing Zylon without warning

purchasers and users about the potential strength loss or issuing

a recall of existing vests.     (Id. ¶¶ 45-62.)   The government

alleges that the defendants knew, within the meaning of the FCA,

that the body armor was defective and that Zylon provided less

protection than “[d]efendants had represented [and] warranted

and/or [was] required by the contract specifications.”      (Id.

¶ 1.)    Additionally, during 2001, Toyobo informed Second Chance

and released additional data showing that it had not found any
                                - 3 -

serious indication of Zylon strength degradation despite

conflicting evidence in its possession.     (Id. ¶¶ 58-59, 63.)

     Following a Toyobo report revealing a dramatic drop in Zylon

strength (id. ¶ 80), Second Chance and Toyobo held a “Crisis

Management Meeting” in which they agreed that all communications

related to Zylon “were to be ‘pre-emptive, consistent,

coordinated, and confidence inspiring.’”     (Id. ¶ 81.)    Second

Chance asked Toyobo to remedy the problems with Zylon, as it

considered the concerns with the material to be a “Toyobo

problem.”   (Id. ¶ 85.)   In response, Toyobo offered Second Chance

a new volume discount program which resulted in a $6 million

payment to Second Chance, retracted data showing dramatic drops

in material strength, and assured Second Chance representatives

that this strength would eventually level out.     (Id. ¶¶ 86-88.)

Despite these promises, Toyobo continued providing updates to

Second Chance confirming that Zylon fiber lost strength through

heat and moisture exposure.   (Id. ¶ 92.)

     In June 2003, a California police officer was shot and

killed during a traffic stop when two bullets passed through the

Second Chance Zylon vest he was wearing.     (Id. ¶ 101.)    That same

month, a Pennsylvania officer was shot in the stomach and

disabled when a bullet pierced the Second Chance Zylon vest he

was wearing which had been made less than one year earlier.       (Id.

¶ 102.)   Second Chance then discontinued selling vests made of
                                 - 4 -

Zylon, notified purchasers of the degradation problem, offered

options including an upgrade of existing vests or discounts on

new vests and issued a safety notice calling for removing its

vests containing Zylon from service.     (Id. ¶¶ 104-05, 112.)

     Aaron Westrick, a former employee of Second Chance, filed a

qui tam complaint against Second Chance and Toyobo under the FCA,

31 U.S.C. §§ 3729-33.   (Id. ¶ 5.)   The government intervened

under 31 U.S.C. § 3730(a)(2), and filed an amended complaint,

adding four Second Chance executives as individual defendants –-

Thomas Bachner, Jr., Richard C. Davis, Larry McCraney, and Karen

McCraney.   (Id. ¶¶ 5, 16-19.)   The amended complaint asserted

claims against all defendants for (1) violations of the FCA

through presenting fraudulent claims, making false statements and

conspiring to defraud, (2) common law fraud, and (3) unjust

enrichment.   (Id. ¶¶ 113-15, 116-18, 119-21, 122-30, 136-39.)

Claims for payment by mistake and breach of contract were

asserted against only Second Chance.     (Id. ¶¶ 131-35, 140-43.)

Toyobo filed a motion to dismiss under Federal Rule of Civil

Procedure 12(b)(6) claiming that the government failed to plead

fraud with the specificity required by Federal Rule of Civil

Procedure 9(b), failed to plead factual allegations that Toyobo

presented a false claim for payment or a false record or

statement to the United States, failed to plead the existence of

a conspiracy, and failed to plead factual allegations that
                               - 5 -

supported any of its common law claims.1     (Defs.’ Mem. in Supp.

of Mot. to Dismiss (“Defs.’ Mem.”) at 1-2.)

