By Zoe Tillman, From Legal Times

The U.S. Department of Justice’s decade-old fraud case against a Japanese textile company that supplied material for bulletproof vests bought by law enforcement agencies is one step closer to a trial.

A federal district judge in Washington ruled late last week that a jury should decide if the federal government was defrauded by Toyobo Co., Ltd. Toyobo supplied the synthetic fiber “Zylon,” which is used to make body armor.

The Justice Department claims Toyobo knew that body armor made with Zylon would degrade during the five-year warranty period but failed to tell the government—with deadly consequences. At least one police officer died and another was seriously wounded after bullets pierced their bulletproof vests, according to DOJ.

Toyobo was also accused of putting out false information about Zylon that “fraudulently induced” state and local governments to buy the body armor.

U.S. District Chief Judge Richard Roberts on Sept. 4 largely rejected requests for summary judgment filed by both sides. He wrote that there were too many facts in dispute for him to decide certain claims. Toyobo and the government disagree about how to interpret the terms of a purchase agreement and whether Toyobo made false statements about Zylon vests, among other things.

Trials in False Claims Act cases are rare. Defendants who lose face treble damages and other penalties. Second Chance Body Armor, Inc., which sold the vests that contained Zylon supplied by Toyobo, provided tens of thousands of the vests to law enforcement agencies, according to filings in the case. Second Chance filed for bankruptcy in 2004 and is no longer part of the litigation.

Konrad Cailteux, a partner at Weil, Gotshal & Manges representing Toyobo, said on Tuesday that his team was studying Roberts’ opinion. He said they were “pleased with the part of the case that the court did dismiss and hope that this can lead to a final resolution of the case.” Roberts granted Toyobo summary judgment on certain claims related to vests sold before a contract modification in 2002.

A Justice Department spokeswoman declined to comment.

The government’s fraud case against Toyobo—which grew out of a whistleblower complaint against Second Chance—has two main components.

The first involves vests that were bought by federal agencies via a contracting program administered by the U.S. General Services Administration. The second involves vests bought by state, local and tribal law enforcement agencies, which then received partial reimbursement from the federal government through the Bulletproof Vest Grant Partnership Act.

On the federal agency claims, a key point of contention is language in Second Chance’s catalog about how the vests would perform within the five-year warranty period. The Justice Department argued the catalog language represented an obligation in the contract that the vests perform at a certain level for five years. Toyobo said the guarantee was an explanation of how Second Chance would interpret its standard warranty.

Roberts ruled in favor of Toyobo on claims related to vests sold before the 2002 contract modification, since he found that the pre-2002 agreement did not incorporate the catalog language. As for claims related to post-2002 sales, Roberts wrote that the government and Toyobo’s arguments about how to interpret the catalog language were both “reasonable.” Absent a clear winner, it was up to a jury to decide, he said.

Roberts also said that he couldn’t decide at this stage of the case whether Toyobo made false statements about Zylon’s durability that “fraudulently induced” state and local governments that received federal reimbursements to buy the vests.

“This factual dispute as to the nature and validity of Toyobo’s assurances to the market present a genuine dispute as to material facts that cannot be resolved at the summary judgment stage,” Roberts wrote.

Below: Read the opinion in United States v. Second Chance Body Armor Inc./Toyobo Co. Ltd.

IMAGE: Richard Roberts. Photo: Diego M. Radzinschi/NLJ

For more on this story go to: http://www.nationallawjournal.com/legaltimes/id=1202736669735/Feds-Fraud-Case-Over-Bulletproof-Vests-Moves-Closer-to-a-Trial#ixzz3lGENTf9o