Free Motion to Amend Pleadings - Rule 15 - District Court of Federal Claims - federal

Case 1:06-cv-00157-FMA

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS YATES INTERNATIONAL, LLC, Plaintiff, v. THE UNITED STATES, Defendant. ) ) ) ) ) ) ) ) )

No. 06-157C (Judge Allegra)

DEFENDANT'S MOTION FOR LEAVE TO AMEND ITS ANSWER Defendant, the United States, pursuant to Rule 15 of the United States Court of Federal Claims ("RCFC"), respectfully requests leave to file an amended answer to plaintiff's complaint to assert affirmative defenses and counterclaims for (1) excess reprocurement costs, and (2) damages resulting from plaintiff's breach of the parties' contracts. On September 16, 2003, the Defense Supply Center Richmond ("DSCR"), a field activity of the Defense Logistics Agency, awarded Contract No. SP0450-03-D-1411 to Yates Fire Protection Service, Inc., for the refurbishment of 11,101 cylinders stored at Pirmasens, Germany (the "Refurbishment Contract"). On

September 29, 2003, DSCR awarded Contract No. SP0450-03-D-4141 to Yates Fire Protection Service, Inc. to provide industrial gas support to various military installations in Germany (the "Refill Contract"). The contracts were subsequently modified to identify

plaintiff, Yates International, LLC ("Yates"), a company related to Yates Fire Protection, as the contractor. Both contracts

included FAR clause 52.249-8, Default (Fixed-Price Supply and

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Service).

Subsequently, both contracts were terminated for

default on March 3, 2005. This motion for leave to file an amended answer should be granted because the contracting officer recently, on June 29, 2006, issued a final decision assessing reprocurement costs and damages against Yates. The final decision was issued only two

weeks after we filed our answer to the complaint, on June 14, 2006. Therefore, pursuant to RCFC 15(a), the interests of

justice are best served by permitting us to amend our answer to assert counterclaims and affirmative defenses.1 stated that it does not object to this motion. I. The Interests Of Justice Require That We Be Permitted To Amend Our Answer To Assert Counterclaims And Affirmative Defenses Plaintiff has

RCFC 15(a) provides, in pertinent part: "[A] party may amend the party's own pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires." RCFC 15(a)(emphasis added); accord First Nationwide Bank v. United States, 48 Fed. Cl. 248, 254 (2000). The determination of whether to grant a motion for leave

to amend a pleading "is within the discretion of the Court." Foman v. Davis, 371 U.S. 178, 182 (1962). Applying this test,

this Court should "deny a motion to amend . . . only for

1

A copy of the proposed amended answer is attached to this 2

motion.

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substantial and legally sufficient reasons."

St. Paul Fire &

Marine Ins. Co. v. United States, 24 Cl. Ct. 518, 520 (1991). Here, although plaintiff has not provided written consent to our filing an amended answer, counsel for plaintiff stated over the telephone to undersigned counsel for defendant on July 20, 2006 that plaintiff does not object to our request to amended our answer. Further, "leave to amend should be freely permitted

absent sufficient explicit reasons indicating that it should be denied." State of Alaska v. United States, 15 Cl. Ct. 276, 279

(1988) (citing Hess v. United States, 210 Ct. Cl. 483, 537 F.2d 457, 461 (1967)). Thus, a motion for leave to amend an answer

should be granted absent "any apparent or declared reason, such as undue delay, bad faith or dilatory motive on the part of the movant . . . ." Foman, 371 U.S. at 182. Our request to amend

our answer is not motivated by any of these reasons. II. Sound Basis Exists For Defendant's Counterclaims And Affirmative Defenses A. Excess Reprocurement Costs And Damages For Breach of Contract

Pursuant to the Contract Disputes Act, 41 U.S.C. § 605, a contracting officer possesses the authority to issue a final decision consisting of a claim against a contractor for excess reprocurement costs incurred by the Government as a result of a termination for default. 41 U.S.C. § 605. The Government may

base a claim for monetary damages upon Federal Acquisition 3

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Regulation ("FAR") clause 52.249-8, entitled "Default (FixedPrice Supply and Service"), which is incorporated into both contracts at issue in this case. According to FAR 52.249-8, a

contractor is liable to the Government for the excess costs of procuring "supplies or services similar to those terminated." FAR 52.249-8. Here, the DSCR terminated Yates' Refill and Refurbishment Contracts for default on March 3, 2005. Shortly thereafter, DSCR On March 10,

executed contracts with two follow-on contractors. 2005, DSCR awarded Contract No. SP0406-05-M-Z791 to