                             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, 624-25 (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 him all reasonable

inferences drawn from those facts, but need not accept either

inferences unsupported by the facts or legal conclusions cast in

the form of factual allegations.   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, acceptable 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

1
     Both the government and relator Westrick filed oppositions
to Toyobo’s motion to dismiss. Under the qui tam provisions of
the FCA, though, “[i]f the Government proceeds with the action,
it shall have the primary responsibility for prosecuting the
action[.]” 31 U.S.C. 3730(c)(1).
                                 - 6 -

draw the reasonable inference that the defendant is liable for

the misconduct alleged.”   Id.

     Rule 9(b), which applies to FCA actions,2 requires that

“[i]n alleging fraud or mistake, a party must state with

particularity the circumstances constituting fraud or mistake.

Malice, intent, knowledge, and other conditions of a person’s

mind may be averred 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 (quoting Felton v. Walston & Co.,

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 averments be “simple[,]

2
     United States ex rel. Totten v. Bombardier Corp. (“Totten
I”), 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).
                               - 7 -

concise and direct” and “short and plain statement[s]” of each

claim.   Joseph, 642 F.2d at 1386 (quoting Fed. R. Civ. P. 8); 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

a qui tam case, Rule 9(b) requires that the pleader “‘state the

time, place and content of the false misrepresentations, the fact

misrepresented and what was retained or given up as a consequence

of the fraud[,]’ . . . [and] individuals allegedly involved in

the fraud.”   United States ex rel. Williams v. Martin-Baker

Aircraft Co., 389 F.3d 1251, 1256 (D.C. Cir. 2004) (quoting Kowal

v. MCI Comm’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 (“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 defense at

trial, and (2) that plaintiff has substantial prediscovery
                               - 8 -

evidence of those facts.” (quoting Harrison v. Westinghouse

Savannah River Co., 176 F.3d 776, 784 (4th Cir. 1999))).

I.   PRESENTMENT OF FALSE CLAIMS

     The FCA allows a private individual –- a relator –- to bring

a cause of action seeking penalties and treble damages 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) (1994).3   See 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).   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) (1994); United States v. TDC

Mgmt. Corp., Inc., 24 F.3d 292, 296 (D.C. Cir. 1994).   After

relator Westrick filed his initial complaint, the government

filed an amended complaint claiming that Second Chance made --

3
     Congress amended the FCA in 2009, 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, at 1625. Since the alleged conduct
occurred prior to 2009, the provision as amended in 2009 does not
apply here.
                                - 9 -

and that Toyobo caused to be made -- fraudulent claims seeking

payment from the government and its grantees.    (Am. Compl.

¶ 114.)

     Toyobo moves to dismiss arguing that the complaint fails to

provide the specific allegations required by Rule 9(b) to support

liability under § 3729(a)(1).   It contends that the government

has not factually alleged that Toyobo knew of Second Chance’s

false claims for payment or that it acted in deliberate ignorance

or reckless disregard for the truth.    (Defs.’ Mem. at 9.)

Indeed, Toyobo contests that it presented any false statements to

the government and asserts that liability is vested solely in

Second Chance.   (Id. at 10 (“Plaintiffs do not allege any facts

demonstrating that Toyobo knew that Second Chance’s Zylon-

containing vests would not satisfy the five-year warranty.     To

the contrary, Plaintiffs’ own account of the facts shows that

Toyobo provided absolutely no warranties and refused requests by

Second Chance that Toyobo provide a warranty on Zylon fiber.”).)

Toyobo insists that it updated Second Chance as to Zylon’s

degradation under certain conditions and that all fraudulent

claims for presentment must be attributed solely to Second

Chance.

     A.   Presentment

     A “claim” includes “any request or demand, whether under a

contract or otherwise, for money . . . which is made to a
                              - 10 -

contractor, grantee, or other recipient if the United States

Government provides any portion of the money . . . which is

requested or demanded, or if the Government will reimburse such

contractor . . . for any portion of the money . . . which is

requested or demanded.”   31 U.S.C. § 3729(c) (1994).4     The FCA

covers claims presented directly to the government as well as

claims presented to grantees who are subsequently reimbursed by

the government.   United States ex rel. Totten v. Bombardier Corp.

