Free Reply to Response to Motion - District Court of Federal Claims - federal

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No. 02-796C (Judge Allegra) ______________________________________________________________________________ IN THE UNITED STATES COURT OF FEDERAL CLAIMS INFORMATION SYSTEMS & NETWORKS CORPORATION, Plaintiff, v. THE UNITED STATES, Defendant. ______________________________________________________________________________ DEFENDANT'S REPLY TO PLAINTIFF'S RESPONSE TO DEFENDANT'S MOTION FOR SUMMARY JUDGMENT ______________________________________________________________________________ PETER D. KEISLER Assistant Attorney General JEANNE E. DAVIDSON Director BRIAN M. SIMKIN Assistant Director STEVEN M. MAGER Trial Attorney Commercial Litigation Branch Civil Division Department of Justice 1100 L Street, Room 12074 Washington, D.C. 20530 Tele: (202) 616-2377 [email protected] June 12, 2007 Attorneys for Defendant

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TABLE OF CONTENTS PAGE(S) ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 I. II. III. ISN Misconstrues The Standard For Summary Judgment . . . . . . . . . . . . . . . . . . . 2 ISN Improperly Raises New Claims In Its Response . . . . . . . . . . . . . . . . . . . . . . . 4 ISN Cannot Demonstrate That There Is A Genuine Issue of Material Fact That The Contracting Officer Ordered The Alleged Changes To The Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ISN Fails To Demonstrate That There Is A Genuine Issue of Material Fact With Regard To Bad Faith . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 ISN's Motion In Limine Is Premature, And Not Relevant To Its Response To The Government's Motion For Summary Judgment . . . . . . 16

IV.

V.

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

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TABLE OF AUTHORITIES CASES PAGE(S) Al Johnson Constr. Co. v. United States, 20 Cl. Ct. 184 (1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Asco-Falcon II Shipping Co. v. United States, 32 Fed. Cl. 595 (1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Baskett v. United States, 2 Cl. Ct. 356 (1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101 (7th Cir. 1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Celotex Corp. v. Catrett, 477 U.S. 317 (1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 3, 4 Crest A Apartments, Ltd. II v. United States, 52 Fed. Cl. 607 (2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Dairyland Power Coop. v. United States, 16 F.3d 1197 (Fed. Cir. 1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Giesler v. United States, 232 F.3d 864 (Fed. Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 International Paper Co. v. United States, 39 Fed. Cl. 478 (1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Michels v. United States, 72 Fed. Cl. 426 (2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Miller Elevator Co., Inc. v. United States, 30 Fed. Cl. 662 (1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 18 North Star Alaska Housing Corp. v. United States, 76 Fed. Cl. 158 (2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

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PAGE(S) Rice Systems, Inc. v. United States, 62 Fed. Cl. 608 (2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 SMS Data Products Group v. United States, 19 Cl. Ct. 612 (1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Snoqualmie Tribe of Indians v. United States, 178 Ct. Cl. 570, 372 F.2d 951 (1967) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Stockton East Water Dist. v. United States, 62 Fed. Cl. 379 (2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-8 Sweats Fashions, Inc. v. Pannill Knitting Company, Inc., 833 F.2d 1560 (Fed. Cir. 1987) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 3 Torncello v. United States, 231 Ct. Cl. 20; 681 F.2d 756 (1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 UMC Electronics Co. v. United States, 43 Fed. Cl. 776 (1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 White Mountain Apache Tribe v. United States, 10 Cl. Ct. 115 (1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 STATUTES AND REGULATIONS 41 U.S.C. § 609(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 28 U.S.C. § 2501 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 MISCELLANEOUS FRE 801(d)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 RCFC 7.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS

INFORMATION SYSTEMS & NETWORKS CORPORATION, Plaintiff, v. THE UNITED STATES, Defendant.

) ) ) ) ) ) ) ) ) )

No. 02-796C (Judge Allegra)

DEFENDANT'S REPLY TO PLAINTIFF'S RESPONSE TO DEFENDANT'S MOTION FOR SUMMARY JUDGMENT Pursuant to Rules 7.1(c) of the Rules of United States Court of Federal Claims ("RCFC"), defendant, the United States, respectfully submits its reply to plaintiff Information Systems & Networks Corporation's ("ISN") response to defendant's motion for summary judgment. In our opening brief, we demonstrated that the Government is entitled to summary judgment upon ISN's constructive change/equitable adjustment claim, because plaintiff could not show that it had received an order to proceed with work despite the lack of a final approved Engineering Change Proposal ("ECP") and because ISN chose to proceed pursuant to a bi-lateral modification process, rather than presenting a change proposal or claim to the contracting officer. Further, we demonstrated that there is no evidence that the Government acted in bad faith, as alleged in plaintiff's complaint. ISN's response fails to successfully rebut these arguments. Accordingly, we respectfully request that this Court grant our motion to for summary judgment.

