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IN THE UNITED STATES COURT OF FEDERAL CLAIMS ________________________________________________________________________ No. 02-465C (Judge Hewitt) ________________________________________________________________________ LA GLORIA OIL AND GAS COMPANY, Plaintiff, v. THE UNITED STATES, Defendant. ________________________________________________________________________ PLAINTIFF'S OPPOSITION TO DEFENDANT'S MOTION TO DISMISS ________________________________________________________________________

J. Keith Burt Mayer, Brown, Rowe & Maw LLP 1909 K Street, N.W. Washington, D.C. 20006 (202) 263-3208 Attorneys for Plaintiff, La Gloria Oil and Gas Company Of Counsel: Gary A. Winters Mayer, Brown, Rowe & Maw LLP 1909 K Street, N.W. Washington, DC 20006 May 1, 2006

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TABLE OF CONTENTS INDEX TO APPENDIX ............................................................................................... iii TABLE OF AUTHORITIES ........................................................................................ ix STATEMENT OF FACTS ............................................................................................ 2 I. II. III. THE PARTIES....................................................................................... 2 DESC'S MILITARY FUEL PRICES AND ITS STATED INTENT TO PAY FAIR MARKET VALUE FOR FUEL ................... 2 DESC'S CONFLICTING INTERNAL ASSESSMENTS AND PUBLIC STATEMENTS ABOUT ITS MILITARY FUEL PRICES .................................................................................................. 4 THE NON-NEGOTIABILITY OF DESC'S MILITARY FUEL PRICES .................................................................................................. 7 THE FAILURE OF DESC'S MILITARY FUEL PRICES TO REFLECT FAIR MARKET VALUE.................................................... 8 DESC'S MINORITY PRICE PREFERENCES AND FUEL CONTRACT AUCTIONS................................................................... 15 LA GLORIA'S AMENDED COMPLAINT ....................................... 16 DESC'S MOTION FAILS TO SATISFY THE STANDARDS FOR JUDGMENT AS A MATTER OF LAW.................................... 17 DESC IS NOT ENTITLED TO JUDGMENT AS A MATTER OF LAW ON LA GLORIA'S CLAIMS THAT DESC'S MILITARY FUEL PRICES VIOLATE FAR§ 16.203 ....................... 20 A. B. III. Only The Issue Of Per Se Illegality Was Before The Court In Tesoro ........................................................................ 20 DESC's Construction Of Tesoro Ignores Its Plain Language.................................................................................. 23

IV. V. VI. VII. I. II.

ARGUMENT............................................................................................................... 17

DESC IS NOT ENTITLED TO JUDGMENT AS A MATTER OF LAW ON LA GLORIA'S CLAIMS THAT DESC'S MILITARY FUEL PRICES VIOLATE FAR § 15.802(b)(1) ............. 27 DESC IS NOT ENTITLED TO JUDGMENT AS A MATTER OF LAW ON LA GLORIA'S CLAIMS OF MISREPRESENTATION.................................................................... 33 DESC IS NOT ENTITLED TO JUDGMENT AS A MATTER OF LAW ON LA GLORIA'S CLAIMS OF BREACH OF CONTRACT ........................................................................................ 36

IV.

V.

i

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TABLE OF CONTENTS (continued) VI. DESC IS NOT ENTITLED TO JUDGMENT AS A MATTER OF LAW ON LA GLORIA'S CLAIMS OF BREACH OF AN IMPLIED-IN-FACT CONTRACT...................................................... 40 DESC IS NOT ENTITLED TO JUDGMENT AS A MATTER OF LAW ON LA GLORIA'S CLAIMS OF FAILURE OF CONSIDERATION AND FRUSTRATION OF PURPOSE .............. 41 DESC IS NOT ENTITLED TO JUDGMENT AS A MATTER OF LAW ON LA GLORIA'S CLAIMS OF MISTAKE..................... 44 DESC IS NOT ENTITLED TO JUDGMENT AS A MATTER OF LAW ON LA GLORIA'S CLAIMS OF A FIFTH AMENDMENT TAKING ................................................................... 46 DESC IS NOT ENTITLED TO JUDGMENT AS A MATTER OF LAW ON LA GLORIA'S CLAIMS THAT DESC ILLEGALLY PROVIDED PRICE PREFERENCES TO MINORITY-OWNED SUPPLIERS.................................................... 53 DESC IS NOT ENTITLED TO JUDGMENT AS A MATTER OF LAW ON LA GLORIA'S CLAIMS THAT DESC ILLEGALLY AUCTIONED THE AWARD OF MILITARY FUEL CONTRACTS........................................................................... 56 DESC IS NOT ENTITLED TO JUDGMENT AS A MATTER OF LAW ON ITS AFFIRMATIVE DEFENSE THAT LA GLORIA WAIVED ALL OF ITS CLAIMS................................. 65 A. B. As A Matter Of Fact, DESC Fails To Establish That La Gloria Waived All Of Its Claims ........................................ 65 As A Matter Of Law, La Gloria's Claims Of Illegality Cannot Be Waived ................................................................... 73 1. 2. 3. La Gloria Is Entitled To Recover A Lawful Price For Fuel........................................................................ 73 Because The Law At Issue Protects Contractors, DESC's Violations Of Law Cannot Be Waived .......... 76 DESC May Not Use A Defense Of Waiver To Seek A Judicially-Imposed Statute Of Limitations Congress Did Not Enact ........................... 79 Federal Crop Insurance v. Merrill Does Not Support A Finding Of Waiver...................................... 81

VII.

VIII. IX.

X.

XI.

XII.

4.

CONCLUSION............................................................................................................ 83

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INDEX TO APPENDIX Request for Deviation from FAR 16.203 (Jan. 5, 1993).................................App. 1 Economic Price Adjustment ­ Published Market Price (Domestic Bulk) (DFSC Nov. 1994) ..................................................App. 9 Hearing Transcript, Barrett Refining Corp. v. United States, Nos. 96-15C, 96-724C, 96-725C, 96-726C, 97-321C (Fed. Cl.) (July 27, 1998)..................................................................App. 11 EPA Reference Study (Nov. 28, 1984).........................................................App. 60 Economic Price Adjustment ­ Published Market Price (Domestic Bulk) (DFSC Nov. 1992) ................................................App. 82 Defense Logistics Agency Inter-Office Memorandum from Lawrence Ervin to DFSC-G regarding Goldline Escalation (June 23, 1995)..................................................................................App. 85 Defense Logistics Agency Memorandum from Lawrence Ervin to DFSC-PEC (L. Manley) regarding Contract Numbers DLA600-94-D-4126 and DLA600-94-D-4172, Petrolea Oil Corp. Escalator Replacement (July 20, 1995) ...........................App. 87 Letter from Edith P. Duhaine to Gaylon H. Simmons regarding Final Decision of November 1, 1988 Claim (Mar. 30, 1999) ......................................................................App. 90 Letter from John E. Griffith to F.M. Doughty regarding Calcasieu Claims (Feb. 27, 1983) .....................................................App. 96 Letter from Dan C. Calhoun to Director, Defense Logistics Agency, regarding Review Comments - Escalators for Bulk Fuels Solicitations (Feb. 9, 1988) ............................................App. 98 Defense Logistics Agency Memorandum from Christopher Lee to DFSC-D regarding Proposed Changes in the Petroleum Marketing Monthly (Mar. 23, 1989) ............................App. 100 Deposition of Christopher Lee, MAPCO Alaska Petroleum, Inc. v. United States, No. 550-89C (Cl. Ct.) (May 31, 1991)................................................................................App. 105 Award/Contract for Exxon Company USA with U.S. Contract No. DLA600-86-D-0583 (effective date Apr. 4, 1986) ...........................................................App. 112

