United States of America v. Second Chance Body Armor Inc ( 2013 )

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 brought this action against defendants Second
Chance Body Armor, Inc. and related entities (collectively
“Second Chance”), Toyobo Co., Ltd. and Toyobo America, Inc.
(collectively “Toyobo”), and individual defendants Thomas
Bachner, Jr., Richard Davis, Karen McCraney, and 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 allegedly defective body armor.1 The government moves
for leave to file a second amended complaint that adds further
factual allegations to clarify the existing claims. Only Toyobo
1
The government has settled its claims against Karen
McCraney, Larry McCraney and Second Chance.
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filed an opposition to the government’s motion.2 Because the
proposed amendment does not fundamentally alter the scope of this
action, and because Toyobo has not shown that the amendment is in
bad faith, is futile, is a waste of judicial resources, or would
unduly delay the litigation, the government’s motion will be
granted.
BACKGROUND
The background of this case is set forth fully in United
States ex rel. Westrick v. Second Chance Body Armor, Inc., 685 F.
Supp. 2d 129, 132-33 (D.D.C. 2010). Briefly, the government
alleges that Second Chance and Toyobo contracted for Toyobo to
supply Second Chance with the synthetic fiber “Zylon” for use in
manufacturing Second Chance bulletproof vests. Id. at 132. The
government purchased the vests both through the General Service
Administration’s Multiple Award Schedule (“MAS”) contracting
program and directly from Second Chance or from Second Chance
distributors. Am. Compl. ¶¶ 27-31. Zylon deteriorated more
quickly than expected, and the government alleges that Second
Chance and Toyobo knew about the prospect of accelerated
degradation but concealed that information from the government.
Westrick, 685 F. Supp. 2d at 132. The first amended complaint
asserts claims against all defendants for (1) violations of the
2
In its Local Civil Rule 7(m) statement, the government
noted that Bachner did not consent to the motion. U.S.’ Mot. for
Leave to File Second Am. Compl. at 1-2.
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FCA through presenting fraudulent claims, making false statements
and conspiring to defraud, (2) common law fraud, and (3) unjust
enrichment. Am. Compl. ¶¶ 113-30, 136-39.
Toyobo’s motion to dismiss the complaint was denied.
Westrick, 685 F. Supp. 2d at 142. Toyobo then filed a motion for
partial summary judgment, seeking dismissal of the claims that
are premised on the vests purchased through the MAS program, but
not of the claims premised on vests directly purchased from
Second Chance or its distributors or vests purchased by state and
local law authorities with claims submitted to the government’s
reimbursement program. Def. Toyobo’s Mot. for Partial Summ. J.
at 1 & n.1. Toyobo argues, relying in large part on this court’s
resolution of a motion to dismiss a related complaint against
Toyobo, United States v. Toyobo Co., 811 F. Supp. 2d 37 (D.D.C.
2011), that the United States has not demonstrated that Second
Chance submitted any false or fraudulent invoices to the
government. Toyobo contends that the invoices were neither
factually nor legally false, and that the fraudulent inducement
theory of FCA liability does not apply. Def. Toyobo’s Mem. of P.
& A. in Supp. of Mot. for Partial Summ. J. at 1-3.
In the pending motion for leave to file a second amended
complaint, the government seeks to “clarify and amplify its
allegations[,]” in light of the arguments made in Toyobo’s
partial summary judgment motion. Mem. of P. & A. in Supp. of
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U.S.’ Mot. for Leave to File Second Am. Compl. at 2-3. The
proposed second amended complaint includes additional allegations
detailing documentation, internal communications and meetings,
and depositions of relevant individuals that the government
contends will clarify its claims against the defendants. The
United States argues that if it is granted leave to amend,
Toyobo’s motion for partial summary judgment will be rendered
moot. U.S.’ Reply in Supp. of Mot. for Leave to File Second Am.
Compl. (“Govt.’s Reply”) at 16.
DISCUSSION
Under Federal Rule of Civil Procedure 15(a)(2), “a party may
amend its pleading only with the opposing party’s written consent
or the court’s leave. The court should freely give leave when
justice so requires.” Fed. R. Civ. P. 15(a)(2). “It is
appropriate for a Court to grant leave to amend unless there is
‘undue delay, bad faith or dilatory motive on the part of the
movant, repeated failure to cure [deficiencies] by amendments
previously allowed, undue prejudice to the opposing party by
virtue of allowance of the amendment, [or] futility of
amendment.’” Utterback v. Geithner, 754 F. Supp. 2d 52, 56
(D.D.C. 2010) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)).