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ARGUMENT I. ISN Misconstrues The Standard For Summary Judgment In its response, ISN attempts to shift the burden of producing evidence of non-existent conditions to the Government by misapplying the standard for summary judgment. In our motion for summary judgment, we provide that ISN cannot demonstrate that it received an order from an authorized Government agent or that the Government acted in bad faith. ISN, however, argues that such a showing is not enough to meet the Government's burden for summary judgment, and that the Government must produce some affirmative evidence that there was no order and that the Government acted in good faith.1 See Pl. Resp. 8-14, 16. Such an argument, however, is contrary to both the law and logic. As a matter of law, the United States Supreme Court and United States Court of Appeals for the Federal Circuit have detailed the standard that a movant must meet in order to succeed on a motion for summary judgment. In Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986), the Supreme Court held that a party's burden on summary judgment is discharged by "showing" that there is an absence of evidence to support the non-moving party's case. This "showing" merely requires that the moving party point out the absence of evidence to support the other party's case. Id. Consistent with this case law, the United States Court of Appeals for the Federal Circuit held in Sweats Fashions, Inc. v. Pannill Knitting Company, Inc., 833 F.2d 1560, 1562 (Fed. Cir. 1987) that "the burden is not on the movant to produce evidence showing the absence

In its response to our arguments for summary judgment upon ISN's bad faith claim, ISN goes even further, asserting that " summary judgment cannot be used in disposing of the [bad faith] claim unless the facts are stipulated." Pl. Resp. at 16. As demonstrated below, this is incorrect and this Court has granted summary judgment on bad faith absent stipulated facts. See, e.g., Rice Systems, Inc. v. United States, 62 Fed. Cl. 608, 630-31 (2004). -2-

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of a genuine issue of material fact." 833 F.2d at 1563 (emphasis in original). Rather, "`the burden on the moving party may be discharged by "showing" -- that is, pointing out to the [Court of Federal Claims] -- that there is an absence of evidence to support the non-moving party's case.'" Id. (emphasis in original) (quoting Celotex Corp. v. Catrett, 477 U.S. at 325). The Government has met this standard. After the non-moving party has pointed out the absence of evidence to support the nonmoving party's case, the burden then shifts to the nonmoving party to demonstrate an issue of material fact with regard to such matters. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986); Sweats Fashions, 833 F.2d at 1562-63. Further, "a nonmoving party's failure of proof concerning the existence of an element essential to its case on which the nonmoving party will bear the burden of proof at trial necessarily renders all other facts immaterial and entitles the moving party to summary judgment as a matter of law." Dairyland Power Coop. v. United States, 16 F.3d 1197, 1202 (Fed. Cir. 1994). As we demonstrated in our opening brief and explain in further detail below, ISN has not met its burden, and the Government is entitled to summary judgment upon the remaining counts of ISN's complaint. This procedure for disposing of claims upon summary judgment also is more logical than ISN's proposed procedure. Pursuant to ISN's construction of the summary judgment standard, a movant would have the nearly impossible task of producing affirmative evidence of nonexistence of a condition, even where the burden of proof at trial is on the movant. In other words, in order to demonstrate that there was no order by an authorized Government official, the Government would have to demonstrate a non-existent order. Similarly, to demonstrate a lack of bad faith, the Government would be required to produce affirmative demonstrate that Government agents were not acting in bad faith (despite the strong presumptions to the -3-