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INDEX TO APPENDIX (continued) Deposition of Lawrence Ervin, La Gloria Oil and Gas Co. v. United States, No. 02-465C (Fed. Cl.) (Dec. 1, 2003) .................................................................................App. 125 Notice of Deposition, La Gloria Oil and Gas Co. v. United States, No. 02-465C (Fed. Cl.) (Oct. 2, 2003) ..................................................................................App. 141 Price Analysis, RFP No. DLA600-95-R-0061 Region: East/Gulf/Offshore and Rocky Mountain (Nov. 18, 1994) ...............................................................................App. 144 Price Analysis, RFP No. DLA600-93-R-0161 Region: Mountain (May 18, 1993) .................................................App. 150 Price Analysis, RFP No. DLA600-93-R-0161 Region: Gulf Coast Area (May 18, 1993).......................................App. 154 Price Analysis, RFP No. SPO600-96-R-0061 (Oct. 17, 1995) ................................................................................App. 157 Price Analysis, RFP No. SPO600-97-R-0061 Region: East/Gulf & Offshore (Oct. 22, 1996)...............................App. 163 DFSC CONUS Bulk Contract Price Escalation: Petroleum Marketing Monthly vs. Published Prices.......................App. 171 Memorandum for the Executive Director (Procurement), Defense Logistics Agency, regarding Request for OneTime Deviation from FAR 16.203-1 ..............................................App. 195 Memorandum from DFSC CAM STA ALEX VA//DFSC-PZB/5 June 1989 to Mapco Alaska Petroleum, Inc. regarding MAPCO Offer Submitted Under RFP DLA600-89-R-0161 (June 5, 1989)..................................................................................App. 198 Letter from Jack Turner to Ola M. Lee regarding Solicitation DLA600-83-R-0461, Contract DLA600-83-D-0586; Item Nos. 0101, 0201, 0301, 0401 (Jan. 23, 1984)........................ App. 201 Memorandum of Meeting with Jack Turner, Mapco Petroleum (Alaska), on Jan. 26, 1984 by Ola Lee (Feb. 2, 1984) ....................App. 204 Defense Logistics Agency Two-Way Memorandum from DFSCPD, M. Johnson to DFSC-N regarding Offers from Mapco, Alaska, and Mapco, Tennessee, on the CONUS Solicitation RFP DLA600-83-R-0461 (July 18, 1983) ......................................App. 205 -iv-

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INDEX TO APPENDIX (continued) Pre-Negotiation Briefing Memorandum (July 15, 1986)............................App. 206 Pre-Negotiation Briefing Memorandum (Dec. 15, 1986)...........................App. 214 Pre-Negotiation Briefing Memorandum (Nov. 18, 1987) ..........................App. 219 Pre-Negotiation Briefing Memorandum (Undated)....................................App. 225 Pre-Negotiation Briefing Memorandum (Nov. 1, 1988) ............................App. 230 Pre-Negotiation Briefing Memorandum (May 8, 1989) .............................App. 235 Pre-Negotiation Briefing Memorandum (Undated)....................................App. 241 Pre-Negotiation Briefing Memorandum (May 10, 1990) ...........................App. 246 Pre-Negotiation Briefing Memorandum (Undated)....................................App. 252 Pre-Negotiation Briefing Memorandum (May 17, 1991) ...........................App. 257 Pre-Negotiation Briefing Memorandum (Undated)....................................App. 262 Pre-Negotiation Briefing Memorandum (May 18, 1992) ...........................App. 267 Pre-Negotiation Briefing Memorandum (Undated)....................................App. 273 BEM Summary of Award Information (Sept. 30, 1992) ............................App. 279 BEM Summary of Award Information (Mar 16, 1992)..............................App. 283 Information to Offerors or Quoters, Section A-Cover Sheet SPO600-96-R-0161.........................................................................App. 286 Status Conference Hearing Transcript, Williams Alaska Petroleum v. United States, No. 02-705C (Fed. Cl.) (Nov. 18, 2003) ..............................................................................App. 287 Hearing Transcript, Oral Argument Before the Court of Appeals For the Federal Circuit, No. 04-5064 (Jan. 10, 2005).....................App. 309 Brief of Plaintiffs Tesoro Hawaii Corporation, Tesoro Alaska Company and Hermes, Consolidated, Inc., No. 04-5064 (Fed. Cir. Apr. 26, 2004) ................................................................App. 355 Brief of Amicus Curiae American Petroleum Institute in Support of Plaintiffs-Appellants and Affirmance on The Contract Illegality Issue, No. 04-5064 (Fed. Cir. May 5, 2004) ..................................................................App. 429 -v-

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INDEX TO APPENDIX (continued) Brief for the United States, Defendant's Appeal from the U.S. Court of Federal Claims in Case Nos. 02-CV-704. Judge Eric Bruggink, and 02-CV-1460, Judge Lawrence Block, (July 2, 2004)............................................App. 461 Defense Procurement and Acquisition Policy - Contract Pricing Reference Guide..............................................................................App. 540 Armed Services Procurement Regulation Manual (APSM No. 1), Department of Defense (1975)........................................................App. 545 Armed Services Pricing Manual (ASPM), Department of Defense (1986)..............................................................................................App. 548 DCAA Contract Audit Manual, Vol. 2 of 2 (July 1, 2005) ........................App. 554 Deposition of John Richard Walker, Pride Companies, L.P., v. United States, No. 95-897C (Fed. Cl. Sept. 18, 1996)....................App. 556 Letter from John R. Walker to D.R. Neumeyer, Berry Petroleum Company regarding EPA claims (Sept. 28, 2001)..........................App. 563 Letter from John R. Walker to Rodney L Nelson, Calcasieu Refining Company regarding EPA claims (Oct. 2, 2001) ..............App. 565 Letter from John R. Walker to Todd P. Grubin, Chevron USA, Inc. regarding EPA claims (Feb. 1, 2002)..............................................App. 567 Letter from John R. Walker to Chris Conway, Conoco, Inc. regarding EPA claims (Aug. 9, 2002).............................................App. 569 Letter from John R. Walker to John B. Holmes, El Paso Merchant ­ Petroleum Company regarding EPA claims (Aug. 9, 2002)......................................................................App. 571 Letter from John R. Walker to Herbert V. Rusk, Exxon Mobil Fuels Marketing Company regarding EPA claims (Mar. 25, 2002) ...............................................................................App. 573 Letter from John R. Walker to Thomas P Bruskotter, Gary-Williams Energy Corporation regarding EPA claims (Aug. 9, 2002)......................................................................App. 575 Letter from John R. Walker to Jeffrey M Shaffer, Koch Petroleum Group, L.P., regarding EPA claims (Oct. 2, 2001) ..................................................................................App. 577