(“Totten II”), 380 F.3d 488, 493 (D.C. Cir. 2004) (“[L]iability

will attach if the Government –- . . . upon presentment of the

claim –- reimburses the grantee for funds that the grantee has

already disbursed to the claimant.”).

     The government alleges that Second Chance presented false or

fraudulent invoices or claims for reimbursement through direct

sales by Second Chance to federal agencies, sales to federal

agencies through the government’s supply schedule (“FSS”), and

sales to state and local law enforcement agencies under a federal

grant program, the Bulletproof Vest Partnership Grant Act

(“BPVPGA”).5   (Am. Compl. ¶¶ 25-27, 30-31, 49, 54.)     Second

4
     Congress also amended this provision in 2009. Because the
amended provision does not apply retroactively, P.L. 111-21, at
1625, the unamended provision applies here.
5
     Toyobo also moves to dismiss the claims against it based on
purchases made under the BPVPGA program claiming that vests
purchased under this program need only meet standards described
by the National Law Enforcement and Corrections Technology Center
of the National Institute of Justice (“NIJ”). See 42 U.S.C.
                               - 11 -

Chance also directly presented invoices to the government for two

types of requests for reimbursement –- direct sales and FSS

sales.   Second Chance submitted invoices from the BPVGPA sales to

state and local law enforcement agencies first to non-federal

entities and then to the United States.    (Id. ¶¶ 27, 30.)

     Toyobo contends that the government does not allege that

Toyobo itself presented any false claims to the government.

(Defs.’ Mem. at 10.)    However, as is discussed below, the

government has factually alleged a fraudulent scheme in which

Toyobo played a part.    “An argument that the presentation of the

claims was the work of another is unavailing as a means to avoid

liability under the False Claims Act.”    Pogue, 238 F. Supp. 2d at

266 (further noting that the “False Claims Act extends beyond the

person making a false claim to ‘one who engages in a fraudulent

course of conduct’ that induces payment by the government”

3796ll-2(1). Because the NIJ standards do not require product
warranties and the government has not alleged that Toyobo itself
warranted the vests, Toyobo claims that the government has not
stated a claim for fraudulent activity as to the BPVGPA indirect
purchases. (Defs.’ Mem. at 29-32.) The government counters that
even if the vests for which claims were submitted passed NIJ
certification, they were fraudulent under Second Chance’s own
warranty. (Gov’t Opp’n to Defs.’ Mot. to Dismiss (“Gov’t Opp’n”)
at 42.) Accepting the government’s allegations as true, even if
the vests met NIJ requirements, the government has factually
alleged that the vests failed to comply with Second Chance’s
warranty due to joint conduct by Toyobo and Second Chance.
Because the government claims that the vests were deficient under
Second Chance’s warranty and Toyobo does not suggest that NIJ
certification should supplant Second Chance’s warranty as to
BPVGPA purchases, Toyobo has not established that it cannot be
liable for fraudulent claims under the BGPVA program.
                               - 12 -

(quoting United States v. Raymond & Whitcomb Co., 25 F. Supp. 2d

436, 445 (S.D.N.Y. 1999))); see also United States v. Bornstein,

423 U.S. 303, 306 (1976) (acknowledging that a subcontractor may

be liable under the FCA where the contractor presented false

claims for payment to the government).6   Although Toyobo never

warranted the Zylon material and Second Chance submitted the

claims for payment (Defs.’ Mem. at 11), the government has pled

that Toyobo engaged in activity in concert with Second Chance

that induced presentment of the false claims.    Accordingly,

submitting direct claims and reimbursed claims satisfies the

FCA’s presentment requirement.    See Totten II, 380 F.3d at 493.

