United States of America v. Second Chance Body Armor Inc

• Court: District Court, District of Columbia
• Decided: March 24, 2011
• Docket: Civil Action No. 2004-0280
• Status: Published

Opinion

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. The

individual defendants have moved to transfer venue to the Western

District of Michigan.1 Because the individual defendants have

not shown that a transfer is in the interest of justice, their

motion will be denied.

1 The individuals defendants also moved for a hearing on their motion to transfer. That motion will be denied. - 2 -

BACKGROUND

The background of this case is discussed fully in United

States ex rel. Westrick v. Second Chance Body Armor, Inc., 685 F.

Supp. 2d 129 (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. Zylon –– which Toyobo

manufactured in Japan (Am. Compl. ¶ 47) –– deteriorated more

quickly than expected. Westrick, 685 F. Supp. 2d at 132. The

government alleges that Second Chance and Toyobo knew about the

accelerated degradation but concealed information about it from

the government, which purchased Second Chance vests through

various programs. Id. Second Chance and its related entities

were primarily Michigan corporations,2 Toyobo Co., Ltd. is a

Japanese Corporation, Toyobo America, Inc. is a New York

Corporation, and the individual defendants –– who served as

officers of Second Chance –– all resided in Michigan when the

government filed its amended complaint in September 2005. (Am.

Compl. ¶¶ 6-19.)

In November 2005, defendants Larry and Karen McCraney filed

a motion to dismiss or, in the alternative, to transfer venue to

the Western District of Michigan. In January 2006, they withdrew

2 Second Chance Body Armor, Inc. filed for bankruptcy in the Western District of Michigan in 2004. - 3 -

their motion and stipulated that venue was proper in this

district. Toyobo filed a motion to dismiss, discovery began

while that motion was pending, and the motion to dismiss was

later denied. Westrick, 685 F. Supp. 2d at 142. Toyobo

unsuccessfully moved for reconsideration, United States ex rel.

Westrick v. Second Chance Body Armor, Inc., 709 F. Supp. 2d 52

(D.D.C. 2010), and a scheduling conference was held at which the

close of discovery was set for January 2012. In July 2010, the

individual defendants moved to transfer venue, arguing that

continuing to defend the suit in this district would impose on

them financial hardship and inconvenience. (Defs.’ Mem. of Law

in Supp. of Their Mot. for Change of Venue (“Defs.’ Mem.”) at 1-

2.) The government and the relator oppose the motion, arguing

that transferring the case would inconvenience the other parties

and witnesses and waste judicial resources.3 (Opp’n of the U.S.

to the Mot. to Change Venue (“Gov’t Opp’n”) at 2; Pl.-Relator’s

Opp’n to Mot. for Change of Venue (“Pl.-Relator’s Opp’n”) at 2.)

DISCUSSION

A case may be transferred to another venue under 28 U.S.C.

§ 1404(a) “[f]or the convenience of parties and witnesses, in the

interest of justice[.]” See also Piper Aircraft Co. v. Reyno,

454 U.S. 235, 253 (1981). The moving party carries the burden of

3 Defendant Toyobo filed a stipulation stating that it does not oppose the motion. - 4 -

showing that a transfer is appropriate. Montgomery v. STG Int’l,

Inc., 532 F. Supp. 2d 29, 32 (D.D.C. 2008); Onyeneho v. Allstate

Ins. Co., 466 F. Supp. 2d 1, 3 (D.D.C. 2006). Because “‘it is

perhaps impossible to develop any fixed general rules on when

cases should be transferred[,]’ . . . the proper technique to be

employed is a factually analytical, case-by-case determination of

convenience and fairness.” SEC v. Savoy Indus. Inc., 587 F.2d

1149, 1154 (D.C. Cir. 1978) (quoting Starnes v. McGuire, 512 F.2d

918, 929 (D.C. Cir. 1974) (en banc)).

“Any transfer under § 1404(a) is restricted to a venue where

the action ‘might have been brought.’” Robinson v. Eli Lilly &

Co., 535 F. Supp. 2d 49, 51 (D.D.C. 2008) (quoting 28 U.S.C.