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contrary). This standard would effectively preclude summary judgment in almost all such circumstances. However, the "summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather an integral part of the Federal Rules as a whole," Celotex, 477 U.S. at 327, which allows for the efficient elimination of factually insufficient claims without the need for a trial. Accordingly, the Government respectfully requests that the Court reject the ISN's attempt to redefine the standards for summary judgment. The proper issue before the Court is whether plaintiff has met its burden of demonstrating in its response that there is a genuine issue of material fact with regard to constructive change/equitable adjustment and bad faith. As demonstrated in our opening brief and below, the Government is entitled to summary judgment as a matter of law. II. ISN Improperly Raises New Claims In Its Response In its response to our motion for summary judgment, ISN asserts new claims regarding constructive change/equitable adjustment and bad faith, that are distinct from the claims set forth in the complaint. These new claims, not found in the complaint, and asserted after the close of discovery and years of litigation (and raised well after the expiration of the relevant statute of limitations), are not properly before this Court. In its complaint, ISN alleges the Government made a constructive change to the contract because "[t]he services and work performed on the ECP were not contemplated by the original scope of services set forth in the Contract." Compl. ¶ 26. According to ISN, "[t]he ECP, at the least, constituted out-of-scope work approved by defendant and is a constructive change to the contract." Id. See also Compl. ¶¶ 30-31, 33 (equable adjustment). In its response to our opening brief, however, ISN criticizes the Government's focus upon facts relevant to the -4-

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unapproved ECP, and the similarity between the facts alleged in connection with our previously filed motion for summary judgment on Count I (breach of contract) of the complaint. Pl. Resp. 10-14. The Government's focus, however, is necessarily a product of ISN's claims. ISN's breach claim and its changes/equitable adjustment claim both are premised on the existence of an approved ECP. Indeed, in its response, ISN continues to link much of its changes/equitable adjustment claim to the ECP, even though this Court previously held that there was no approved ECP. See Def. App. 146-52. Yet, to the extent that ISN is making new changes claim, divorced from the ECP, that claim would not be properly before this Court. Indeed, as noted in our opening brief, such an independent changes claim was not presented to the contracting officer or the termination contracting officer ("TCO") for a final decision, and the Court would lack jurisdiction over such a claim. Similarly, in its complaint, ISN alleges that the Government acted in bad faith: (1) by advising ISN that its ECP proposal was approved and that it would be paid costs for its services; (2) by representing that the ECP had been approved and that the formal paperwork would "eventually catch up;" (3) by directing, authorizing, and approving the services performed by ISN pursuant to the ECP and then failing to pay for such services; and (4) by recognizing, through the TCO, that ISN was entitled to costs incurred pursuant to the ECP, and then disavowing the authority of the TCO to make such a conclusion. Compl. ¶ 22. In its response to our motion, however, ISN alleges that the Government acted in bad faith by: (1) requesting and demanding multiple ECPs and changes within the scope of the contract, and then refusing to memorialize the changes and pay for such changes; (2) orchestrating ISN's termination; and (3) failing to participate in the termination settlement process. Pl. Resp. at 17. At best, only the

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first of these new claims bears any resemblance to the bad faith claim contained in the complaint. The remaining two claims, however, fall outside the scope of the complaint. ISN should not be permitted to amend its complaint by response to the Government's opening brief. Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1107 (7th Cir. 1984) ("[I]t is axiomatic that a complaint may not be amended by the briefs in opposition to a motion to dismiss."); Michels v. United States, 72 Fed. Cl. 426 (2006) (refusing to consider new allegations raised on motion to dismiss but not in complaint); Crest A Apartments, Ltd. II v. United States, 52 Fed. Cl. 607, 613 (2002) (refusing to consider claim asserted in summary judgment motion but not in complaint). See also SMS Data Products Group v. United States, 19 Cl. Ct. 612, 616 (1990) (plaintiff barred from raising claim that is fundamentally different from the claim presented to the contracting officer). ISN's changes/equitable adjustment claim is premised upon an approved ECP; and the litigation and discovery have proceeded upon this understanding of ISN's claim. Further, ISN's complaint does not provide any direct or inferential reference to bad faith in connection with the decision to terminate ISN's contract for the convenience of the Government, nor to the contracting officer's alleged lack of participation in the settlement. ISN does not even challenge its termination in its complaint. Instead, ISN's bad faith claim also focused upon the Government's purported failure to pay ISN for an approved ECP. ISN should not be permitted to change its claims only after the Government has moved for summary judgment. Nor would these new claims be the proper subject of a motion to amend the complaint, even had ISN raised such claims on a motion to amend, rather than a response brief. ISN would be raising such claims in an untimely manner, well outside of the one year statute of limitations