A court may also deny a motion to amend “where the only result
would be to waste time and judicial resources.” Ross v. DynCorp,
362 F. Supp. 2d 344, 364 n.11 (D.D.C. 2005). “Amendments that do
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not radically alter the scope and nature of the action . . . are
especially favored.” Estate of Gaither ex rel. Gaither v.
District of Columbia, 272 F.R.D. 248, 252 (D.D.C. 2011) (citing
Smith v. Café Asia, 598 F. Supp. 2d 45, 48 (D.D.C. 2009)); see
also Council on American-Islamic Relations Action Network, Inc.
v. Gaubatz, 793 F. Supp. 2d 311, 324 (D.D.C. 2011) (noting that
the addition of factual allegations that “merely fine-tune the
basis for the relief [sought],” while “not likely to change the
outcome of the legal issues presented,” is “rarely a bad thing”
and “certainly does not provide a basis for denying leave to
amend”).
“The decision to grant or deny leave to amend . . . is
vested in the sound discretion of the trial court.” Doe v.
McMillan, 566 F.2d 713, 720 (D.C. Cir. 1977). Accordingly, “a
court should ‘determine the propriety of amendment on a case by
case basis, using a generous standard[.]’” Commodore-Mensah v.
Delta Air Lines, Inc., 842 F. Supp. 2d 50, 52 (D.D.C. 2012)
(quoting Harris v. Sec’y, U.S. Dep’t of Veterans Affairs, 126
F.3d 339, 344 (D.C. Cir. 1997)). The defendant bears the burden
of showing why leave to file an amended complaint should not be
granted. Café Asia, 598 F. Supp. 2d at 48.
I. IMPROPER TACTICS OR BAD FAITH
Toyobo argues that “[t]he United States’ motion for leave to
file a second amended complaint should be denied because it is an
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admitted attempt to avoid Toyobo’s motion for partial summary
judgment.” Def. Toyobo’s Opp’n to U.S.’ Mot. for Leave to File
Second Am. Compl. (“Def.’s Opp’n”) at 8. Toyobo cites precedent
suggesting that “[a] plaintiff . . . cannot be permitted to
‘circumvent the effects of summary judgment by amending the
complaint every time a termination of the action threatens.’”
Hoffmann v. United States, 266 F. Supp. 2d 27, 34 (D.D.C. 2003)
(quoting Glesenkamp v. Nationwide Mut. Ins. Co., 71 F.R.D. 1, 4
(N.D. Cal. 1974), aff’d per curiam, 540 F.2d 458 (9th Cir.
1976)). The authority upon which Toyobo relies, however, is
distinguishable from this case. The plaintiffs in Hoffmann, for
example, sought in their proposed amendment to “relitigate
claims” that other courts had already resolved. Hoffmann, 266 F.
Supp. 2d at 35 n.9. The Hoffmann court found not only that the
plaintiff’s actions raised the specter of bad faith, but also
that the plaintiff’s amendment would cause undue prejudice and
was brought after an undue delay in a series of trials lasting
“for nearly twenty years.” Id. at 33. Glesenkamp dealt with a
plaintiff bringing two new causes of action against the defendant
while having failed to present any persuasive findings of fact in
support of her first claim. Glesenkamp, 71 F.R.D. at 2, 4. In
the present case, the United States’ claims have already survived
a motion to dismiss and no new causes of action are asserted in
the proposed second amended complaint.
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Toyobo also cites Unique Industries, Inc. v. 965207 Alberta
Ltd., 764 F. Supp. 2d 191 (D.D.C. 2011), in which a court denied
a motion to amend filed when summary judgment motions were
pending. Id. at 206-08 (D.D.C. 2011). However, in that case, at
the time the motion to amend was filed, discovery had already
closed. Id. at 208 (finding that “[t]he plaintiff’s failure to
seek leave to amend until after the close of discovery and the
submission of summary judgment briefs constitutes an
unjustifiable lack of diligence that plainly weighs against
granting leave to amend”) (emphasis added). In the present case,
the government moved to amend before discovery closed. Toyobo
has demonstrated neither improper tactics nor bad faith.
II. UNDUE DELAY OR PREJUDICE
Even if the timing of a motion to amend does not support a
finding of bad faith, a dilatory motive on behalf of the movant
or an undue delay in filing can justify a denial of the motion.
Foman, 371 U.S. at 182. Toyobo contends that because the facts
the United States seeks to add to its complaint have been known
to the government for some time, it is proper for the court to
deny the motion on the grounds that the United States has unduly
delayed its filing. The government disputes that notion on the
ground that before Toyobo’s partial summary judgment motion was
filed, “the Government perceived no need to amend the complaint
. . . because the United States had prevailed on its motion to
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dismiss in this case.” Govt.’s Reply at 5. The government
contends that Toyobo’s dispositive motion, although styled as one
for summary judgment, effectively attacks the sufficiency of the
government’s pleadings. Id. at 2 & n.1.