     B.   Fraud

     Rule 9(b) requires that a complaint allege facts regarding a

fraudulent request for payment with a higher degree of

particularity.    The FCA attaches liability not to underlying

fraudulent activity unrelated to the claim for payment or to the

6
     Toyobo relies on United States ex rel. Grynberg v. Ernst &
Young LLP, 323 F. Supp. 2d 1152 (D. Wy. 2004), for the
proposition that the government must allege affirmative action by
Toyobo to establish that Toyobo caused the presentment of a false
claim. (Defs.’ Reply to Gov’t Opp’n at 7.) “Courts have
previously held, in addressing Rule 12(b)(6) motions, that
allegations that a defendant had direct and concrete knowledge of
a fraud on the government but did nothing to stop it are not
enough to state a claim under the FCA.” Grynberg, 323 F. Supp.
2d at 1155. However, the Grynberg court also recognized that
“the word ‘cause’ in § 3729(a) has been used to reach persons or
firms that do not deal directly with the government, but receive
a financial benefit indirectly from the government by motivating
an intermediary to file a false report.” Id.
                              - 13 -

government’s wrongful payment, but to the claim for payment

submitted.   See United States ex rel. Totten v. Bombardier Corp.

(“Totten I”), 286 F.3d 542, 551 (D.C. Cir. 2002).   While, by

itself, “the bare assertion that defendants delivered goods that

did not conform to contractual specifications is not enough to

state a violation of the FCA,” id. (emphasis added), fraud is

pled if a plaintiff alleges fraud in the inducement for payment.

See John T. Boese, Civil False Claims and Qui Tam Actions 2-18 to

2-19 (3d ed. 2006).   “[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) (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” (quoting S. Rep. No. 99-345, at 9

(1986))); see also United States ex rel. Schwedt v. Planning

Research Corp., 59 F.3d 196, 199 (D.C. Cir. 1995) (allowing FCA

liability to attach because the defendant made an initial

misrepresentation about its ability to comply with contractual

terms, inducing the government to enter into the contract, and

finding that “this original misrepresentation tainted every

subsequent claim made in relation to the contract, including [the
                             - 14 -

defendant’s] claims for payment”).    At the Rule 12(b)(6) stage,

the government is required merely to allege with factual

specificity that defendants duplicitously induced the government

to pay for a product, not to prove the “specific fraudulent

scheme upon which the Complaint is based.”   (Defs.’ Mem. at 15.)

See McCready, 251 F. Supp. 2d at 118 (“[A] plaintiff need not

plead his legal theory of fraud in the complaint; the complaint

must only plead the facts that form the basis for the fraud.”).7

     Here, the government alleges that Second Chance predicated

each Zylon vest sale and each consequent invoice submission upon

a fraudulently represented five-year warranty despite the fact

that Second Chance and Toyobo knew the vests lost strength when

exposed to sunlight, high temperatures and humidity (Am. Compl.

¶¶ 27, 30-31, 54), inducing the government to pay the claims.8

7
     Toyobo cites to the Totten I holding that a relator’s
complaint did not include a sufficiently detailed description of
any actionable claims. (Defs.’ Mem. at 15.) The court stated
that “the bare assertion that defendants delivered goods that did
not conform to contractual specifications is not enough to state
a violation of the FCA. Instead, in the sections relevant here,
the statute proscribes only false ‘claims’ –- that is, actual
demands for money or property[.]” Totten I, 286 F.3d at 551.
However, the government clearly has alleged not only the
fraudulent activity but also that claims were submitted to the
government for payment. (Am. Compl. ¶¶ 30-31.) Cf. Totten I,
286 F.3d at 551 (finding that the relator had not alleged that
defendants “actually made false demands or submitted false
records” to anyone).
8
     Toyobo argues that the government must prove that Toyobo had
a duty to disclose information related to Zylon strength loss to
the government. (Defs.’ Mem. at 20-21.) However, the government
has adequately alleged that Toyobo, in concert with Second
                              - 15 -

The government has pled fraudulent requests for payment with

sufficient particularity such that Toyobo is more than able to

“defend against the charge[s] and not just deny that [it] ha[s]

done anything wrong.”   Lee, 245 F.3d at 1052 (quoting Neubronner

v. Milken, 6 F.3d 666, 671 (9th Cir. 1993)).