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contained in the Contract Disputes Act ("CDA"), 41 U.S.C. § 609(a)(3), or this Court's general six-year statute of limitations for non-CDA claims. 28 U.S.C. § 2501. ISN's ECP claim was based upon ISN's proposal dated June 20, 1995, and the Government's alleged approval on August 31, 1995. ISN alleges that it was terminated for the convenience of the Government on March 15, 1996. On December 9, 1997, the TCO made a determination that the gross settlement for the termination was $4,049,532, and the net amount due ISN was $0. Upon ISN's request, a final decision was issued on December 24, 1997. Accordingly, ISN should have been aware of any additional changes/equitable adjustment claims it might have, distinct from its claim of an approved ECP, more than a decade prior to filing its response brief. Further, ISN alleges that the agency formulated a plan to terminate ISN in December 1995, and ISN was terminated for the convenience of the Government on March 15, 1996. Even if ISN was not fully aware that it might have a bad faith claim for improper termination on March 15, 1996, by October 18, 1999, ISN had deposed the contracting officer, Roscoe Crawford, and specifically questioned him about the document upon which its assertion of bad faith is based. See Def. Supp. App. 15-21; Pl. App. 154-55. Thus, it is clear that well over seven years prior to the filing of its response, ISN was aware of such facts as would have required it to raise its new bad faith claim with this Court. Nor can this claim be said to relate back to the original filing of the complaint, as the complaint did not bring an action based upon any change/equitable adjustment distinct from the unapproved ECP, or a bad faith claim arising from the termination or the conduct of the termination settlement process. See Stockton East Water Dist. v. United States, 62 Fed. Cl. 379,

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392 (2004) (quoting Snoqualmie Tribe of Indians v. United States, 178 Ct. Cl. 570, 587, 372 F.2d 951, 960 (1967)). The contract at issue in this case was awarded in 1994 and terminated in 1996. The acts at issue and the relevant documents are over a decade old. Upon information and belief, many of the Government's and ISN's employees associated with this matter have retired or moved on to other matters. During the course of discovery, and in filing its motion for summary judgment, the Government reasonably focused upon the claims actually asserted by ISN in its complaint. It cannot be said that we had fair notice of these new claims, and we are, thus, entitled to the protections of the statute of limitations. Having failed to previously raise such claims, ISN cannot now raise new claims in response to the Government's motion to dismiss. III. ISN Cannot Demonstrate That There Is A Genuine Issue of Material Fact That The Contracting Officer Ordered The Alleged Changes To The Contract As noted in our opening brief, the contracting officer did not issue any change order or other order to proceed with the ECP work. The contract expressly provides that the contracting officer is the only person with the authority to issue a change to the contract, and further provides that "The Contractor shall not comply with any order, direction, or request of Government personnel unless issued in writing and signed by the Contracting Officer, or pursuant to specific authority otherwise included in this contract." Def. App. 24. Accordingly, because ISN still fails to demonstrate that the contracting officer issued any order or direction to proceed with the ECP work despite the lack of an approved ECP, ISN cannot recover pursuant its constructive change/equitable adjustment theory. While ISN contends that the contracting officer approved the ECP and work performed pursuant to the ECP, this contention is not supported by any evidence. To the contrary, the -8-

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record demonstrates that the ECP remained unapproved, and that ISN was aware that the ECP was unapproved. While the Space and Naval Warfare Systems Command ("SPAWAR") technically approved the ECP on July 20, 1995, it recommended that the contracting officer negotiate "all terms and conditions" with ISN. Def. App. 66. On August 23, 1995, an ISN internal memorandum provides that Lisa Murtha, the contract specialist for the contract had not looked at the ECP to date, and would not be able to work on the ECP until September 1995, due to "too much `end of year' work and too few people to accomplish it." Def. App. 69. ISN's October 1995, November 1995, December 1995, and January 1996 progress reports details that ISN is "[w]aiting response from the Government" on the ECP. Def. App. 72, 76, 79, 83. On January 26, 1996, ISN wrote to the contracting officer, stating that "the approval of the latest ECP dated June 20, 1995 in the amount of $930,527 for Hampton Roads has not been received by ISN." Def. App. 85. Less than one month later, ISN was issued a stop work order, and the contract was terminated. Def. App. 90. ISN argument that it did not need a formal change order in order to bring a constructive change claim misses the point. ISN still needs to demonstrate that it can meet the "order/fault" component of a constructive change claim. Miller Elevator Co., Inc. v. United States, 30 Fed. Cl. 662, 678 (1994) (citing Al Johnson Constr. Co. v. United States, 20 Cl. Ct. 184, 204 (1990)). ISN, however, presents no evidence that the contracting officer, the only party with the authority to make a change, required that ISN work on the ECP despite his lack of approval. Indeed, the contracting officer has testified that he believes that ISN did not perform any work on the ECP. Def. Supp. App. 4-7. Nor can ISN assert that it was unaware of the express contract provisions requiring the contracting officer's approval prior to performing any work on a proposed change. It is -9-