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INDEX TO APPENDIX (continued) Letter from John R. Walker to Matt Clifton, Navajo Refining Company, regarding EPA claims (Sept. 28, 2001).........................App. 579 Letter from John R. Walker to Dan Robinson, Placid Holding Company, regarding EPA claims (Sept. 28, 2001).........................App. 581 Letter from John R. Walker to Patricia Pavlak, Sunoco, Inc., regarding EPA claims (Sept. 28, 2001) ..........................................App. 583 Letter from John R. Walker to Andrew T. Nomura, Tesoro Hawaii Corporation, regarding EPA claims (Dec. 3, 2001) ...........App. 585 Letter from John R. Walker to Kenneth A. Applegate, Diamond Shamrock Refining and Marketing Company, regarding EPA claims (Aug. 19, 2002)...........................................App. 587 Letter from John R. Walker to Scott Weaver, Western Refining Company, L.P., regarding EPA claims (Sept. 27, 2002) ................App. 589 Letter from John R. Walker to Keith Selby, Williams Alaska Petroleum, Inc., regarding EPA claims (Sept. 28, 2001)................App. 591 Letter from John R. Walker to Wyoming Refining Company regarding EPA claims (Sept. 28, 2001)...........................................................App. 593 Defense Logistics Agency Inter-Office Memorandum from Christopher Lee to DFSC-D/DD regarding Economic Price Adjustment in the Domestic Bulk Program (May 5, 1997)..................................................................................App. 595 Defense Logistics Agency Inter-Office Memorandum from Christopher Lee to DFSC-C, -G, -P, -L regarding Economic Price Adjustment in the Domestic Bulk Programs (Apr. 9, 1987)..................................................................................App. 596 Armed Services Pricing Manual (ASPM), Volume 2, Price Analysis, Department of Defense (1987)........................................................App. 603 Declaration of Joseph P. Kalt, La Gloria Oil and Gas Company v. United States, No. 02-465C (Fed. Cl.) (April 28, 2006).................App. 607 Expert Report of Joseph P. Kalt and Peter Killen, La Gloria Oil and Gas Company v. United States, No. 02-465C (Fed. Cl.) (April 28, 2006) ..............................................................App. 608 Declaration of Dennis Marple, La Gloria Oil and Gas Company v. United States, No. 02-465C (Fed. Cl.) (April 25, 2006).................App. 639 -vii-

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INDEX TO APPENDIX (continued) Declaration of John R. Walker, Calcasieu Refining Company v. United States, No. 02-1219C (January 17, 2003) ...........................App. 641 Award/Contract for La Gloria Oil and Gas Company, with United States, Contract No. SPO600-99-D-0478 (effective date March 18, 1999)......................................................App. 648 Award/Contract for La Gloria Oil and Gas Company, with United States, Contract No. SPO600-98-D-0468 (effective date February 27, 1998)..................................................App. 650 Award/Contract for La Gloria Oil and Gas Company, with United States, Contract No. SPO600-97-D-0464 (effective date February 27, 1997)..................................................App. 653 Award/Contract for La Gloria Oil and Gas Company, with United States, Contract No. SPO600-96-D-0475 (effective date March 15, 1996)......................................................App. 656 Award/Contract for La Gloria Oil and Gas Company, with United States, Contract No. SPO600-95-D-0480 (effective date March 30, 1995)......................................................App. 662 Award/Contract for La Gloria Oil and Gas Company, with United States, Contract No. DLA600-93-D-0559 (effective date October 6, 1993) .....................................................App. 671

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TABLE OF AUTHORITIES Page(s) Cases A Olympic Forwarder, Inc. v. United States, 33 Fed. Cl. 514 (1995) .....................................66, 73 AT&T v. United States, 177 F.3d 1375 (Fed. Cir. 1999) .........................................................32, 40 AT&T v. United States, 307 F.3d 1374 (Fed. Cir. 2002) .............................................31, 32, 78, 82 Accardi v. Shaughnessy, 347 U.S. 260 (1954)...............................................................................33 Adams v. United States, 391 F.3d 1212 (Fed. Cir. 2004) ........................................................18, 65 Adarand Constructors, Inc. v. Pena, 515 U.S. 200 (1995)............................................................53 Aerojet-General Corp. v. Askew, 453 F.2d 819 (5th Cir. 1971) ....................................................41 Agredano v. United States, No. 05-608C (Fed. Cl. March 27, 2006)............................................40 Ahrenholz v. Bd. of Trustees, 219 F.3d 674 (7th Cir. 2000) ..........................................................23 Alaska Pulp Corp. v. United States, 48 Fed. Cl. 655 (2001) .........................................................69 Alde, S.A. v. United States, 28 Fed. Cl. 26 (1993) .........................................................................52 Aluminum Co. of Am. v. Essex Group, Inc., 499 F. Supp. 53 (W.D. Pa. 1980) .................................................................................................................46 American Capital Corp. v. United States, 58 Fed. Cl. 398 (2003) ................................................38 American Sav. Bank, F.A. v. United States, 62 Fed. Cl. 6 (2004) .................................................39 Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) ............................................................18, 19 Applied Devices Corp. v. United States, 591 F.2d 635 (1979) ................................................75, 78 Armstrong v. United States, 364 U.S. 40 (1960) ...........................................................................51 Ashford v. United States, 43 Fed. Cl. 1 (1997) ..............................................................................36 Barrett Ref. Corp. v. United States, 242 F.3d 1055 (Fed. Cir. 2001) .................................... passim Barrett Ref. Corp. v. United States, 42 Fed. Cl. 128 (1998)..................................................3, 8, 45 Beta Systems, Inc. v. United States, 838 F.2d 1179 (Fed. Cir. 1988) .................................... passim Blonder-Tongue Lab., Inc. v. University of Ill. Found., 402 U.S. 313 (1971).................................................................................................................................25 ix