     As it must, the government also sets out in detail “the

time, place and content” of the fraud, “identif[ies] individuals

allegedly involved in the fraud[,]” and makes plain what was

“retained or given up as a consequence of the fraud.”   Williams,

389 F.3d at 1256 (citations omitted); accord Totten I, 286 F.3d

at 552 (requiring a relator to “set forth an adequate factual

basis for his allegations [regarding the submission of false

claims] . . . , including a more detailed description of the

specific falsehoods that are the basis of his suit”).   For

example, contents of the alleged fraud –- that Toyobo retracted

negative data contemporaneously with its offer of a $6 million

rebate or discount program for continued purchase of Zylon

fibers, and made promises to Second Chance that degradation

studies would “level out” after Toyobo’s “fiber strength tests on

woven Zylon fabric . . . showed a greater and more serious

Chance, engaged in a “fraudulent course of conduct” in violation
of the FCA. See Pogue, 238 F. Supp. 2d at 266. The government
does not need to allege any duty by Toyobo to report if it
alleges that Toyobo knowingly assisted in causing false claims to
be submitted to the government. See United States ex rel. Riley
v. St. Luke’s Episcopal Hosp., 355 F.3d 370, 378 (5th Cir. 2004).
                                - 16 -

degradation than Toyobo’s previously published data of unused

Zylon fiber” –- are averred with detail.    (Am. Compl. ¶¶ 87-89,

107.)   Toyobo’s actions may constitute the underlying fraudulent

conduct leading to Second Chance’s submission of false claims.

See United States ex rel. Marcus v. Hess, 317 U.S. 537, 544-45

(1943) (finding several contractors liable because the language

of the FCA “indicate[s] a purpose to reach any person who

knowingly assisted in causing the government to pay claims which

were grounded in fraud, without regard to whether that person had

direct contractual relations with the government”).

     The government further alleges the time span –- from May

1996 until October 2003 –- during which Toyobo partnered with and

supplied defective Zylon fiber to Second Chance.9   (Am. Compl.

¶¶ 32-33, 107.)   Cf. Williams, 389 F.3d at 1257 (finding that the

complaint only “nebulously allege[d]” the period in question and

did not allege a start date).    Additionally, it was during a

three-year period from October 1998 until at least July 2001 that

9
     Some courts have held that in cases involving complex or
extensive fraud schemes, the Rule 9(b) standard requiring
particularity may be relaxed. See, e.g., Harris, 275 F. Supp. 2d
at 8 (collecting cases and explaining that due to the complexity
of the scheme and the period of time during which the scheme
allegedly occurred, an allegation of a span of time is
sufficient). However, the D.C. Circuit has not adopted
explicitly the standard articulated by these courts. Williams,
389 F.3d at 1258. Here, the government did more than meet these
relaxed requirements; it provided “exact dates, named individual
defendants, noted where the fraud took place, [and] alleged facts
that exemplified the fraudulent scheme[.]” Id.
                               - 17 -

Toyobo and Second Chance were allegedly silent about the

increasing research showing the high rates of Zylon fabric

degradation.    The government provides numerous dates of specific

memos, faxes, meetings, and sales events at or during which the

parties agreed to withhold or downplay the discoveries regarding

Zylon.   (See, e.g., Am. Compl. ¶¶ 67, 68, 70, 75, 107.)

     While the government claims that fraud was committed broadly

throughout the United States, it specifically alleges the

location of meetings at which the fraudulent scheme was planned

or furthered.   (See, e.g., id. ¶¶ 81, 88.)   The government also

specifies the identities of Second Chance executives, named as

individual defendants, who were involved in presenting false

claims and were present at specific meetings and signed letters

or sent faxes warranting -- or causing their subordinates to

falsely warrant -- Second Chance Zylon vests for five years.