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axiomatic that the "[p]arties to a contract are generally bound by its terms," and a contractor is responsible for knowing and compiling with the express terms of the contract. Giesler v. United States, 232 F.3d 864, 869 (Fed. Cir. 2000). Further, on May 25, 1995, ISN stated to the Government that "ISN will insure that all changes are approved by contractually authorized Government Representatives and documented." Pl. App. 138. Even assuming for the sake of argument that ISN performed work on the ECP, a matter not placed at issue in this motion for summary judgment, while such changes remained unapproved by the contracting officer, ISN cannot recover for such work. Recognizing it cannot demonstrate that the contracting officer issued a change order or required ISN to begin work on the ECP, ISN asserts that the changes were approved by the contracting officer's technical representative ("COTR"), in accordance with section G.4 of the contract. Pl. Resp. 26-27. Section G.4 of the contract, however, does not permit the COTR to approve ECP requests, or to make any changes to the contract. Rather, the COTR was responsible for "monitoring, progressing, and overall surveillance of services to be performed" pursuant to the contract. Def. App. 25. Indeed, this section expressly states that the COTR does not possess authority to make a change to the contract: In no event will any understanding or agreement, modification, change order, or other matter deviating from the terms of the basic contract between the contractor and any other person other than the Procuring Contracting Officer (PCO) or the Administering Contracting Officer (ACO) be effective or binding upon the Government. Id. (emphasis added). While ISN is correct that the contract provides that the COTR shall notify the contracting officer of any requests by the contractor to engage in efforts outside of the scope of the existing contract, this section also provides that "[n]o action shall be taken by the - 10 -

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contractor under such technical instruction unless the PCO or ACO has issued a contractual change." Id. See also Def. Supp. App. 2-3 (deposition of Roscoe Crawford) ("[t]he COR is not authorized to make changes to the terms or conditions of the contract.") As noted in the March 21, 1995 program meeting minutes, the contracting officer merely "want[ed] ISN to put in the equipment that ISN bid to install." Pl. App. 34. There is no evidence that he approved the ECP or ordered ISN to work on the ECP without approval. Accordingly, we respectfully request that the Court grant the Government's motion for summary judgment upon ISN's constructive change/equitable adjustment claims. IV. ISN Fails To Demonstrate That There Is A Genuine Issue of Material Fact With Regard To Bad Faith In its response, ISN first asserts that it was bad faith for the Government not to respond to its "multiple" ECP requests. At the outset, there is some confusion regarding dates of ISN's ECP requests. According to the citations in ISN's response, the initial configuration change ECP request was prepared on April 18, 1995 (not April 7, 1995), Pl. App. 93-104, and its initial cable ECP was prepared on April 21, 1995 (not April 18, 1995), Pl. App. 130-137. On May 25, 1995, ISN provided a summary of its previous ECP requests in its submittal of contract data requirement list item B002. Pl. App. 138-39.2 ISN ultimately brought these ECP requests together into one document on June 20, 1995, not June 20, 1996. Pl. App. 52-61. Accordingly, it is this request that was the proper focus of the Government's subsequent consideration and our motion for summary judgment. Further, to say that the Government failed to respond to the previous ECPs is highly disingenuous, since the June 20, 1995 ECP expressly provides that it is the product of

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"[g]uidance provided by the Government" in a May 1, 1995 letter. Our opening brief did not focus upon these initial ECP requests because the Government had responded, and had attempted to assist ISN in preparing the June 20, 1995 ECP request. The Government did not approve this ECP request, but, as we demonstrated in our opening brief, it was not bad faith for the Government to not approve a requested change to the terms of the contract. The most serious allegation of bad faith by ISN is that the contracting officer contemplated a plan to improperly terminate ISN for default.3 As ISN acknowledges, however, it was not terminated for default, but rather was terminated for the convenience of the Government. Pl. Resp. 6. See also Def. Supp. App. 19-20. Accordingly, although the presumption that Government officials act in bad faith can only be overcome with clear and convincing proof of "specific acts of bad faith on the part of the government," Asco-Falcon II Shipping Co. v. United States, 32 Fed. Cl. 595, 604 (1994) (emphasis added), ISN bases its claim upon the mere contemplation of an act that it alleges was improper, rather than an act itself. This is incorrect. Moreover, although the Government considered terminating ISN for default and observed that termination for default is "cheaper" than a termination for convenience, it is uncontested that here, the Government choose the more expensive route and terminated ISN for the convenience of the Government. See Pl. App. 154. As ISN acknowledges, ISN was paid an additional $1,542,517 after termination. Pl. Resp. at 7. Accordingly, it is difficult to argue that the Government's decision to terminate was in bad faith, since the Government choose to terminate the contract in a manner that provided a greater benefit for the contractor, even though