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TABLE OF AUTHORITIES (continued) Page(s) Board Machine, Inc. v. United States, 49 Fed. Cl. 325 (2001)......................................................49 Boston Edison Co. v. United States, 64 Fed. Cl. 167 (2005) .........................................................48 Brown v. Legal Found. of Washington, 538 U.S. 216 (2003)........................................................47 Burness v. Bruce, 776 P.2d 32 (Or. Ct. App. 1989).......................................................................68 C & H Comm. Contractors, Inc. v. United States, 35 Fed. Cl. 246 (1996) .......................36, 39, 46 Cain v. Burns, 280 P.2d 888 (Cal. Dist. Ct. App. 1955)................................................................75 Calcasieu Ref. Co. v. United States, No. 02-1219C, Slip. Op. (Fed. Cl. July 31, 2003) ...............................................................................................66, 71 Carter v. Seaboard Fin. Co., 203 P.2d 758 (Cal. 1949) ................................................................75 Castle v. United States, 48 Fed. Cl. 187 (2000).......................................................................50, 52 Celotex Corp. v Catrett, 477 U.S. 317 (1986) ...............................................................1, 18, 19, 20 Centel Communications Co., 89-1 B.C.A. (CCH) ¶ 21,225 (Sept. 8, 1988) .................................76 Centex Corp. v. United States, 395 F.3d 1283 (Fed. Cir. 2005) ....................................................40 Cessna Aircraft Co. v. Dalton, 126 F.3d 1442 (Fed. Cir. 1997)..................................31, 77, 78, 79 Cherokee Nation v. United States, 174 Ct. Cl. 131 (1966)............................................................66 Chris Berg, Inc. v. United States, 426 F.2d 314 (Ct. Cl. 1970) .....................................................76 Clark v. United States, 95 U.S. 539 (1877) ...................................................................................82 Coastal Corp. v. United States, 713 F.2d 728 (Fed. Cir. 1983).....................................................55 Commodity Futures Trading Comm'n v. Schor, 478 U.S. 833 (1986).....................................78, 79 Conley v. Gibson, 255 U.S. 42 (1957) .......................................................................................1, 18 Consolidated Edison Co. of N.Y., Inc. v. United States, 67 Fed. Cl. 285 (2005) .................................................................................................49, 50 Cont'l Bus. Enter., Inc. v. United States, 452 F.2d 1016 (Ct. Cl. 1971) ........................................33 Cornetta v. United States, 851 F.2d 1372 (Fed. Cir. 1988) ...........................................................81 Costanzo Coal Mining Co. v. Weirton Steel Co., 150 F.2d 929 (4th Cir. 1945)....................................................................................................................74 D.F.K. Enter., Inc. v. United States, 45 Fed. Cl. 280 (1999)...................................................39, 40 -x-

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TABLE OF AUTHORITIES (continued) Page(s) DGS Contract Serv., Inc. v. United States, 43 Fed. Cl. 227 (1999)...............................................64 DSI Corp. v. United States, 655 F.2d 1072 (Ct. Cl. 1981) ............................................................52 Del-Rio Drilling Programs Inc. v. United States, 146 F.3d 1358 (Fed. Cir. 1998)..................................................................................................................49 Desert Apartments, Inc. v. United States, 250 F.2d 457 (10th Cir. 1957) .....................................73 Detroit Edison Co. v. United States, 56 Fed. Cl. 299 (2003)...................................................48, 51 District of Columbia v. Thompson, 281 U.S. 25 (1930) ................................................................41 Dow Chem. Co. v. United States, 226 F.3d 1334 (Fed. Cir. 2000).......................................... 68-69 E. Walters & Co. v. United States, 576 F.2d 362 (Ct. Cl. 1978) ...................................................78 Edwards v. Aguillard, 482 U.S. 578 (1987) ..................................................................................31 Everett Plywood Corp. v. United States, 227 Ct. Cl. 415 (1981) ............................................43, 44 Far West Fed. Bank, S.B. v. Director, OTS, 930 F.2d 883 (Fed. Cir. 1991) ...........................42, 43 Far West Fed. Bank, S.B. v. OTS, 119 F.3d 1358 (9th Cir. 1997).................................................43 Fed. Crop Ins. v. Merrill, 332 U.S. 380 (1947) ...........................................................37, 68, 76, 83 Franconia Assocs. v. United States, 61 Fed. Cl. 718 (2004) .........................................................51 Freightliner Corp. v. Caldera, 225 F.3d 1361 (Fed. Cir. 2000)..............................................28, 31 G.L. Christian & Assocs. v. United States, 320 F.2d 345 (Ct. Cl. 1963).......................................75 Gardner v. Brown, 5 F.3d 1456 (Fed. Cir. 1993) ....................................................................58, 63 Gen. Eng'g & Machine Works v. O'Keefe, 991 F.2d 775 (Fed. Cir. 1993)....................................67 George Solitt Constr. Co. v. United States, 64 Fed. Cl. 229 (2005)..............................................33 Gold Line Ref., Ltd. v. United States, 43 Fed. Cl. 291 (1999) .......................................................76 Gold Line Ref., Ltd. v. United States, 54 Fed. Cl. 285 (2002) .................................................77, 78 Gould, Inc. v. United States, 67 F.3d 925 (Fed. Cir. 1995) .....................................................54, 55 Hamilton v. Williams, 573 N.E.2d 1276 (Ill. Ct. App. 1991) ........................................................67 Hamlet v. United States, 873 F.2d 1414 (Fed. Cir. 1989)..............................................................54 Hansen v. United States, 65 Fed. Cl. 76 (2005).............................................................................48 -xi-

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TABLE OF AUTHORITIES (continued) Page(s) Hendler v. United States, 11 Cl. Ct. 91, 95 (1986) ........................................................................47 Hercules, Inc. v. United States, , 292 F.2d 1378 (Fed. Cir. 2002).................................................37 Hermes Consol., Inc. v. United States, 58 Fed. Cl. 3 (2003) .................................23, 68, 78, 82, 83 Hermes Consol., Inc. v. United States, 58 Fed. Cl. 409 (2003) .............................23, 68, 77, 82, 83 Heydt v. United States, 38 Fed. Cl. 286 (1997) .............................................................................48 Hughes Communications Galaxy, Inc. v. United States, 271 F.3d 1060 (Fed. Cir. 2001)..........................................................................................51 INS v. Hibi, 414 U.S. 5 (1973).................................................................................................69, 80 Integrated Logistics Support Sys. Int'l, Inc. v. United States, 42 Fed. Cl. 30 (1998) .............................................................................................49, 50, 51 Interstate Plywood Sales Co. v. Interstate Container Corp., 331 F.2d 449 (9th Cir. 1964) .............................................................................................35 Inupiat Community of the Arctic Slope v. United States, 680 F.2d 122 (Ct. Cl. 1982) ...............................................................................................54 J&E Salvage v. United States, 37 Fed. Cl. 256 (1997)..................................................................46 John C. Grimberg Co. v. United States, 185 F.3d 1297 (Fed. Cir. 1999) .....................................33 John Deere Indus. Equip. v. Triple Cities Equip., Inc., 646 F. Supp. 114 (N.D.N.Y. 1986)....................................................................................67 John Massman Contracting Co. v. United States, 23 Cl. Ct. 24 (1991) .................................. 35-36 Johnson v. Zerbst, 304 U.S. 458 (1938) ......................................................................65, 66, 79, 81 Kaiser Aluminum & Chem. Sales, Inc. v. Avandole Shipyards, Inc., 677 F.2d 1045 (5th Cir. 1982) ...........................................................................................74 Kaiser Steel Corp. v. Mullins, 455 U.S. 72 (1982) ............................................................74, 76, 79 Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240 (1933)...............................................26 L.W. Matteson, Inc. v. United States, 61 Fed. Cl. 296 (2004) .......................................................37 LaBarge Products, Inc. v. West, 46 F.3d. 1547 (Fed. Cir. 1995) .......................................... passim La Gloria Oil & Gas Co. v. United States, 56 Fed. Cl. 211 (2003).........................................63, 65 LeBlanc v. United States, 50 F.3d 1025 (Fed. Cir. 1995) ..............................................................54 -xii-