Courts that have found an undue delay in filing have
generally confronted cases in which the movants failed to
promptly allege a claim for which they already possessed
evidence. See LaPrade v. Abramson, Civil Action No. 97-10 (RWR),
2006 WL 3469532, at *5 (D.D.C. Nov. 29, 2006) (finding the motion
for leave to amend dilatory and unduly delayed “because [the
plaintiff] knew sufficient facts before the amendment deadline to
make the claims she now seeks to add”); see also McGee v.
District of Columbia, 646 F. Supp. 2d 115, 121-22 (D.D.C. 2009)
(holding that “[t]he fact that claims [added] in an amended
complaint are based on the same legal duties or facts asserted in
the original complaint is grounds for denying leave to amend”).
The United States does not seek to add any claims in its
amendment; it seeks to add only factual allegations designed to
clarify existing claims. See Gaubatz, 793 F. Supp. 2d at 324
(granting leave for the plaintiff to amend the complaint with “a
handful of allegations . . . that are designed to flesh out the
factual basis for the claims they have already asserted” in the
absence of any prejudice to the defendant).
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Toyobo argues that the timing of the United States’ motion
is prejudicial because Toyobo has “already devoted significant
time and resources to the development of its defenses to the
claims iterated in the amended complaint . . . , most notably
evidenced in Toyobo’s pending motion for partial summary
judgment.” Def.’s Opp’n at 10. Courts have stated, in some
circumstances, that amendments that force defendants to expend
additional resources qualify as prejudicial. See, e.g., Sindram
v. Kelly, Civil Action No. 06-1952 (RBW), 2008 WL 3523161, at *2
n.5 (D.D.C. Aug. 13, 2008) (finding that “the defendant [would]
be prejudiced by having to expend additional resources to respond
to the amendment”). Toyobo cites, for example, Raney v. District
of Columbia, 892 F. Supp. 283 (D.D.C. 1995), in which a court
denied a defendant’s motion to file an amended answer where the
motion was filed three business days before trial and presented a
previously-abandoned statute of limitations defense. Id. at 284-
85. The court reasoned that the plaintiff “ha[d] incurred
substantial legal costs in conducting discovery, attending
hearings and conferences, and preparing for trial,” and that
“[s]uch expenditures of time and money constitute the type of
prejudice the Federal Rules seek to prevent.” Id. at 285.
However, an amendment is not automatically deemed
prejudicial if it causes the non-movant to expend additional
resources. Any amendment will require some expenditure of
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resources on the part of the non-moving party. “Inconvenience or
additional cost to a defendant is not necessarily undue
prejudice.” City of Moundridge v. Exxon Mobil Corp., 250 F.R.D.
1, 6-7 (D.D.C. 2008) (citing Hisler v. Gallaudet Univ., 206
F.R.D. 11, 14 (D.D.C. 2002) (finding that if the court “were to
employ a policy of denying plaintiffs leave to amend in every
situation where an amended complaint may result in additional
discovery or expense, then this court would fail to abide by the
legal standard of granting leave ‘freely . . . when justice so
requires.’”)). The United States maintains that any additional
expenditure by Toyobo will be minimal because “most of the facts
cited in the Proposed Second Amended Complaint came from Toyobo’s
own documents, the deposition testimony of Toyobo’s witnesses,
and the depositions of pro se Defendants Thomas Edgar Bachner,
Jr. and Richard Davis, taken by Toyobo counsel in earlier
lawsuits about Zylon.” Govt.’s Reply at 5; see also id. at 12
(“Toyobo will be defending against substantially similar
allegations in the [separate but related] Toyobo case, in
response to the amended complaint that it stipulated could be
filed.”). Toyobo has not demonstrated that the United States
acted with undue delay, or articulated what undue prejudice would
result if leave to amend is granted.
