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Honeywell says it’s paid the government enough in body armor fraud suit

The multinational conglomerate told the D.C. Circuit that if the government has its way, “there will be intense cross-litigation among co-defendants.”

WASHINGTON (CN) — Honeywell tried to convince a federal appeals court Wednesday that it does not owe the government any more damages in the body armor fraud suit filed against it 13 years ago.

Craig Primis, an attorney for the multinational conglomerate, urged the U.S. District Court of Appeals for the D.C. Circuit to reverse a lower court’s decision finding the government can pursue treble damages through a proportionate share approach.

The government has already received $36 million in settlement negotiations paid by Honeywell and other co-defendants, so Primis claims Honeywell should receive a pro tanto dollar-for-dollar credit for that — which would reduce Honeywell’s damages liability to zero.

The yearslong litigation goes back to 2008 when the government sued Honeywell, alleging the company knew its “Z Shield” bulletproof vests degraded under high heat and humidity and that it did not give test data to Armor Holdings, which caused that company to make false claims for payment to the government. The outcome of the case may impact how multiple judgments in fraud cases must be divvied up among multiple defendants.

If the government has its way, he argues, Honeywell could still be liable for an additional $34.4 million — six times $11.5 million in damages initially alleged by the government.

It “would turn a treble damages provision into a sextuple damages provision,” the company said in court filings.

But one member of the circuit court’s three-judge panel suggested Honeywell’s pro tanto approach “will result in a person that defrauds the government in not being liable for treble damages” which “seems inconsistent with the statute.”

“If it is read that way and every person who is a party to a jointly admitted tort is liable for three times the damages, then in theory you could have 15, 20, 30 times damages, and no court has ever applied it that way,” Primis said.

“Well, what’s the matter with that?” the judge quipped, adding that the Supreme Court ruled in McDermott, Inc. v. AmClyde that “making tortfeasors pay for the damages they cause may be more important than preventing overcompensation.”

Primis, however, warned that allowing a proportionate share rule would create a “very chaotic small claims situation.”

“There will be intense cross-litigation among co-defendants trying to blame one another for the same fault, and it will create many trials within trials,” he said.

Meanwhile, U.S. Attorney Sean Janda argued that the government’s argument is based on equitable approach and view that if Honeywell does not have to pay the damages, it will undermine the punitive and deterrent effects of the False Claims Act.

But Judge Neomi Rao, a Trump appointee, suggested that a proportionate share approach could turn into a “complete mess.”

“How will settling parties have any idea how to proceed in terms of working with the government to settle if they don’t know when they settle whether they’ll have to pay a proportionate share [or] whether their settlement will be final?” she asked.

Janda said that as a general rule, the government is always proceeding with “legal uncertainty” when it comes to settlement litigation.

“I can see there might be a little more uncertainty if the court adopts the government’s approach,” the government attorney added.

“A little more uncertainty?” Rao pressed him. “It’ll just be a little bit?”

“I don’t think it’s that much more uncertainty,” Janda said. “One input of Honeywell’s approach is what every other defendant settles for — and so at the outset of a case, each defendant has no idea what other defendants might settle for — so I’m not sure that adopting that approach really reduces uncertainty on the front end.”

Wednesday’s oral arguments lasted approximately 40 minutes. It is not clear when a ruling will be issued.

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