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TABLE OF AUTHORITIES (continued) Page(s) Leiter v. United States, 271 U.S. 204 (1926) .................................................................................78 Logicon, Inc. v. United States, 22 Cl. Ct. 776 (1991)....................................................................64 Lone Mtn. Prod. Co. v. Nat. Gas Pipeline Co. of Am., 710 F. Supp. 305 (D. Utah 1989).......................................................................................66 Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982).................................47, 48 Louisville & Nashville R.R. Co. v. Cent. Iron & Coal Co., 265 U.S. 59 (1924).............................................................................................................80 Lynch v. United States, 292 U.S. 571 (1934)...........................................................................47, 50 M.A. Mortenson Co. v. Brownlee, 363 F.3d 1203 (Fed. Cir. 2003)...............................................37 MAPCO Alaska Petroleum, Inc. v. United States, 27 Fed. Cl. 205 (1992) ............................................................................................... passim M.G. Constr., Inc. v. United States, 67 Fed. Cl. 176 (2005)..........................................................38 Maine Yankee Atomic Power Co. v. United States, 225 F.3d 1336 (Fed. Cir. 2000)..........................................................................................50 Maislin Ind., U.S., Inc. v. Primary Steel, Inc., 497 U.S. 116 (1990) .......................................68, 80 Majernick v. Hartford Cas. Ins. Co., 688 A.2d 1330 (Conn. 1997) ..............................................67 McDonnell Douglas Corp. v. United States, 182 F.3d 1319 (Fed. Cir. 1999)..................................................................................................................33 Motorola Inc. v. West, 125 F.3d 1470 (Fed. Cir. 1997).................................................................80 Mullenberg v. United States, 857 F.2d 770 (Fed. Cir. 1988).........................................................54 Nat'l Leased Housing Ass'n v. United States, 24 Cl. Ct. 647 (1991) .............................................56 Navajo Ref. Co., L.P. v. United States, 58 Fed. Cl. 200 (2003).....................................8, 31, 72, 73 Newell Cos. v. Kenney Mfg. Co., 864 F.2d 757 (Fed. Cir. 1988) ..................................................21 Nortel Networks, Inc. v. Gold & Appel Transfer, S.A., 298 F. Supp. 2d 81 (D.D.C. 2004) .....................................................................................66 Northern Helex Co. v. United States, 455 F.2d 546 (Ct. Cl. 1980) ...............................................71 OPM v. Richmond, 496 U.S. 414 (1990) .......................................................................................76 Osprey Pacific Corp. v. United States, 41 Fed. Cl. 150 (1998)...............................................48, 50 -xiii-

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TABLE OF AUTHORITIES (continued) Page(s) Pacific Gas & Elec. v. United States, 3 Cl. Ct. 329 (1983) ...........................................................73 Pan-American Petroleum & Transp. Co. v. United States, 273 U.S. 456 (1927)...........................................................................................................73 Pauley Petroleum, Inc. v. United States, 219 Ct. Cl. 24 (1979) ....................................................44 Perpetual Fin. Corp. v. United States, 61 Fed. Cl. 126 (2004) .....................................................43 Phoenix Petroleum Co. v. United States, No. 97-315C Slip Op. (May 11, 1998).......................................................................................................77, 78, 79 Phoenix Petroleum Co. v. United States, No. 98-5124, 1999 U.S. App. LEXIS 16939 (Fed. Cir. July 23, 1999).............................................................................26 Pi Elecs. Corp. v. United States, 55 Fed. Cl. 279 (2003) ........................................................51, 52 Pittsburgh Ry. Co. v. United States, 250 U.S. 577 (1919).................................................73, 74, 82 Pleasant Country, Ltd. v. United States, 37 Fed. Cl. 321 (1997) ..................................................18 Princess Cruises, Inc. v. United States, 397 F.3d 1358 (Fed. Cir. 2005) ......................................73 Puerto Rico Dep't. of Labor & Human Res. v. United States, 49 Fed. Cl. 24 (2001) .........................................................................................................37 RCS Enters., Inc. v. United States, 53 Fed. Cl. 303 (2002) ...........................................................33 Randy v. Columbia/HCA Healthcare Corp., 2003 U.S. Dist. LEXIS 17270 (N.D. Tex. Sept. 30, 2003).................................................................................................68 Reliance Ins. Co. v. United States, 20 Cl. Ct. 715 (1990)..............................................................66 Rose v. Mitsubishi Int'l Corp., 423 F. Supp. 1162 (E.D. Pa. 1976) ...............................................67 Roseburg Lumber Co. v. Madigan, 978 F.2d 660 (Fed. Cir. 1992)...............................................35 Rothe Dev. Corp. v. United States Dep't of Defense, 262 F.3d 1306 (Fed. Cir. 2001)......................................................................................................54, 55, 56 Rothe Dev. Corp. v. United States Dep't of Defense, 413 F.3d 1327 (Fed. Cir. 2005)..................................................................................................................53 Rothe Dev. Corp. v. United States Dep't of Defense, 324 F. Supp. 2d 840 (W.D. Tex. 2004) ...............................................................................................................53 Rough Diamond Co. v. United States, 351 F.2d 636 (1965) .........................................................75 Roxco, Ltd. v. United States, 60 Fed. Cl. 39 (2004).......................................................................66 -xiv-

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TABLE OF AUTHORITIES (continued) Page(s) S.E.R., Jobs for Progress, Inc. v. United States, 759 F.2d 1 (Fed. Cir. 1985)..................................................................................................................81 S.J. Amoroso Constr. Co. v. United States, 12 F.3d 1072 (Fed. Cir. 1993)...................................75 Saunders v. Hilpertshauser, 1988 U.S. Dist. LEXIS 3646 (S.D.N.Y. 1988) ................................42 Scan-Tech Security, L.P. v. United States, 46 Fed. Cl. 326 (2000) ....................................... passim In re Schenck Tours, Inc., 69 B.R. 906 (E.D.N.Y. 1987) ..............................................................42 Seaboard Lumber v. United States, 308 F.3d 1283 (Fed. Cir. 2002).......................................43, 44 Shimrak v. Garcia-Mendoza, 912 P.2d 822 (Nev. 1996)...............................................................75 Short Bros. PLC v. United States, 65 Fed. Cl. 695 (2005) ............................................................32 Sola Elec. Co. v. Jefferson Co., 317 U.S. 173 (1942)..................................................65, 71, 73, 74 Southern Pacific Transp. Co. v. Commercial Metals Co., 456 U.S. 336 (1982)...........................................................................................................74 Spalding & Sons, Inc. v. United States, 28 Fed. Cl. 242 (1993)....................................................43 Sprague Steamship Co. v. United States, 172 F. Supp. 674 (Ct. Cl. 1959) .......................75, 82, 83 State Oil Co. v. Khan, 522 U.S. 3 (1997).......................................................................................21 Stone Forest Indus., Inc. v. United States, 973 F.2d 1548 (Fed. Cir. 1992) ............................38, 42 Sun Oil Co. v. United States, 572 F.2d 786 (Ct. Cl. 1978) ............................................................51 Sunoco, Inc. v. United States, 59 Fed. Cl. 390 (2004) .......................................................38, 63, 66 Sunoco, Inc. v. United States, No. 02-466C (Fed. Cl., Dec. 15, 2005)..........................................38 Sweats Fashions, Inc. v. Pannill Knitting Co., Inc., 833 F.2d 1560 (Fed. Cir. 1987)........................................................................................................1, 18, 19 System Fuels, Inc. v. United States, 65 Fed. Cl. 163 (2005)....................................................48, 50 T. Brown Constructors, Inc. v. Sec'y. of Transp., 132 F.3d 724 (Fed. Cir. 1997)............................................................................................................34, 35 T.L. Roof & Assoc. Constr. Co. v. United States, 28 Fed. Cl. 572 (1993).....................................36 Tesoro Hawaii Corp., et al. v. United States, 58 Fed Cl. 65 (2003)...................................... passim Tesoro Hawaii Corp., et al. v. United States, No. 02-704C, 2003 U.S. Claims LEXIS 410 (Fed. Cl. Oct. 30, 2003) ....................................................23 -xv-

