Free Motion in Limine - District Court of Federal Claims - federal

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS UNITED MEDICAL SUPPLY COMPANY, INC., Plaintiff v. THE UNITED STATES, Defendant

CASE NO: 03-CV-289 Judge Allegra

PLAINTIFF'S FIRST MOTION IN LIMINE TO THE HONORABLE UNITED STATES COURT OF FEDERAL CLAIMS: On June 19, 2008 the Court ordered the parties to file their motions in limine by August 4, 2008. Plaintiff files its First Motion in Limine contemporaneously with its Second Motion in Limine. With respect to this First Motion in Limine, Plaintiff

requests the Court exclude from trial scheduled to commence in these consolidated cases in November 2008 evidence of the following:

LIST OF MATTERS SUBJECT TO PLAINTIFF'S FIRST MOTION IN LIMINE
Plaintiff requests that the Court enter an order excluding evidence in support of the following matters: 1. The Solicitation Estimates were not negligently prepared.

2. Plaintiff did not rely on the Estimates. 3. The Court does not have jurisdiction over Plaintiff's negligent estimation claim. 4. The dollar amount of orders placed by the Government under the contract but not filled by Plaintiff cannot reasonably be estimated from the fill rate reports.
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ATTACHED DOCUMENTS IN SUPPORT OF PLAINTIFF'S MOTION
Exhibit #
1 2 3 4 5 6 7 8 9

Description
Excerpts from Affidavit of Linda Flatley filed by the Government in opposition to Plaintiff's Motion for Summary Judgment. Excerpt from Solicitation Amendment 008 Excerpt from Deposition Transcript of Mike David Excerpt from Deposition Transcript of Colonel James Riley Excerpt from Solicitation Amendment 012 Government's Response to Request for Admission 9 Excerpt from Deposition Transcript of William Bandy Interrogatory Answer with Jennings verification Deposition Excerpt of Mr. James Jennings, Contracting Officer

Bates "Limine Page __"
1-4

5-6 7-11 12-15 16-17 18-21 22-23 24-27 28-31

MATTER 1 Exclusion of Evidence that the Solicitation Estimates were not negligently prepared
Plaintiff requests that the Court enter an order excluding evidence at trial in support of any contention the Solicitation Estimates were not negligently prepared. Realistic Estimates are Required by FAR §16.503(a)(1) FAR §16.503(a)(1) requires the Government to estimate the quantity of orders it will place under a requirements contracts. Typically that estimate is stated in terms of product units, but in this case it was an estimate of the dollar amount of orders that would be placed under the contract, exclusive of the contractor's distribution fee. Under FAR §16.503 the Government is required to "state a realistic estimated total quantity in the solicitation and resulting contract...which may be obtained from records

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of previous requirements and consumption, or by other means, and should base the estimates on the most current information available." Defendant admits that the Solicitation estimates were estimates of purchases of all medical/surgical items and were not limited to estimates of items subject to the contract. Defendant, in response to Plaintiff's Motion for Summary Judgment, filed a supporting affidavit of Ms. Linda Flatley [Exhibit 1, ¶19] in which set testified, The estimate did not reflect the dollars spent for only DAPA items. Rather it reflected the dollars spent for all medical/surgical items, regardless of whether those exact items were covered by a DAPA. [Ex. 1, ¶19, Bates 3]. Ms. Flatley's statement quoted above was repeated in the Government's proposed findings of fact submitted in connection with its summary judgment response at numbered paragraph 14 and in its summary judgment response at p. 10. The Government never expected to purchase all of its medical/surgical items under the Contract The Solicitation repeatedly stated that it was expected that the majority of the type of products described in the Solicitation would be purchased under contract. See, for example, Solicitation Amendment 008, p.4, in which the Government stated, "Under this program, the prime vendors chosen by DPSC will furnish the participating ordering facilities with the majority of their normal day-to-day requirement for brand name specific and generic medical supplies." [Bates 6]. There was nothing in the Solicitation to indicate that the estimates were anything other than the estimates

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required by FAR 16.503, that is, "a realistic to quantity" to be ordered under the contract. During the course of discovery the Government identified the person who collected the Army estimates as a man named Mr. Mike David. Plaintiff took the deposition of Mr. David and he testified, inter alia, that the Government will never buy all of its medical/surgical items under the prime vendor program. [David depo. Tr., p. 29-30; Bates 10-11]. Not a single MTF logistics officer testified that the estimates were reasonable. Plaintiff deposed several logistics personnel at the MTF level. Not one testified that the estimates were reasonable. Colonel James Riley, for example, who was

previously head of medical logistics at the two largest MTFs (Brooke Army Medical Center in San Antonio and William Beaumont Army Hospital in El Paso), testified that in his opinion the estimates had no basis in reality, that they appeared to include many products that were not suitable for purchase through a prime vendor program, and that a reasonable estimate would have been six to eight million, not 18 million. [Ex. 4, Riley depo tr. 18-20; Bates 15]

MATTER 2 Exclusion of Evidence that Plaintiff did not rely on the estimates
Plaintiff requests that the Court enter an order excluding evidence at trial in support of any contention Plaintiff did not rely on the estimates.

