Honeywell Looks to Slip Big-Dollar Judgment Over Defective Vests

A panel of D.C. Circuit judges asked Honeywell International Inc. Wednesday why it should avoid paying damages to the government for allegedly supplying faulty body armor when supply chain partners have paid $36 million in False Claims Act settlements.

Honeywell contends that under a dollar-for-dollar offset approach known as pro tanto, the company couldn’t owe the government millions in trebled damages because the government has already recovered from the suppliers what it seeks over the alleged fraud.

The government says the right damages approach is “proportionate share,” which forces a bad actor to pay a fair amount of total damages relative to others if found liable.

But applying proportionate share in this 13-year-old case, and letting the government get about $70 million, would cause “great havoc,” Honeywell’s counsel, Craig S. Primis of Kirkland & Ellis LLP in Washington, told the U.S. Court of Appeals for the D.C. Circuit during oral argument.

If any defendant in a multiple-defendant case can be forced to pay full FCA damages, the government could receive 30 times its actual damages, he said. “And no court has done it that way,” he said.

The government is seeking 100% compensation, and they already got it, Primis said.

This case would be litigated differently if proportionate share applied, he also said. “There would be co-defendants trying to blame each other, trials within trials,” he said. “A whole trial would be the co-defendants against each other.”

When asked if the court should ignore the FCA requirement that anyone can be liable to the government, Primis said Honeywell could still potentially be subject to penalties and potential debarment, which precludes companies from performing federal government contracts.

Deterrence

Counsel for the government,aid allowing Honeywell to escape any damages would be inequitable, and wouldn’t further the purpose of the FCA, which is to deter federal fraud.

The U.S. Supreme Court has said that government overcompensation isn’t always improper, and allowing it in this case—involving something as important as faulty body armor—would be appropriate.

Judge Neomi Rao wanted to know if a “mess” would result if district courts applied the government’s damages approach on a case-by-case basis, and how defendants would know how to approach settlement negotiations not knowing which approach would apply.

Defendants always face uncertainty when considering settlements, Janda responded.

Judges David S. Tatel and Douglas H. Ginsburg also participated in the panel.

2008 Suit

The Department of Justice sued Honeywell in 2008 asserting that the company hid information about bulletproof vest material Z Shield and how it degraded in high heat and humidity. The vests were provided to law enforcement agencies between 2000 and 2005.

Honeywell took Zylon fiber—purchased from Toyobo Co.— and bound it with resin to create sheets of ballistic-resistant materials to make Z Shield. Honeywell sold Z Shield to Armor Holdings Inc., which used the product in vests.

While litigating with Honeywell, the government recovered about $36 million in Z Shield-related settlements with parties in the supply chain, including Armor Holdings and Toyobo.

The U.S. District Court for the District of Columbia rejected a motion to dismiss in July 2011. Honeywell filed its motion for summary judgment in June 2019 arguing that no evidence showed that Z Shield failed to perform as intended in law enforcement officers’ vests.

The district court denied summary judgment to Honeywell in November 2020, ruling that a jury could decide the government didn’t fully know about the degradation problem and that Honeywell downplayed it.

Honeywell then sought an interlocutory appeal to the D.C. Circuit on the damages issue. The district court granted the petition in June 2021 after citing no controlling precedent on the issue.

The case is United States v. Honeywell Int’l Inc., D.C. Cir., No. 21-5179, oral argument 3/30/22.