(See, e.g., id. ¶¶ 60-62, 64, 88, 93, 96-97.)   Although the

government does not name Toyobo executives who participated in

the fraudulent scheme, this has not frustrated Toyobo’s ability

thus far to plead responsively or defend itself, as is clear from

the extensive arguments on the merits propounded in its briefs.10

10
     Toyobo accurately argues that the government does not
specifically identify “a single Toyobo employee involved in the
alleged fraud.” (Defs.’ Mem. at 17.) However, as the government
notes, even though “Toyobo argues that it cannot determine who at
Toyobo made the false statement or participated in the
conspiracy, . . . Toyobo itself attached copies of the Toyobo
memoranda and letters referred to in the complaint to its motion
                               - 18 -

While the D.C. Circuit “require[s] pleaders to identify

individuals allegedly involved in the fraud” under Rule 9(b),

Williams, 389 F.3d at 1256, the Williams court disapproved of

that complaint’s failure to identify individual defendants

involved where the relator had worked with both defendant

companies for five years.   Id. at 1257.   There is no similar

allegation here that relator Westrick, a Second Chance employee,

had ever worked with Toyobo over an extended period of time.

Further, the Williams court found that the government’s failure

to identify specific individuals was but one of multiple

shortcomings of the complaint.   Id.; see also Lee, 245 F.3d at

1051 (“[Relator] did not specify the types of tests implicated in

the alleged fraud, identify the [defendant’s] employees who

performed the tests, or provide any dates, times, or places the

tests were conducted.”).    Under these circumstances, the absence

of named Toyobo employees should not render the otherwise

detailed complaint deficient under Rule 9(b).    See United States

ex rel. Bledsoe v. Cmty. Health Sys., Inc., 501 F.3d 493, 509

(6th Cir. 2007) (“[W]here the corporation is the defendant in a

FCA action, we hold that a relator need not always allege the

specific identity of the natural persons within the defendant

corporation that submitted the false claims.    Instead, such

information is merely relevant to the inquiry of whether a

to dismiss.”   (Gov’t Opp’n at 38 n.15.)
                              - 19 -

relator has pled the circumstances constituting fraud with

particularity.” (emphasis added)).

     Finally, the government makes clear that all monies paid by

the government either directly or as reimbursement for falsely-

warranted Zylon vests were “given up as a consequence of the

fraud.”   Williams, 389 F.3d at 1256; see Corsello v. Lincare,

Inc., 428 F.3d 1008, 1013 (11th Cir. 2005) (reasoning that

plaintiff’s complaint did not satisfy Rule 9(b) because it used

vague allegations which “failed to provide a factual basis to

conclude fraudulent claims were ever actually submitted to the

government in violation of the False Claims Act”).   Given that

numerous contracts and purchases by disparate entities are

involved in this action, it is sufficient that the government

demands “the return of all payments by the United States directly

or indirectly to Second Chance for Zylon vests . . . for fiscal

years 1998 to the present time.”   (Am. Compl. ¶ 138.)   The

government’s averments of fraud satisfy the requirements of Rule

9(b).

     C.    Knowledge

     A person acts knowingly if he acts with “actual knowledge,

deliberate ignorance or reckless disregard of the truth or

falsity of information.”   31 U.S.C. § 3729(b).   Because Rule 9(b)

permits knowledge to be pled generally, there is no basis for

dismissal for failure to plead knowledge with particularity.     The
                               - 20 -

government maintains that although Toyobo knew of Zylon’s

deficiencies, Toyobo continued in its partnership with Second

Chance to market Zylon-fiber vests, while concealing evidence of

and issuing misleading statements about degradation.     Toyobo

maintains that the government has not pled facts adequate to meet

the knowledge requirement because it has not shown that Toyobo

knowingly made fraudulent claims or that it knew that Second

Chance presented any claims to the government.     (Defs.’ Mem. at

11.)    However, the government has factually alleged that Toyobo

knew of and participated in making Second Chance’s warranty to

the government.    (See Am. Compl. ¶ 54.)   The government’s

allegations as to knowledge are sufficient.

