The State of Texas sued Second Chance Body Armor, Inc. (News Release) in state district court in Dallas in August, 2004, for alleged violations of the Texas Deceptive Trade Practices - Consumer Protection Act, seeking among other things, restitution for Texas purchasers of Second Chance ballistic resistant vests containing the fiber Zylon.
In addition, seven other states have sued Second Chance and there are several pending private class actions against Second Chance, Toyobo (the fiber manufacturer), distributors and insurers.
On October 17, 2004, Second Chance filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy court in Grand Rapids, Michigan. Upon receiving notice of the bankruptcy filing, the Texas state district judge abated the Texas state court action.
While we have advised the state court that the bankruptcy automatic stay does not apply to government police and regulatory proceedings, Texas has agreed to attempt resolution of our claims together with those of the other states, through informal negotiations with Second Chance through its bankruptcy counsel.
The bankruptcy court has set April 29, 2005 as the deadline for filing proofs of claims against Second Chance. The court has granted an extension for governmental entities with claims against Second Chance to May 31, 2005. Copies of claim forms have been mailed to all known purchasers of the Second Chance vests.
To share in any distribution of assets from the debtors estate, a creditor MUST file a Proof of Claim by the court imposed deadline. The definition of "claim" in a bankruptcy case is very broad and is defined at Title 11 U.S.C. §101(5) as being
- right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.
The State of Texas intends to file an estimated proof of claim form that covers all Texas purchasers of Second Chance Zylon Ultima and Ultimax vests in an amount that is at least equal to the total amount spent by Texas customers. The State will not file until shortly before the extended deadline of May 31, 2005.
Even though the State will file a claim, you may wish to file a proof of claim for your own purchases to ensure that the debtor and the court have a timely claim and a record of your specific purchase or if the State of Texas' Proof of Claim were to be successfully challenged by either the Debtor or another party in interest. You should consult your attorney regarding any questions you may have as to the specifics of your proof of claim.
In addition to lawsuits by the states, several class actions have been filed around the country, most alleging breach of warranty and deceptive trade practices in the marketing of the Second Chance vests containing Zylon. Because of Second Chance's bankruptcy, all private litigation against that company is stayed, but litigation continues against other parties, most notably the fiber manufacturer, Toyobo.
A state district court in Oklahoma has certified a nationwide class of all purchasers of Second Chance vests containing Zylon on the breach of warranty issues, and a sub-class of Oklahoma purchasers only on the deceptive marketing issues. (To our knowledge, although there are other lawsuits that have been brought as class actions, no other court has actually certified any classes.)
Notice of the class certification has been sent, and class members will be covered by any judgment or settlement reached in that case unless they inform the court that they do not wish to be part of the class by filing an opt-out notice on or before May 31, 2005. You can read the court's notice at www.zylonvestclassaction.com.
If you are a member of the class and do not respond, your breach of warranty claims against Toyobo and any other defendants in the Oklahoma suit except Second Chance will be resolved through the Oklahoma lawsuit. Claims against Second Chance itself, including the claims in the Texas lawsuit, will not be extinguished, but, because of its financial situation, chances of significant recovery from Second Chance are slim.
Second Chance is in bankruptcy and there is little chance of recovering substantial moneys from Second Chance. To preserve their chance to recover what little may be available, claimants should file a proof of claim before the bar date. Texas will file a claim sufficient to cover all Texas purchasers but individual purchasers are advised to also file their own claims.
An Oklahoma state court has certified a nationwide class for breach of warranty claims, made up of purchasers of Second Chance Ultima, Ultimax and Triflex vests. Because Second Chance is in bankruptcy, the Oklahoma lawsuit is proceeding against Toyobo, the fiber manufacturer, but not against Second Chance. Purchasers will be treated as part of the class, and bound by any settlement or judgment on the breach of warranty claims against Toyobo, unless they file notices of exclusion on or before May 31, 2005. Texas has not sued Toyobo, so to pursue claims against that company you must participate in the class or file an exclusion and hire your own attorney.
The Texas Attorney General has limited authority to offer legal advice to persons other than state entities or officials, and we strongly advise that you consult with your city attorney or private counsel for individualized advice as to what course of action is best for your particular situation.