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TABLE OF AUTHORITIES (continued) Page(s) Tesoro Hawaii Corp. v. United States, 405 F.3d 1339 (Fed. Cir. 2005) ............................... passim Thomas v. United States, 125 Ct. Cl. 76 (1953) ............................................................................80 Toxgon Corp. v. BNFL, Inc., 312 F.3d 1379 (Fed. Cir. 2002).......................................................65 Trauma Serv. Group v. United States, 104 F.3d 1321 (Fed. Cir. 1997) ..................................54, 55 Tylor Bank v. Truck Ins. Exch., 51 F.3d 736 (7th Cir. 1995).........................................................67 USA Petroleum Corp. v. United States, 821 F.2d 622 (Fed. Cir. 1987) ........................................39 U.S. Philips Corp. v. Sears Roebuck & Co., 55 F.3d 592 (Fed. Cir. 1995).............................23, 24 United Counties Trust Co. v. Maclum, Inc., 643 F.2d 1140 (5th Cir. 1981) .................................68 United States Fid. & Guar. Co. v. Bimco Iron & Metal Corp., 464 S.W.2d 353 (Tex. 1971)..............................................................................................67 United States v. Amdahl, 786 F.2d 387 (Fed. Cir. 1986)...................................................47, 76, 83 United States v. Cleveland Indians Baseball Co., 532 U.S. 200 (2001)........................................30 United States v. Connolly, 716 F.2d 882 (Fed. Cir. 1983).............................................................54 United States v. Mitchell, 463 U.S. 206 (1983) .............................................................................54 United States v. Pewee Coal Co., 341 U.S. 114 (1951).................................................................48 United States v. Salerno, 481 U.S. 739 (1987) ..............................................................................21 United States v. Spearin, 248 U.S. 132 (1918) ..............................................................................39 Urban Data Sys., Inc. v. United States, 699 F.2d 1147 (Fed. Cir. 1983) .............................. passim Utah Power & Light Co. v. United States, 243 U.S. 389 (1917).............................................69, 80 Walker v. Cont. Life & Accident Co., 445 F.2d 1072 (9th Cir. 1971) .....................................42, 43 Washington State Hop Producers, Inc. v. Goschie Farms, Inc., 773 P.2d 70 (Wash. 1989)..................................................................................................42 Whittaker Elec. Sys. v. Dalton, 124 F.3d 1443 (Fed. Cir. 1997) ...................................................78 Williams Alaska Petroleum, Inc. v. United States, 57 Fed. Cl. 789 (Fed. Cl. 2003) ...................................................................................................................34 Williams Alaska Petroleum, Inc. v. United States, No. 02-705C (Fed. Cl.) ............................16, 24 Yee v. City of Escondido, 503 U.S. 519 (1992)..............................................................................47 -xvi-

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TABLE OF AUTHORITIES (continued) Page(s) Yerxa v. United States, 11 Cl. Ct. 110 (1986)................................................................................82 Yosemite Park & Curry Co. v. United States, 582 F.2d 552 (Ct. Cl. 1978) ..................................83 Yuba Goldfields, Inc. v. United States, 723 F.2d 884 (Fed. Cir. 1983) .........................................52 Statutes and Regulations 28 U.S.C. § 1292(d)(2) ..................................................................................................................23 28 U.S.C. § 1491............................................................................................................................54 41 U.S.C. § 253..............................................................................................................................33 41 U.S.C. § 423......................................................................................................57, 58, 60, 63, 64 Contract Disputes Act, 41 U.S.C. § 601 ........................................................................................54 Department of Defense Act, 101 Stat. 1329 ..................................................................................31 DFARS § 252.219-7001(c)(3) ........................................................................................... 60-61, 64 FAR § 15.306.................................................................................................................................64 FAR § 15.402...........................................................................................................................16, 28 FAR § 15.506.................................................................................................................................60 FAR § 15.610.....................................................................................................................57, 58, 59 FAR § 15.802.............................................................................................16, 19, 28, 29, 31, 32, 33 FAR § 15.803.................................................................................................................................28 FAR § 15.804...................................................................................................................2, 3, 27, 28 FAR § 16.203......................................................................................................................... passim FAR § 19.502.........................................................................................................57, 59, 61, 62, 64 FAR § 19.507.........................................................................................................57, 60, 61, 62, 64 FAR § 33.206.................................................................................................................................80 FAR § 52.219.7............................................................................................................57, 60, 61, 64 H. Rep. No. 100-911 at 21, 18 (Sept. 9, 1988) .................................................................. 57-58, 63 Pub. L. 100-679, § 27 (1988).........................................................................................................57 -xvii-

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TABLE OF AUTHORITIES (continued) Page(s) Pub. L. 101-28 (1989)....................................................................................................................57 Pub. L. 101-84 (1989)....................................................................................................................57 Pub. L. 104-106, § 4304 (1996).....................................................................................................57 U.S. Const. amend. V.....................................................................................................................46 Miscellaneous 2 DCAM, § 9-201(b) at 924 (July 1, 1989) ...................................................................................29 All Phase Environ., Inc., B-292919.2, 2004 U.S. Comp. Gen. LEXIS 19 (Feb. 4, 2004).....................................................................................................................32 ASPM § 1.3 (Dep't of Def. 1986) ..................................................................................................29 ASPM § 2.5 (Dep't of Def. 1986), at 2-6 .......................................................................................29 ASPM § 9.2 (Dep't of Def. 1986), at 2-6 .......................................................................................29 ASPM No. 1 (Dep't of Defense 1975) at 2B10 .............................................................................29 Allan Farnsworth, Farnsworth on Contracts § 8.6 at 452 (3d ed. 2004) ......................................67 Arthur L. Corbin, 6A Corbin on Contracts §§ 40.1, 1255, 1540 (1962).................................41, 67 CCH Nash & Cibinic eSeries, Government Contracts Reference Book, F Guidebook (2005) (available on Lexis) .............................................................................30 Black's Law Dictionary (8th ed. 1999)..........................................................................................20 Cascading Set-Asides: A Legal and Fair Procedure, 19 Nash & Cibinic Report ¶ 39 (Aug. 2005) .....................................................................61 Chevron Products Company, Aviation Fuels Technical Review 13 (2000).....................................2 Contracting Pricing Reference Guide § I.2.1 (available at http://www.acq.osd.mil/dpap/contractpricing/vol1intro.htm#I.2.1) (last updated Aug. 26, 2005)..............................................................................................30 Dimensions, Defense Logistics Agency News Magazine (1999 Almanac ed.) available at http//www.dla.mil/dimensions/almanac/desc.htm.....................................2 Joseph Perillo, Calamari And Perillo On Contracts at 458 (5th ed. 2003) ...................................67 Kevin R. Garden, Fifth Amendment Takings of Rights Arising from Agreements with the Federal Government, 29 Pub. Cont. L.J. 187, 205 (2000)..........................................................................................................................51 -xviii-