II.    FALSE STATEMENTS

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

§ 3729(a)(2) (1994), which created a cause of action against

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

a false 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 that it knows to be a misrepresentation, even if that

defendant did not actually submit either the claims or the

statement to the government.    Totten II, 380 F.3d at 501 (noting

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

those who make false records or statements . . . from escaping
                              - 21 -

liability solely on the ground that they did not themselves

present a claim for payment or approval”).

     Congress amended § 3729(a)(2) in the Fraud Enforcement and

Recovery Act of 2009 (“FERA”).    The amended provision, 31

U.S.C.A. § 3729(a)(1)(B) (West 2010), 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,

at 1625.   Because this suit was pending on June 7, 2008, the

amended provision applies here.    The amended provision

“‘legislatively overrules’ the holding” of Allison Engine Co.,

Inc. v. United States ex rel. Sanders, 128 S. Ct. 2123 (2008).

United States v. Sci. Applications Int’l Corp., 653 F. Supp. 2d

87, 106 (D.D.C. 2009).   Sanders held that the original false

statements provision, § 3729(a)(2), required the government to

prove that “a defendant must intend that the Government itself

pay the claim.”   128 S. Ct. at 2128.   Congress intended for the

amended provision to eliminate any intent requirement, S. Rep.

No. 111-10 (2009), and instead for liability to attach when a

record or statement has “a natural tendency to influence” or “is

capable of influencing[] the payment or receipt of money or

property.”   31 U.S.C.A. § 3729(b)(4) (West 2010).   Additionally,
                               - 22 -

to state a claim under § 3729(a)(1)(B), the plaintiff must show

that the created statement or record was false and that the

defendant knew the statement or record was false.    Harris, 275 F.

Supp. 2d at 6.    The government alleges that Toyobo knowingly

misrepresented and concealed facts, creating a false record that

in part caused Second Chance to submit a false claim to the

government.    This more than satisfies the materiality

requirement.    Because the government has pled with sufficient

particularity the fraud involved, it has stated a cognizable

§ 3729(a)(1)(B) claim as to Toyobo.

III. CONSPIRACY TO DEFRAUD

     Anyone who “conspires to defraud the Government by getting a

false or fraudulent claim allowed or paid” may be subject to 31

U.S.C. § 3729(a)(3) (1994) liability.11   The FCA does not define

a conspiracy, but courts have held that general civil conspiracy

principles apply to FCA conspiracy claims.    See United States ex

rel. Durcholz v. FKW, Inc., 189 F.3d 542, 545 n.3 (7th Cir.

1999); United States v. Bouchey, 860 F. Supp. 890, 893 (D.D.C.

1994) (“the government must show: (1) that defendant conspired

with one or more persons to have a fraudulent claim paid by the

11
     Congress also amended this provision in FERA. The amended
provision imposes liability on anyone who “conspires to commit a
violation” of any substantive section of § 3729(a). 31 U.S.C.
§ 3729(a)(1)(C). However, this provision does not apply
retroactively, P.L. 111-21 (2009), and the claim will be analyzed
under the unamended statute.
                             - 23 -

United States, (2) that one or more of the conspirators performed

any act to have such a claim paid by the United States, and (3)

that the United States suffered damages as a result of the

claim.”).12

     Arguing that Toyobo and Second Chance together intended to

defraud buyers of Zylon vests, the government cites Toyobo’s six

million dollar “rebate” payment to Second Chance for the

continued use of Zylon fiber and Toyobo’s January 2002 retraction

of its earlier data showing a dramatic drop in Zylon fiber

strength as conspiratorial activities.   (Gov’t Opp’n to Defs.’

Mot. to Dismiss (“Gov’t Opp’n”) at 37-38.)   Despite Toyobo’s

claim that the government’s complaint contains no factual

allegations supporting an inference of conspiracy (Defs.’ Mem.

at 24), the government specifically alleges that the parties

acted with intent to defraud consumers when they decided not to

warn customers in December 2001 as they originally proposed to do

(Am. Compl. ¶¶ 83, 120), and Second Chance continued selling

vests with a five-year warranty until September 2003 when it

offered customers options to replace defective vests.   (Id.