§ 1404(a)). A plaintiff may bring a claim under the FCA “in any

judicial district in which . . . , in the case of multiple

defendants, any one defendant can be found, resides, transacts

business, or in which any act proscribed by section 3729

occurred.” 31 U.S.C. § 3732(a); see also United States v.

Intrados/Int’l Mgmt. Grp., 265 F. Supp. 2d 1, 6 (D.D.C. 2002).

Because many of the defendants either reside or transact business

in the Western District of Michigan, there is no question –– and

the relator and the government do not contest –– that this action

could have been brought in that district.4 (See Gov’t Opp’n at 9

4 Although it concedes that the case could have been brought in the Western District of Michigan under the FCA venue provision, the government suggests two reasons why venue may - 5 -

(noting that “this action could have been brought in the W.D.

Michigan”); Pl.-Relator’s Opp’n at 4.)

After determining that venue in the proposed transferee

district would be proper, a court then “must weigh in the balance

the convenience of the witnesses and those public-interest

factors of systemic integrity and fairness that, in addition to

[the] private concerns [of the parties], come under the heading

of ‘the interest of justice.’” Stewart Org., Inc. v. Ricoh

Corp., 487 U.S. 22, 30 (1988).

I. PUBLIC INTERESTS

The public factors to assess include “1) the local interest

in making local decisions about local controversies, 2) the

potential transferee court’s familiarity with applicable law, and

still not be proper in the Western District of Michigan. First, some of the individual defendants stipulated to venue in the District of Columbia. (Gov’t Opp’n at 3.) However, the individual defendants have not moved under 28 U.S.C. § 1406(a) to transfer for improper venue but rather have moved under 28 U.S.C. § 1404(a) to transfer in the interests of justice. Because transfer under § 1404(a) could be appropriate even if venue in this district is proper, the stipulation is immaterial.

Second, the government notes that a court in the Western District of Michigan dismissed under the forum non conveniens doctrine another action against defendant Toyobo, see German Free State of Bavaria v. Toyobo Co., Ltd., 480 F. Supp. 2d 948, 957 (W.D. Mich. 2007), and speculates that there may be additional procedural litigation if Toyobo moves to dismiss on those grounds in the Western District of Michigan should the motion to transfer be granted. (Gov’t Opp’n at 9-10 & n.7.) However, a forum non conveniens dismissal has no bearing on whether venue was proper in the dismissing jurisdiction, see id. at 951-52, and there is no question that the FCA authorizes venue in the Western District of Michigan. See 31 U.S.C. § 3732(a). - 6 -

3) the congestion of the transferee court compared to that of the

transferor court.” Demery v. Montgomery Cnty., Md., 602 F. Supp.

2d 206, 210 (D.D.C. 2009). All federal courts are presumed

equally familiar with the law governing the plaintiffs’ FCA

claims, and this factor does not weigh either for or against

transfer. See Montgomery, 532 F. Supp. 2d at 34.

The other two factors, however, weigh against transfer.

Since millions of dollars in allegedly false claims were

submitted in the District of Columbia (Gov’t Opp’n at 19), this

district has a significant interest in providing a forum for

these allegations of fraud. See Dooley v. United Techs. Corp.,

786 F. Supp. 65, 73 (D.D.C. 1992) (involving Racketeer Influenced

and Corrupt Organizations Act claims), abrogated on other grounds

by FC Inv. Grp. LC v. IFX Mkts., Ltd., 529 F.3d 1087, 1099 (D.C.

Cir. 2008). With respect to the third factor, there may be a

shorter median disposition time for cases in the Western District

of Michigan than for cases in this district. (See Defs.’ Mem. at

16 (comparing median disposition time of 26.4 months in the

Western District of Michigan to a median disposition time of 33.1

months in this district).) Nonetheless, the risk of injecting

unnecessary delay in resolving this case may be greater if this

seven-year-old case is transferred. This Court is familiar with

the multiple issues and lengthy procedural history of the case,

and decided Toyobo’s dispositive motions. Given the parties’ - 7 -

voluminous filings, this experience is not insignificant, and a

court in the Western District of Michigan will likely require a

substantial amount of time to familiarize itself with the case.