For the purposes of this section, we will assume that the Court has determined that ISN is permitted to raise this new allegation. - 12 -

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believed it might be possible to re-establish its rights under the contract and terminate for default. Further, assuming that the mere consideration of termination for default and ISN's ultimate termination for convenience could be improper, there is absolutely no evidence anywhere in any documents that these actions (or any other actions) were motivated by "some specific intent to injure the plaintiff," Torncello v. United States, 231 Ct. Cl. 20, 681 F.2d 756, 770 (1982) (emphasis omitted), rather than legitimate concerns regarding ISN's performance of the contract. The document cited by ISN as evidence of an improper plan to terminate ISN for default provides that: [t]he contractor has had all kinds of performance problems from the beginning. We and SPAWAR have tried to work with them as much as possible but now realize that he will probably never perform satisfactorily. We are still in the first lot, made up of three sites. The contractor is at least five months late on delivery/installation completion on all three sites. Roscoe [Crawford, the contracting officer,] never modified the contract to re-establish deliv. schedule on any of the sites because he could not get a good idea of what a relaistic new deliv. schedule would be. Also the contractor would not agree to pay consideration to extend the schedule. So right now we are in limbo. The first site (Hampton Rds.) is 80% complete. ISN is having trouble completing it. We have paid over $2 million so far in progress payments towrds all three sites in Lot I, which covers the cost of the equipment. We haven't taken title to any of it yet. Pl. App. 152. See also Def. Supp. App. 16 (deposition of Roscoe Crawford) (stating that the Government considered terminating for default because ISN was "more than eight months late . . . almost a whole year late in installation and cutoff" and providing that "[i]t was just one problem after another that the company ran into.") Only after the discussion of these alleged - 13 -

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performance problems does the Government consider its options of how to resolve problems with ISN, including the possibility of unilaterally re-establishing a delivery schedule that it was likely that ISN could not meet. The Government, however, planned to first attempt to prepare a new delivery schedule with ISN's input, and viewed these acts as merely "reestablishing [the Government's] rights under the existing contract." Pl. App. 150. Further, there is no evidence that the contracting officer intended to set a generally unreasonable delivery schedule, but rather he has testified that he believed that ISN would not meet any new delivery schedule "[b]ased on their track record for delivering other stuff." Def. Supp. App. 17. ISN argues that there were no actual performance problems on the contract, but this claim is contradicted by the very documents relied upon by ISN. Throughout ISN's performance, the Government continually expressed its concern to the plaintiff of its ability to perform. On September 28, 1994, the Government noted that "[t]he ISN schedule showed that the installation plan to slip from the contract schedule . . . Current manpower is level is a little below needed level." Pl. App. 6. At the time, it was believed that "this slip should not affect the installation schedule," and ISN represented that these difficulties it would be "back on schedule by beginning of next year" Id. Problems remained, however, and on November 30, 1994, "Ron Zell [of SPAWAR] stated a concern about the ISN management structure and the ability to actually accomplish the task." Pl. App. 26. On March 21, 1995, the contracting officer, Roscoe Crawford, provided ISN with a long list of overdue contract data requirements, and requested that ISN provide him with a plan to "get back on track and in compliance with the original contract." Pl. App. 31-37. ISN also attempts to rebut the Government's concerns about its progress by noting its subsequent progress at the Hampton Roads, Virginia facility. Pl. Resp. 13. Even assuming the - 14 -