¶¶ 104-05; see also Gov’t Opp’n at 37-38.)   The detailed

12
     While there is disagreement among courts and commentators as
to whether damages are a necessary element of a Section (a)(3)
claim, here damages are clearly alleged because the government
paid the claims at issue. Compare United States ex rel. Finney
v. Nextwave Telecom, Inc., 337 B.R. 479, 489 (S.D.N.Y. 2006) with
Boese at 2-29 n.62.
                              - 24 -

assertion about the meetings between Toyobo and Second Chance

fulfills the requirements for a conspiracy claim under

§ 3729(a)(3) at the motion to dismiss stage in the litigation.

Cf. United States ex rel. El Amin v. George Washington Univ., 26

F. Supp. 2d 162, 165 (D.D.C. 1998) (citing the complaint’s

failure to “identify any agreement between the parties to defraud

the government or to engage in any act that could constitute an

attempt to defraud the government” (emphasis omitted)); Corsello,

428 F.3d at 1014 (rejecting a plaintiff’s conspiracy claim where

he failed to provide specific allegations of an agreement or

overt act).

IV.   COMMON LAW FRAUD

      A plaintiff in an FCA action may plead -- if not ultimately

recover upon -- alternative common law theories.   See Fed. R.

Civ. P. 8(d)(3) (allowing a party to plead “as many separate

claims or defenses as it has regardless of consistency”); United

States ex rel. Purcell v. MWI Corp., 254 F. Supp. 2d 69, 79

(D.D.C. 2003).   A successful claim for common law fraud requires

“(1) a false representation (2) in reference to material fact (3)

made with knowledge of its falsity (4) and with the intent to

deceive (5) with action taken in reliance upon the

representation.”   Pence v. United States, 316 U.S. 332, 338

(1942).   The government has alleged that Toyobo failed to

disclose or misrepresented evidence of, among other things, the
                               - 25 -

material fact of Zylon’s degradation, with knowledge of the

misrepresentation of its data and intention to deceive both

Second Chance and consumers.   (See Am. Compl. ¶¶ 1, 54, 63, 75,

107.)   The United States has adequately alleged that Second

Chance and Zylon vest buyers relied upon Toyobo’s

misrepresentations.   (Id. ¶¶ 127-28.)

V.   UNJUST ENRICHMENT

     A plaintiff claiming unjust enrichment must show 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); accord

In re Lorazepam & Clorazepate Antitrust Litig., 295 F. Supp. 2d

30, 50-51 (D.D.C. 2003).   The In re Lorazepam court refused to

dismiss an action 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
                                  - 26 -

because plaintiffs had properly alleged defendants’ enrichment to

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

plaintiffs’ subscribers.    Id.

     Toyobo argues that the government never conferred any

benefit upon it because all federal monies were paid to Second

Chance.   (Defs.’ Mem. at 28-29.)     However, the government alleges

that payment for Second Chance’s submissions was based upon

Toyobo’s false statements and omissions, and Toyobo, as an

indirect recipient of the government’s payments, was unjustly

enriched to the government’s disadvantage.     (Am. Compl. ¶ 139.)

Toyobo does not dispute that it has retained all monies from

Zylon sales to Second Chance and the subsequent sales of Zylon

vests to the government and its grantees.

                       CONCLUSION AND ORDER

     Because plaintiffs have stated claims under the FCA and the

common law for fraud and unjust enrichment, Toyobo’s motion to

dismiss will be denied.    Plaintiffs have pleaded their

allegations regarding fraud with sufficient particularity to meet

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

hereby

     ORDERED that Toyobo’s motion [25] to dismiss be, and hereby

is, DENIED.
                         - 27 -

SIGNED this 23rd day of February, 2010.

                                   /s/
                         RICHARD W. ROBERTS
                         United States District Judge