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TABLE OF AUTHORITIES (continued) Page(s) Michael J. Sniffen, Refiner to pay $110 million in underpaid-royalties suit, Corpus Christi Caller-Times (Jan. 24, 2001).............................................................81 Polarad Elect., Inc., ACAB No. 1116, 2 ECR para. 134 (1971)...................................................46 Professional Materials Handling Co., Inc.--Reconsideration, B-205969.2; B-205969.3, 82-1 CPD ¶ 501 (May 28, 1982) .......................................59, 65 Restatement (Second) of Contracts § 84 (1979) ...................................................................... 67-68 Restatement (Second) of Contracts § 93 (1979) ............................................................................67 Restatement (Second) of Contracts, § 161(b) (1979).....................................................................36 Restatement (Second) of Contracts § 162 (1979) ..........................................................................35 Restatement (Second) of Contracts § 237 cmt. a (1979) ...............................................................41 Restatement (Second) of Contracts § 241 (1979) ..........................................................................38 Restatement (Second) of Contracts § 266 cmt. a (1979) ...................................................42, 43, 44 Webster's II New Riverside University Dictionary 161 (1988) .....................................................30 Webster's New World Dictionary of the American Language 502 (2d ed. 1984) ................................................................................................................ 30-31 WHY R&D, Inc., B-221817, 86-1 CPD ¶ 375 (Apr. 16, 1986)......................................................60 Williston on Contracts § 814 (3d ed. 1962)...................................................................................41

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS LA GLORIA OIL AND GAS COMPANY, Plaintiff, v. THE UNITED STATES, Defendant. ) ) ) ) ) ) ) ) )

No. 02-465C (Judge Hewitt)

PLAINTIFF'S OPPOSITION TO DEFENDANT'S MOTION TO DISMISS Plaintiff, La Gloria Oil and Gas Company ("La Gloria"), respectfully submits its Opposition to Defendant's Motion to Dismiss. In its motion, Defendant seeks dismissal of La Gloria's Amended Complaint pursuant to RCFC 12(b)(1) and 12(b)(6), and, alternatively, seeks summary judgment pursuant to RCFC 56(b) on all of La Gloria's claims, save paragraphs 40 and 41 relating to DESC's small business and minority price preferences. DESC's Motion at 1. As set forth below, Defendant's RCFC 12(b) motion to dismiss, which must assume the truth of the well-pleaded allegations in the Amended Complaint, should be denied because Defendant fails to establish that it is entitled to judgment as a matter of law. Conley v. Gibson, 255 U.S. 42, 45-46 (1957). Furthermore, Defendant's alternative request for summary judgment must be denied because Defendant fails to provide evidence which "would establish its right to judgment," Sweats Fashions, Inc. v. Pannill Knitting Co., Inc., 833 F.2d 1560, 1562 (Fed. Cir. 1987), and its motion amounts to little more than "a conclusory assertion that the plaintiff has no evidence to prove his case." Celotex Corp. v Catrett, 477 U.S. 317, 328 (1986) (White, J., concurring). (See discussion pp. 18-20, infra.) Moreover, to the extent that DESC could be deemed to satisfy its burden with respect to any material fact, and, to the extent that La Gloria is deemed not to provide sufficient countering evidence to establish a genuine issue with respect to that fact, this Court should, pursuant to La Gloria's accompanying motion under RCFC 56(f), refuse DESC's application for summary judgment or, in the alternative, grant a continuance to permit La Gloria the discovery it requires to establish these facts. Celotex, 477 U.S. at 326. For these reasons and as further set forth below, Defendant's Motion should be denied.

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STATEMENT OF FACTS I. THE PARTIES DESC1 is the principal purchaser of military fuel for the Department of Defense ("DOD"). It is the single largest purchaser of fuel in the world.2 As relevant here, DESC principally purchased unique types of military jet fuel. Amended Complaint ¶ 2; App. 648-87.3 La Gloria was a supplier of military fuel to DESC. La Gloria maintained long-term supply relationships with DESC and committed substantial, long-term capacity to refining military fuel. App. 648-87. DESC purchased military fuel from La Gloria, as it did from essentially all military fuel suppliers, under long-term contracts typically lasting one year. Amended Complaint ¶ 2; App. 648-87. During the period relevant here, La Gloria and DESC entered 6 contracts providing for the purchase of military fuel in Texas. Amended Complaint ¶¶ 31; App. 648-87. II. DESC'S MILITARY FUEL PRICES AND ITS STATED INTENT TO PAY FAIR MARKET VALUE FOR FUEL DESC's military fuel contracts contained adjustable prices that permitted DESC to set military fuel prices monthly or weekly during the contract term. App. 648-87. FAR § 16.203 permits use of adjustable prices where, inter alia, prices are set based on changes in "established prices." "Established prices" are "established market prices." Tesoro Hawaii Corp. v. United States, 405 F.3d 1339, 1345 (Fed. Cir. 2005) (quoting the prior provisions of FAR § 15.804-

DESC previously was known as the Defense Fuel Supply Center ("DFSC"). For simplicity, "DESC" is used throughout.
2

1

Dimensions, Defense Logistics Agency News Magazine (1999 Almanac ed.), available at http//www.dla.mil/dimensions/almanac/desc.htm. Chevron Products Company, Aviation Fuels Technical Review 13 (2000) (military "maintain[s] separate specifications for jet fuel [because of] operational and logistical differences between the military and civilian systems and the additional demands high-performance jet fighter engines place on the fuel").