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truth of this allegation, the contract at issue also involved switching centers at Pearl Harbor, Hawaii, and Camp Smith, Hawaii (as well as four options to provide the same system at several other installations around the world). Compare Def. App. 3-8 (contract line items) with Pl. App. 439 (acknowledging that ISN was 95% complete with one contract line item [CLIN 0001AA]). See also Pl. App. 154 ("This is FFP [fix fixed price] services with numerous sites and lots."). The Hampton Roads facility only represented a portion of the contract requirements. Further, having made progress on the contract is not the same thing as having timely performed or having performed to the Government's satisfaction, and ISN presents no evidence of such performance.4 Finally, ISN claims that the Government acted in bad faith when the contracting officer failed to participate in the termination settlement process.5 Pl. Resp. 22-24. At the outset, it is unclear how this would be bad faith, especially if the contracting officer was the alleged source of animus toward ISN.6 In any event, the contracting officer and the TCO both testified that the TCO possessed the authority to negotiate a settlement with ISN, and it is unclear how the contracting officer's involvement was integral to this process at this stage of the agency's action. Def. Supp. App. 8-9, 13-14, 23. While ISN asserts that the contracting officer did not promptly respond to the TCO's inquires regarding a proposed change to ISN's settlement, the contracting officer testified that he was on travel when the TCO attempted to get his feedback on this matter. Id. at 11. ISN has offered no evidence to rebut this sworn testimony.

ISN also cites to an affidavit filed by Roma Malkani. This affidavit, however, has no value, as Ms. Malkani previously testified at her 30(b)(6) deposition that she had almost no knowledge of the contract or ECP at issue in this case. Def. Supp. App. 36-49. For the purposes of this section, we will assume that the Court has determined that ISN is permitted to raise this new allegation.
6 5

4

ISN has not alleged that the TCO acted in bad faith. - 15 -

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After the TCO sent a termination settlement proposal to ISN, Def. Supp. App. 27, the contracting officer did respond, by informing the TCO that the ECP that ISN sought costs for was never approved. Def. Supp. App. 11-12, 24, 25-26, 28. The contracting officer also informed the TCO that SPAWAR would not be funding any additional settlement. Id. at 28. Accordingly, it is unclear what prejudice ISN suffered by the contracting officer's alleged lack of involvement in the process. Indeed, the Government, not ISN, might have been prejudiced by such acts, had the TCO and ISN agreed to a final settlement without the contracting officer's input. While ISN can demonstrate that its ECP was not approved, that it was terminated, and that it only received a portion of the amount it sought in the termination settlement process, these acts do not establish bad faith. ISN can produce no evidence of bad faith, and this case stands in stark contrast to those cases in which this Court has held that the Government has acted in bad faith. See, e.g., North Star Alaska Housing Corp. v. United States, 76 Fed. Cl. 158 (2007). Accordingly, the Court should grant the Government's motion for summary judgment upon plaintiff's bad faith claims. V. ISN's Motion In Limine Is Premature, And Not Relevant To Its Response To The Government's Motion For Summary Judgment In its response, ISN appears to have renewed a previously filed motion in limine. While the caption of ISN's response does not reflect the inclusion of this motion, we briefly respond and respectfully request that the Court deny this premature motion at this time, without prejudice. To the extent that the Court denies our current motion for summary judgment and sets a schedule for trial, ISN's motion may be renewed at the appropriate time.

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The purpose of a motion in limine is to "prevent a party before trial from encumbering a record with irrelevant, immaterial, or cumulative matters. Such a motion enables a Court to rule in advance on the admissibility of documentary or testimonial evidence, and thus to expedite and render efficient a subsequent trial." Baskett v. United States, 2 Cl. Ct. 356 (1983). "A motion in limine is a recognized method under [RCFC] 16 and Fed. R. Civ. P. 16 for obtaining a pretrial order simplifying issues for trial." White Mountain Apache Tribe v. United States, 10 Cl. Ct. 115, 116 (1986). This Court previously deferred ruling on ISN's motion in limine because it was premature. It remains premature at this time, however, for several reasons. First, the Court presently has before it the Government's motion for summary judgment. A motion in limine, however, is a pre-trial device. If the motion is successful there will be no need for trial, and the parties have not yet set a schedule for the filing of pre-trial motions and filings. Second, the alleged admissions are not relevant to any of the issues raised in our motion for summary judgment, as they relate more to questions of damages or performance, rather than the issues addressed in our opening brief. Indeed, ISN failed to file any cross-motion for summary judgment in response to our opening brief. Third, even if ISN could demonstrate that the underlying information is relevant to its response to the Government's motion, in order to respond to our motion, ISN need only demonstrate a genuine issue of material fact with regard to the Government's motion, and need not establish that there was some alleged admission. Indeed, in presenting such information, ISN confuses the question of whether ISN performed work outside of the contract requirements (and the nature and extent of such work) with the separate question of order/fault. As noted in our opening brief, there are two prongs to a "constructive change" claim: a "change" component, which focuses upon whether the work - 17 -