See Savoy Indus., Inc., 587 F.2d at 1156 (affirming denial of

motion to transfer in part because of the delay that would arise

while the transferee court familiarized itself with the complex

case that the district court was already prepared to try); cf.

Devaughn v. Inphonic, Inc., 403 F. Supp. 2d 68, 73 (D.D.C. 2005)

(noting that “the case has not progressed so far that delay would

result if another court must familiarize itself with the disputed

facts or the procedural background”). Finally, to conserve

judicial resources, “[l]itigation of . . . related claims in the

same forum is strongly favored.” Islamic Republic of Iran v.

Boeing Co., 477 F. Supp. 142, 144 (D.D.C. 1979); see also SEC v.

Daly, Civil Action No. 05-55 (CKK), 2006 WL 6190699, at *5 n.1

(D.D.C. Feb. 11, 2006). Because there are four other related

cases pending before this Court, transferring this case would

allocate inefficiently scarce judicial resources. Thus, the

public factors weigh decidedly against transfer.

II. PRIVATE INTERESTS

The private factors to assess include

1) the plaintiff’s choice of forum, 2) the defendant’s choice of forum, 3) where the claim arose, 4) the convenience of the parties, 5) the convenience of the witnesses, particularly if important witnesses may actually be unavailable to give live trial testimony in - 8 -

one of the districts, and 6) the ease of access to sources of proof.

Demery, 602 F. Supp. 2d at 210.

A. Forum choices

A plaintiff’s choice of forum is entitled to deference,

unless that forum has no meaningful relationship to the

plaintiffs’ claims or to the parties. See Veney v. Starbucks

Corp., 559 F. Supp. 2d 79, 84 (D.D.C. 2008). Because the United

States is the real party in interest in a qui tam action filed by

a relator, the United States’ choice of forum is entitled to

principal deference. See United States ex rel. Penizotto v.

Bates E. Corp., No. CIV.A. 94-3626, 1996 WL 417172, at *2 (E.D.

Pa. July 18, 1996) (surveying other courts). Here, the

government and the relator have chosen the same forum, as the

relator filed suit in this district and the government did not

disturb that choice when it elected to intervene. (Gov’t Opp’n

at 24; Pl.-Relator’s Opp’n at 5.) The individual defendants

carry a weighty burden to demonstrate that the plaintiffs’ forum

choice should be disturbed in favor of the individual defendants’

choice. Since there is at least some meaningful relationship

between the plaintiffs’ claims and the parties and this district,

see infra II(B), the individual defendants have not carried that

burden. - 9 -

B. Where the claims arose

The individual defendants argue that the plaintiffs’ claims

arose in Michigan because Second Chance was a Michigan

corporation, and it developed and tested its vests in Michigan.

(Defs.’ Mem. at 9.) Where “‘most of the relevant events occurred

elsewhere,’” deference to the plaintiff’s choice of forum is

weakened. Aftab v. Gonzales, 597 F. Supp. 2d 76, 80 (D.D.C.

2009) (quoting Hunter v. Johanns, 517 F. Supp. 2d 340, 344

(D.D.C. 2007)). However, the government alleges that multiple

aspects of the fraud took place outside of Michigan, including in

this district. Specifically, the government claims that

thousands of Second Chance vests were shipped to federal agencies

in Washington, D.C. resulting in approximately $1 million in

claims for payment. (Gov’t Opp’n at 19.) State, local, and

Indian law enforcement agencies submitted in this district to the

federal government over $12.5 million in claims for reimbursement

for vests purchased under the Bullet Proof Vest Grant Partnership

Act. (Id.; Am. Compl. ¶ 29.) Toyobo manufactured the Zylon

fiber in Second Chance vests in Tsuruga, Japan. (Am. Compl.