Exploitatiemaatschappij Laanweg BV, to temporarily provide secure storage for the Government Furnished Property which Yates had abandoned when it left the jobsite. performance of this contract. DSCR paid $31,837.41 for the

Additionally, on May 3, 2005, DSCR

awarded Contract No. SP0406-05-D-4067-001Z to International Gas & Services, NV ("IGS") in Belgium to perform the remainder of the term of the Refill contract and to complete the Refurbishment contract. This contract includes a separate contract line item

number ("CLIN") for the removal of the Government Furnished Property from Yates' abandoned facility in Holland to IGS and for the clean up of Yates' Holland facility. The Government paid

$62,901.88 to IGS for services under this CLIN.2
2

Performance of Contract No. SP0406-05-D-4067-001Z is continuing and the Government is not therefore currently able to assess the entire reprocurement costs that it will incur under 4

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Finally, Yates owes breach of contract damages to the Government in the amount of $32,837.50 due to Yates' failure to provide 2,627 cylinder valves to the Government after receipt of payment for them. Thus, as set forth in the contracting

officer's final decision dated June 29, 2006, the Government is entitled to a total amount of $127,576.79 from Yates. For these reasons, sound basis exists in support of our proposed counterclaims. B. Affirmative Defenses

Our amended answer asserts the affirmative defenses of accord and satisfaction and waiver. The parties executed numerous bilateral modifications which addressed and resolved many of the claims contained in plaintiff's complaint. For this reason, our amended answer

asserts the affirmative defense of accord and satisfaction. Axion Corp. v. United States, 68 Fed. Cl. 468 (2005). Additionally, plaintiff arguably waived its claims of delay. For the most part, the allegations contained in the complaint occurred in 2003. In late 2003, and thereafter in 2004, the

parties executed numerous bilateral modifications which addressed

this or any other follow-on contract. However, because the nature of CLIN 9905 of the contract is severable from the remainder of the contract as a one-time cost resulting from Yates' default, the Government is asserting damages for this single CLIN now. By doing so, the Government is in no way forfeiting or waiving its rights to seek additional reprocurement costs from Yates in the future under this or any other contract. 5

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these claims.

A contractor who agrees to a contract modification

surrenders its right to subsequently argue that delays experienced prior to the agreement caused a later default. Appeal of Kamp Systems, ASBCA No. 54192, 03-2 BCA ¶ 32,412. Thus, sound basis exists for our assertion of the affirmative defenses of accord and satisfaction and waiver. As we stated above, Yates does not object to our motion for leave to file an amended answer containing affirmative defenses and counterclaims. Because we have not delayed in the filing of

this motion, and Yates is admittedly not prejudiced by the proposed amended answer, the Court should grant our request to amend our answer to assert affirmative defenses and counterclaims. Foman, 371 U.S. at 182; accord State of Alaska,

15 Cl. Ct. at 279; Hess, 210 Ct. Cl. at 483, 537 F.2d at 461. CONCLUSION For the reasons stated above, we respectfully request that the Court grant leave to file our amended answer.

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Respectfully submitted, PETER D. KEISLER Assistant Attorney General DAVID M. COHEN Director s/ Brian M. Simkin BRIAN M. SIMKIN Assistant Director s/ Lauren S. Moore OF COUNSEL: DONALD S. TRACY Chief Trial Attorney Office of Counsel Defense Supply Center Richmond 8000 Jefferson Davis Highway Richmond, VA 23297-5701 (804) 279-4811 LAUREN S. MOORE Attorney Commercial Litigation Branch Civil Division Department of Justice 1100 L Street, N.W. Attn: Classification Unit 8th Floor Washington, D.C. 20530 Tele: (202) 616-0333 Facsimile: (202) 514-8640 Attorneys for Defendant JULY 25, 2006

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CERTIFICATE OF ELECTRONIC FILING I hereby certify that on the 25th day of July, 2006, a copy of the foregoing "DEFENDANT'S MOTION FOR LEAVE TO AMEND ITS ANSWER" 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, and that the parties may access this filing through the Court's system. /s/ Lauren S. Moore