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done by the contractor was outside of the scope of the contract; and an "order/fault" component, which focuses upon whether the Government is responsible for the contractor's additional work. Miller Elevator Co., Inc. v. United States, 30 Fed. Cl. 662, 678 (1994) (citations omitted). Our motion for summary judgment does not focus upon the question of whether or not there has been a "change," which we acknowledge would be a highly contested material fact, but rather has focused upon "order/fault" component. Accordingly, the extent to which ISN can demonstrate that there is a contested issue of material fact with regard to its performance of work outside of the contract requirements is irrelevant to the motion before this Court, especially because ISN did not file a cross-motion for summary judgment on this point. Further, ISN's motion appears to confuse a judicial admission with evidentiary admission. A judicial admission is a "formal act, done in the course of judicial proceeding, which waives or dispenses with the production of evidence, by conceding for purposes of litigation that the proposition of fact alleged by the opponent is true." International Paper Co. v. United States, 39 Fed. Cl. 478, 482 (1997). Statements not made in pleadings or in response to a request for admissions, however, are ordinary evidentiary admissions that may be controverted or explained by the party. See UMC Electronics Co. v. United States, 43 Fed. Cl. 776, 808 (1999). The claim that a statement is an evidentiary admission is often used to respond to the allegation that certain evidence is hearsay. FRE 801(d)(2). Indeed, the Government would be able to controvert or explain the statements offered by ISN at trial. For example, ISN first argues that the portions of the December 19, 1996 Defense

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Contract Audit Agency's ("DCAA") audit7 are admissions.8 DCAA's audit, however, was based primarily upon the ISN contract administration files, not any of the Navy's files, and accordingly was expressly a "qualified" report. Def. App. 107-109. DCAA expressly noted that it lacked possessed no information on several points relating to the amount to be paid ISN. Id. Further, DCAA's role is merely advisory, as Ms. Ellen Erdelsky made clear at her 30(b)(6) depositions: Q. Okay, and, in fact, the purpose of these reports is to provide a recommendation to an agency or terminating contract officer; is that correct? Yes. Okay, these audit reports are in no way mandatory. That's correct, they are advisory to them. You're advisory? And they are the ones that make the decision and they don't always agree with us. And a terminating contracting officer isn't limited to the information provided in an audit report in terms of negotiating a settlement with the contractor, is he? That's true, he is not limited. There is other information that he can consider? Yes.

A. Q. A. Q. A. Q.

A. Q. A.

Def. Supp. App. 33-34. ISN also asserts that statements made by the TCO are admissions. ISN, however, does not identify which statements it is referring to in its brief. In any event, the TCO was charged with settlement negotiations in connection with the termination and any statement attributed to the TCO must be viewed in that light. Further, as ISN itself alleges, the TCO did not always

ISN incorrectly lists the date of this report as December 16, 1996 in its brief. Compare Pl Resp. 30 with Def. App. 106. While ISN encourages the Court to adopt certain portions of the DCAA audit as admissions, it does not encourage the Court to adopt the report's conclusion that ISN is only entitled to $4,049,532, which is the amount that ISN was paid under the contract. Def. App. 109. - 19 8

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possess all the information known to the contracting officer, and her statements therefore must be viewed in that context. Accordingly, we respectfully request that the Court deny ISN's motion in limine without prejudice. CONCLUSION For the reasons stated in our motion for summary judgment and this reply, we respectfully request that the Court grant the Government's motion for summary judgment and dismiss Counts II (bad faith), III (constructive change), IV (equitable adjustment) and V (attorney fees) of ISN's complaint. Respectfully submitted, PETER D. KEISLER Assistant Attorney General JEANNE E. DAVIDSON Director s/ Brian M. Simkin by Deborah A. Bynum BRIAN M. SIMKIN Assistant Director /s/ Steven M. Mager STEVEN M. MAGER Trial Attorney Commercial Litigation Branch Civil Division Department of Justice Attn: Classification United 8th Floor 1100 L Street, NW Washington, D.C. Tel: (202) 616-2377 Fax: (202) 305-7643 [email protected] Attorneys for Defendant - 20 -

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CERTIFICATE OF FILING I hereby certify that on this 12th day of June 2007, a copy of the foregoing "DEFENDANT'S MOTION FOR SUMMARY JUDGMENT" was filed electronically. I understand that notice of this filing will be sent to all parties by operation of the Court's electronic filing system. Parties may access this filing through the Court's system.

/s/ Steven M. Mager Steven M. Mager Trial Attorney Commercial Litigation Branch Civil Division Department of Justice