¶ 47.) Second Chance and Toyobo representatives met in Los

Angeles, California in 2001 to discuss a strategy to cope with

Zylon’s degradation and in Osaka, Japan in 2002, where Toyobo

asserted that further testing would prove that Zylon’s fiber

strength would stop deteriorating over time. (Am. Compl. ¶¶ 81, - 10 -

88.) Ultimately, while the parties do not allege that most of

the relevant events occurred in this district, neither do the

parties allege that most of the relevant conduct occurred in the

Western District of Michigan. In any event, the conduct that

gives rise to an FCA claim is filing a false claim for payment,

and this district was the locus for many such filings in this

case. This factor does not weigh in favor of transfer.

C. Convenience of the parties

A court may consider whether litigating in a particular

forum would cause a party to suffer a hardship, such as from

significant expense. Kotan v. Pizza Outlet, Inc., 400 F. Supp.

2d 44, 50 (D.D.C. 2005). The party requesting transfer should

provide documented proof of financial hardship. See Daly, 2006

WL 6190699, at *5. However, “‘[u]nless all parties reside in the

selected jurisdiction, any litigation will be more expensive for

some than for others.’” Kotan, 400 F. Supp. 2d at 50 (quoting

Moses v. Bus. Card Express, Inc., 929 F.2d 1131, 1139 (6th Cir.

1991)). Thus, for this factor to weigh in favor of transfer,

litigating in the transferee district must not merely shift

inconvenience to the plaintiffs, but rather should lead to an

overall increase in convenience for the parties. See Daly, 2006

WL 6190699, at *5.

The individual defendants assert that continuing to litigate

in this district “will translate into ever mounting expenditures - 11 -

for flights, hotel accommodations, food, and other miscellaneous

expenses[.]” (Defs.’ Mem. at 11.) In support of their argument,

the individual defendants cite defendant Bachner’s proof of claim

filed on December 1, 2009 in the Second Chance Bankruptcy action

in the Western District of Michigan. That proof of claim

estimated $1,000,000 in future legal fees for Bachner to defend

himself through trial and $40,000 in anticipated travel fees.

(Defs.’ Reply, Ex. 1 at 10.) The individual defendants base

their argument that continuing to litigate the case in this

district is prohibitively expensive on travel and miscellaneous

costs alone; they do not argue and have not provided evidence

that litigating in Michigan will reduce their legal fees. Since

the individual defendants’ estimated travel expenses make up only

a small fraction of the costs they expect to incur litigating the

suit in this district, they have not shown that transferring this

case will result in more than marginal relief from any financial

hardship they may be suffering. Thus, they have not shown that

transferring the case will lead to a net increase in convenience

for all parties. This factor, therefore, does not weigh in favor

of transfer.

D. Convenience of witnesses

When considering the convenience of witnesses, a court must

pay particular attention to whether important witnesses will be

available to give live trial testimony. Montgomery, 532 F. Supp. - 12 -

2d at 33. Because the FCA provides for nationwide service of

trial subpoenas, 31 U.S.C. § 3731(a), all prospective witnesses

will be available for trial in either district. A transferee

district, though, may be more convenient for witnesses even if

the witnesses would not be unavailable to testify in the

transferor district. Id. at 33 n.5. While the individual

defendants have identified seven trial witnesses for whom the

Western District of Michigan would represent a more convenient

forum (Defs.’ Mem. at 12-13), the plaintiffs have identified

twelve witnesses who live in the Washington, D.C. area and

another five witnesses who live in the Boston-Washington corridor

and for whom this district would represent a more convenient

forum in which to testify.5 (Gov’t Opp’n at 18; Ex. 3.) This

factor weighs against transfer.6

CONCLUSION AND ORDER

The individual defendants have not shown that a transfer to

the Western District of Michigan is in the interests of justice.

Accordingly, it is hereby

5 The individual defendants do not dispute that this district will be more convenient for these witnesses. Instead they argue that the government will be better able to afford to transport these witnesses to the Western District of Michigan. (Defs.’ Reply at 14.) This argument bears on the convenience of the parties, not the convenience of the witnesses. 6 Neither party argues that either district provides easier access to sources of proof. - 13 -

ORDERED that the individual defendants’ motion [237] to

transfer venue be, and hereby is, DENIED. It is further

ORDERED that the individual defendants’ motion [245] for a

hearing be, and hereby is, DENIED.

SIGNED this 24th day of March, 2011.

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