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The Government has repeatedly argued throughout this case that Plaintiff cannot recover under its negligent estimate theory because it cannot prove causation since, according to the Government, it did not rely on the estimates. At one point in time it suggested to the Court that it intended to file a summary judgment motion on this issue. That issue has been resolved by a formal admission by the Government and the opinion in Hi-Shear Technology Corporation v. United States, 356 F.3d 1372 (Fed. Cir. 2004). The Solicitation Instructs Bidders to Rely on the Published Estimates Solicitation Amendment 012, at page 4 specifically instructs the bidders to prepare their bids based on the estimates. [Bates 17]. This instruction was substantially identical to all other Solicitation Amendments in which the estimates were disclosed, including Amendments 008 and 014. Government Admits Reliance Plaintiff served a formal request on the Government as follows: 9. Admit that Plaintiff's bid, in terms of [percentage], would have been greater if the Government's estimates had been 1/3 or more [lower] than the estimates provided in the Solicitation. The Government responded, Admitted ­ with the proviso that, in that case, Plaintiff probably would not have been awarded the Contract. [Bates 19]. United Claims Reliance In its bid package United included, albeit unenforceably per the Court's summary judgment order, a provision requiring adjustment of its distribution fee if actual sales did not equal at least 90% of the estimate.
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At his deposition Mr. William Bandy (president of United Medical at the time it submitted its bid) testified that he believes United Medical would have bid a substantially higher distribution fee if the estimates would have approximated actual sales. [2005 deposition of William Bandy, p. 20; Bates 23]. Reliance is Presumed In Hi-Shear Technology Corp. v. U.S., 53 Fed. Cl. 420, 432-433 (Fed. Cl. 2002; aff'd 356 F.3d 1372 (Fed. Cir. 2004)) the trial court stated, ...the court rejects the government's argument that a contractor cannot rely on the estimates in a solicitation for a requirements contract because those estimates are not guarantees. In Medart, Inc. v. Austin, the contract at issue was a requirements contract and included a statement that the estimates therein were not guaranteed quantities. 967 F.2d at 580. Although the court noted that a variance between actual purchases and government estimates will not give rise to liability, the court also indicated that "presumably contractors rely on the proffered estimates in formulating their bids, so the government must act in good faith and use reasonable care in computing its estimated needs." Id. at 581. The Medart court found that `where a contractor can show by preponderant evidence that the estimates were `inadequately or negligently prepared, not in good faith, or grossly or unreasonably inadequate at the time the estimate was made[,]' the government could be liable for appropriate damages resulting. [citations omitted]. Courts also have reiterated the presumption that contractors rely on government estimates in other case involving requirements contracts. See Educators Assocs., Inc. v. United States, 41 Fed.Cl. at 816; Datalect Computer Servs., Ltd. v. United States, 40 Fed.Cl. at 35; Crown Laundry and Dry Cleaners, Inc. v. United States, 29 Fed.Cl. at 519....

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MATTER 3 Exclusion of Evidence that the Court does not have jurisdiction over Plaintiff's negligent estimation claim
Plaintiff requests that the Court enter an order excluding evidence at trial in support of any contention the Court does not have subject matter jurisdiction over Plaintiff's negligent estimation claim. Plaintiff recognizes that the parties cannot confer subject matter jurisdiction on the Court where there is none. This issue was previously addressed by the Court and it concluded, with agreement of the parties that negligent estimation was before the Court. Nothing has arisen that would indicate otherwise and it would be a waste of judicial resources and delay trial to rehash the jurisdiction issue.

MATTER 4 The dollar amount of Plaintiff's unfilled orders cannot be estimated from fill rate reports
Plaintiff requests that the Court enter an order excluding evidence at trial in support of any contention the dollar amount of orders submitted to Plaintiff but which Plaintiff did not fill cannot be estimated from the fill rate reports. An important distinction must be made between a diverted order and a diverted purchase The Government admits that the contract required the Government to order its contract requirements from United Medical before going to an outside source. [Ex Flatley Affidavit, para 20, Bates 3]. The Government has repeatedly asserted that the volume of orders submitted to United Medical is irrelevant to the lawsuit. Yet, at the

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same time it attempts to justify its third party purchases by claiming that United Medical killed those orders. A comparison of orders killed or otherwise unfilled by United Medical with purchases of contract items from third parties is relevant. Moreover, to estimate damages resulting from a negligent estimation claim, total orders submitted by the Government is relevant.1 The sworn, unchanged testimony, of contracting officer Jennings is that the dollar volume of orders submitted to United Medical but which United Medical did not fill can be reasonably estimated from the fill rate reports Mr. James Jennings, a contracting officer for the United Medical contract, signed verified interrogatories that a dollar estimate of unfilled orders could be obtained from the fill rate reports. [Exhibit 8, Interrogatory 5; Bates 25]. At the summary judgment hearing the idea was discussed that since fill rate reports reported orders by line and not by dollar, that there may not be a correlation. As a consequence, Plaintiff deposed Mr. Jennings to determine whether his interrogatory answer was correct. He testified that it was and that, due to the volume, unfilled lines reasonably equated to unfilled dollars. [Jennings Depo Tr. p. 105-109; Bates 30-31]. That testimony has never been changed. Moreover, the Government has not produced any evidence to suggest that Mr. Jennings testimony is anything but accurate on that issue.

In Hi-Shear Technology Corp. v. U.S., 53 Fed. Cl. 420, 444-445 (Fed. Cl. 2002; aff'd 356 F.3d 1372 (Fed. Cir. 2004)) the trial court used actual orders as a basis for estimating damages. Actual orders are relevant to Plaintiff's damages model in a similar manner.
1

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For the reasons shown above, Plaintiff requests that the Court enter an order excluding admission of evidence on the matters shown. Signed August 4, 2008.

Respectfully submitted, s/ Frank L. Broyles Frank L. Broyles State Bar No. 03230500 Goins, Underkofler, Crawford & Langdon, LLP 1201 Elm Street 4800 Renaissance Tower Dallas, Texas 75270 (214) 969-5454 (214) 969-5902 Fax Attorney for Plaintiff

CERTIFICATE OF SERVICE Service of a copy of the foregoing including exhibits will be accomplished via the Court Clerk's ECF system. s/ Frank Broyles

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