3

2

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3(c)(2)). Established market prices may include price references such as indexes, but, where used, indexes must be "market-based references." Id. at 1347-48.4 As relevant to DESC's motion, DESC set fuel prices under its military fuel contracts using a compilation of petroleum sales data published by the Department of Energy ("DOE") known as the Petroleum Marketing Monthly ("PMM").5 App. 650-54. The PMM reports a monthly average sales figure for specified fuels, such as jet fuel or diesel fuel, for five regions known as Petroleum Administration for Defense Districts ("PADDs"). Barrett Ref. Corp. v. United States, 42 Fed. Cl. 128, 130 n.6, 131 (1998), aff'd in part and rev'd in part, 242 F.3d 1055 (Fed. Cir. 2001). As the PMM moved upward or downward each month, DESC's fuel prices also moved upward or downward. App. 650-54.6 DESC's Deputy Director of Contracting, Edward Biddle, stated in a 1993 memorandum that the purpose of DESC's adjustable prices was to "ensure[] that the sale will be at the market price, which is a fair and reasonable price. Not only is the government protected, but the contractor is protected by knowing that its price will always be related to the price it could obtain in the commercial marketplace." App. 4 (emphasis added). DESC's Director of the Office of Market Research and Analysis, Lawrence Ervin, testified similarly before this Court in 1998 that DESC used adjustable prices because: "[W]e wanted our prices to reflect, as closely as possible, market levels for the same or similar commercial fuels in the marketplace. . . . We wanted the price to go up and also down when the market prices of similar fuel went [up or] down." App. 14; see also App. 62 ("the EPA [economic price adjustment] reference selected is
4 5

See infra fn. 26.

DESC also used other compilations of sales data to set fuel prices. However, in its motion, DESC offers no evidence concerning these other compilations or their relationship to the market for military fuel. Because DESC fails to meet its burden to offer any evidence concerning these other compilations, or otherwise move with respect to them, La Gloria does not address them specifically in its response and limits its discussion to the PMM. The PMM is designed for Congressional use in developing broad energy policy. Barrett, 42 Fed. Cl. at 131.

6

3

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[intended to be] reflective of changes in commercial market prices"); App. 69 ("the EPA reference is designed to adjust the award price in concert with changes in going market price levels;" "the D[E]SC Office of Market Research and Analysis endeavors to select the reference that most accurately reflects movements of going market prices"). Consistent with this purpose, DESC's pricing clause is titled "Economic Price Adjustment ­ Published Market Price." App. 9. Among its various iterations over time, the clause states that "[t]he market price [used to set military fuel prices] is derived from quotes, assessments, or sales prices in the market place" and further provides that military fuel prices are "to reflect market conditions." App. 9 (emphasis added).7 It is therefore unsurprising that in Barrett the United States Court of Appeals for the Federal Circuit expressly found that DESC's adjustable pricing clause embodied a promise to "pay at least fair market value" for fuel. 242 F.3d at 1060. III. DESC'S CONFLICTING INTERNAL ASSESSMENTS AND PUBLIC STATEMENTS ABOUT ITS MILITARY FUEL PRICES Outwardly, DESC maintained that the PMM was the "gold standard" for measuring fair market value. DESC wrote to its parent organization, the Defense Logistics Agency ("DLA"), that its PMM "references are virtually unimpeachable from an accuracy standpoint, since they don't just `track' the market ­ they are the market." App. 98 (emphasis added).8 In response to a supplier's objection to the PMM, DESC similarly wrote that the PMM "consistently reflects actual market prices," App. 96, and to another objecting supplier DESC wrote that the PMM is "a reliable indicator of price movements in the petroleum products market." App. 91. As late as See also App. 87 (Mr. Ervin stating that, pursuant to DESC's pricing clause, "replacement of the escalation reference is called for if the reference `consistently fails to reflect market value'"); App. 85 (Mr. Ervin stating that through its pricing clause "DESC assumes the risk of higher product prices").
8 7

DESC's public espousal of the PMM is unsurprising, given DESC's acknowledgment that "DOE normally will work with us to see that our needs are satisfied as we are one of the primary users of PMM." App. 100.

4

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1998, DESC's Mr. Ervin testified before this Court that the PMM is "the benchmark against which we . . . compare everything domestically." App. 29. DESC's statements to DLA, its suppliers and this Court stand in stark contrast to DESC's expert economists' assessment of the PMM. In 1986, DESC's then-Director of the Office of Market Research and Analysis, Mr. Christopher Lee, undertook an assessment of the PMM to compare its performance with commonly used commercial price references for fuel, such as Platts and OPIS (which DLA subsequently directed DESC to use in place of the PMM). Referring to Platts and OPIS as "other references,"9 Mr. Lee, who holds a Doctorate in Economics,10 stated: "Yet our analysis of the movement of the PMM as compared to other references as used for interim price adjustments indicates that the PMM may have moves as much as one or two cents per gallon out of step with such interim references." App. 103 (emphasis added). In contrast, DESC required its suppliers to submit bids to the one tenthousandth of a cent ($0.000001). See, e.g., App. 672 (reflecting a bid price of $0.576300). In 1987, DESC's Office of Market Research and Analysis undertook another study "comparing PMM versus Platts and OPIS." App. 134. That study supported using the commercial price references Platts and OPIS to make price adjustments ­ not the PMM. App. 134. When DLA ultimately learned of DESC's 1987 study ­ albeit seven years later ­ DLA directed DESC to stop using the PMM to set prices and to use Platts and OPIS instead. Mr. Ervin explains how DESC's 1987 study led to DLA's directive to stop using the PMM in 1994:

In the 1986 assessment, Mr. Lee uses the phrase "other references as used for interim price adjustments." App. 103. DESC used its interim price adjustments to set prices on an interim basis at the time fuel was delivered. App. 120. DESC set final prices when the PMM was published three months after the fact ­ i.e., three months after the fuel was delivered. App. 121. DESC's interim references, as identified in its adjustable pricing clause, were Platts and OPIS. App. 120.
10

9

App. 111.

5

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I was sitting in a room when the decision happened and it was made in response to some pressure from headquarters to do things differently. So the analysis is based on, basically is the analysis in the '87 study. Some people who have read the '87 studies [stated] that they would draw different conclusions than what was presented at the end of the study, certainly a close call. Analysis would have supported that as well so it's really the '87 study which is the basis for that move [in 1994 from PMM to Platts and OPIS]. App. 134.11 The 1987 study was written by the Office of Market Research and Analysis with the objective of justifying continued use of its "gold standard," the PMM. App. 595-602.12 While the all-important statistical analysis behind the study has not yet been produced, the admissions against interest in the narrative of the study are compelling. DESC's expert economists admit that using Platts and OPIS to set prices instead of the PMM "would cost DESC money" and concede that "[t]here is market risk associated with the move away from escalation on actual sales [PMM] particularly with respect to jet kerosene [military jet fuel]." App. 599; App. 602.13 DESC's economists additionally recount in the 1987 study how its suppliers had complained that, as a result of DESC's use of the PMM to set prices after fuel is delivered, "`we never know if we have made or lost money when you (D[E]SC) lift a cargo.'" App. 597 (emphasis added); see also App. 595 (cover memorandum to the 1987 study stating with respect to the proposed change in using the PMM, "The issue has been raised several times in recent years, formally and informally, by contractors").
11

DESC proffered Mr. Ervin as a witness in response to a Notice of Deposition served under Rule 30(b)(6) in this case. App. 141. The notice directed DESC to designate a witness to address the existence of documents requested in the plaintiff's requests for production of documents. App. 141. Because, pursuant to the terms of the notice, the deposition was limit