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III. WASTE OF JUDICIAL RESOURCES
A court may deny a motion for leave to amend a complaint if
the only effect would be a waste of judicial resources. See
McGee, 646 F. Supp. 2d at 119 (holding that “[a] court
considering a motion to amend a complaint should evaluate the
amendment’s effect on judicial resources”). Toyobo argues that
the United States’ motion to amend would delay the disposition of
pending dispositive motions and require renewed filings,
prolonging a now nine-year litigation process. Def.’s Opp’n at
13.3
The Seventh Circuit, affirming the denial of a motion for
leave to amend filed shortly before trial, found that “[t]he
burden to the judicial system can justify a denial of a motion to
amend ‘even if the amendment would cause no hardship at all to
the opposing party.’” Perrian v. O’Grady, 958 F.2d 192, 195 (7th
Cir. 1992) (quoting Tamari v. Bache & Co. (Lebanon) S.A.L., 838
F.2d 904, 909 (7th Cir. 1988)). In this case, the United States
does not seek to add any additional claims to its complaint and
no showing has been made that discovery would need to be re-
opened if the motion to amend were granted. As there is little
3
The United States does not directly respond to this charge,
stating only that “[n]o waste of judicial resources will occur
because Toyobo has known of and cross-examined witnesses about
the new facts set forth in the Proposed Second Amended Complaint
during discovery.” Govt.’s Reply at 2. This implicates not
judicial resources, but the resources of the defendant.
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evidence that the amendment would significantly burden the
judicial system, waste of judicial resources thus is not a
compelling reason for the motion to be denied.4
IV. FUTILITY
A court may deny a motion for leave to amend if the proposed
amendment would be futile. Foman, 371 U.S. at 182. An amendment
is futile “if the proposed claim would not survive a motion to
dismiss.” James Madison Ltd. v. Ludwig, 82 F.3d 1085, 1099 (D.C.
Cir. 1996). In order to survive a motion to dismiss, a complaint
must provide “enough facts to state a claim to relief that is
plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007). Toyobo argues that because motions to dismiss
brought by the defendants in three related cases were granted in
part, the government’s motion for leave to amend should be denied
as futile as the United States is not changing the relevant
theories of liability or alleging new causes of action. Def.’s
Opp’n at 13 (citing Toyobo, 811 F. Supp. 2d at 46; United States
4
In the interest of avoiding unnecessary delay, Toyobo’s
pending motions for partial summary judgment will not be denied
as moot due to this opinion’s granting the government leave to
amend. Although the United States contends that its amended
pleading resolves the arguments presented in Toyobo’s first
pending summary judgment motion, Govt.’s Reply at 16, the United
States also stresses the substantial similarity between the
factual allegations added by its amendment and the evidence that
has been produced in discovery to date and of which both parties
are aware, see id. at 2, 5, 11. It therefore appears likely that
the material facts that are relevant to summary judgment have
already been addressed by the parties in their briefing on the
dispositive motions.
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v. First Choice Armor & Equip., Inc., 808 F. Supp. 2d 68, 75
(D.D.C. 2011); United States v. Honeywell Int’l Inc., 798 F.
Supp. 2d 12, 20 (D.D.C. 2011)). Each of the related cases,
however, addressed different allegations regarding the conduct of
specific parties in the Zylon manufacturing and distribution
network. In this action, the United States’ complaint has
already survived a motion to dismiss brought by Toyobo. The
proposed second amended complaint differs from the previous
complaint only in that it contains additional factual
allegations, but no new claims, and Toyobo has not shown that the
proposed complaint would not likewise survive a motion to
dismiss. Therefore, the United States’ motion for leave to amend
is not subject to denial on grounds of futility.5
CONCLUSION AND ORDER
The proposed second amended complaint adds further factual
allegations intended to clarify existing claims. Toyobo has not
demonstrated that amendment is sought in bad faith or would
5
Toyobo contends that “courts often apply a heightened
standard of futility when a motion to amend is made after summary
judgment motions have been filed.” Def.’s Opp’n at 7. Toyobo
relies on Glassman v. Computervision Corp., 90 F.3d 617 (1st Cir.
1996), which held that an elevated standard exists requiring
motions for leave to amend filed after summary judgment motions
to possess substantial merit and be supported by substantial,
convincing evidence. The circumstances of Glassman are distinct
from those of this case. As the government notes, Govt.’s Reply
at 4 n.2, discovery was already closed in that case and the prior
complaint had been dismissed. Toyobo cites no authority from
this circuit for a heightened futility standard and, given that
the motion for leave to amend the complaint was filed before
discovery closed, no apparent grounds justify applying one here.
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result in a waste of judicial resources or undue delay. In
addition, because the operative complaint has already survived a
motion to dismiss, there are no grounds to find the proposed
amendment futile. Accordingly, it is hereby
ORDERED that the government’s motion [292] for leave to file
its second amended complaint be, and hereby is, GRANTED. The
Clerk is directed to file as the United States’ Second Amended
Complaint the third attachment [292-3] to the motion.
SIGNED this 30th day of December, 2013.
/s/
RICHARD W. ROBERTS
Chief Judge