Importer Seeks Over $68 Million From PPE Manufacturer, Says It Hid CBP Forced Labor Investigation
Personal protective equipment manufacturer defendants, led by Smart Glove Holdings, failed to disclose they were under investigation by CBP for using forced labor, leading to over $68.5 million in damages to protective equipment supplier Airboss Defense Group (ADG), ADG said in a Sept. 19 complaint. Filing suit in the U.S. District Court for the Central District of California, ADG claimed that had it known about this investigation, it would not have agreed to source its gloves from Smart Glove and would have avoided the millions in charges, logistics costs and storage fees it incurred due to the imports being detained under a withhold release order (Airboss Defense Group v. Smart Glove Holdings, C.D. Calif. #2:22-06727).
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ADG said that in March 2021 it contracted with the Department of Health and Human Services to provide the agency with over 18.2 million boxes of nitrile rubber gloves. After conducting "diligence," the plaintiff said it chose Smart Glove as its supplier. What it didn't know was that CBP was already investigating the manufacturer on allegations of using forced labor in production of the products. When ADG tried to import the gloves, CBP detained them via a WRO. The border agency in all detained 202 containers of gloves.
Smart Glove deceived ADG since it knew throughout their whole relationship that it was being investigated by CBP yet never revealed this fact, the complaint said. "Of course, had ADG known about those allegations of forced labor or CBP’s investigation of those allegations at certain Smart Glove factories, it would not have agreed to have those factories supply gloves for HHS given the likelihood that a Withhold Release Order could be forthcoming," the brief said. In fact, this very thing happened with Top Glove -- Smart Glove's top Malaysian competitor. ADG said it halted price negotiations with Top Glove after CBP issued a forced labor finding against the manufacturer.
ADG said Smart Glove's deceit cost the company millions. "Because of Smart Glove’s concealment of the fact that it was being investigated by CBP on allegations of forced labor, ADG has incurred substantial damages," the complaint said. "To date, ADG incurred at least more than $11.6 million in charges for protracted demurrage, storage, and other Withhold Release Order-related charges, more than $12.3 million in logistics costs to procure alternative gloves, lost profits of more than $12.6 million, and potential inventory losses upwards of $32 million. ADG has thus been damaged in an amount of more than $68.5 million on account of Smart Glove’s conduct and has or will likely suffer other or further damages in an amount to be proven at trial."
Ultimately, the plaintiff filed a two-count complaint at the district court. Count I says that Smart Glove "engaged in fraudulent concealment" of CBP's investigation, resulting in ADG's suffering of substantial damages. Count II levies a "tortious interference with contract" claim at Smart Glove. The plaintiff argued that Smart Glove's actions made ADG's ability to fulfill the contract "more expensive and difficult," and that the defendant "intended to disrupt the performance of this contract and/or knew that disruption of performance was certain or substantially certain to occur as a result of its actions." ADG deemed Smart Glove's conduct as "fraudulent, oppressive, and/or malicious."
In the complaint, ADG tried to establish a date when Smart Glove first learned of the investigation. The plaintiff pointed to an International Trade Today article marking Smart Glove as one of the three companies named in a recent forced-labor petition sent to CBP. International Trade Today tried to get a comment from Smart Glove on the article in May 2021. ADG said it conducted diligence efforts on Smart Glove in July 2021 -- a date by which the defendant surely "must have known it was being investigated."