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

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UNITED STATES COURT OF FEDERAL CLAIMS THE BOEING COMPANY, SUCCESSOR- ) IN-INTEREST TO ROCKWELL ) INTERNATIONAL CORPORATION, ) ) Plaintiff, ) ) v. ) ) THE UNITED STATES OF AMERICA, ) ) Defendant. )

No. 91-1362 C (Judge Lettow)

DEFENDANT'S REPLY TO PLAINTIFF'S MEMORANDUM IN REPLY TO DEFENDANT'S OPPOSITION TO PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND IN OPPOSITION TO DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT

PETER D. KEISLER Assistant Attorney General DAVID M. COHEN Director DONALD E. KINNER Assistant Director JOHN A. KOLAR DONALD WILLIAMSON Trial Attorneys Commercial Litigation Branch Civil Division Department of Justice P.O. Box 261 Ben Franklin Station Washington, D.C. 20044 Tele: (202) 305-9301 Attorneys for Defendant

Dated: September 14, 2006

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TABLE OF CONTENTS Page

PRELIMINARY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 A. Defendant's Non-Breach Theory Is Not "Newly Minted," And Is Reasonable, and Consistent With The Contract's Language, the Evidence, and the Government's Stipulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1. 2. The Government's Non-Breach Theory Is Not "Newly Minted" . . . . . . . 2 The Government's Non-Breach Theory is Reasonable, and Consistent With The Contract's Language, the Evidence, and the Government's Stipulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

B.

The Award Fee Amounts Paid to Rockwell Were Entirely Within the Government's Discretion and Not Reviewable by the Court . . . . . . . . . . . . . . . 12 Rockwell Suffered No Legally Cognizable Damages Even If DOE Breached the Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 The Government's Defense of Waiver Is Encompassed by Estoppel and, Therefore, Is Not Barred; The Summary Judgment Proof Submitted By the Government Establishes That Rockwell Waived Its Purported Right to Have Field Officials Determine its Award Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

C.

D.

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

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TABLE OF AUTHORITIES Page Cases: AFSCME, Council 4, Local 704 v. Department of Public Health, 866 A.2d 582 (Conn. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Burnside-Ott Aviation Training Center v. Dalton, 107 F.3d 854 (Fed. Cir. 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 13 George Sollitt Constr. Co. v. United States, 64 Fed. Cl. 229 (2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 13 Helix Elec., Inc. v. United States, 68 Fed.Cl. 571 (Fed. Cl. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Kline v. San Francisco Unified School Dist., 104 P.2d 661 (Cal. App. 1940) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Manson Constr. Co. v. United States, 64 Fed. Cl. 746 (Fed. Cl. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Moncel Realty Corp. v. Whitestone Farms, 68 N.Y.S.2d 673 (N.Y. Sup. 1947) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Sphere Drake Ins. Ltd. v. Am. Gen. Life Ins. Co., 376 F.3d 664, 679 (7th Cir. 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

Other: Blacks Law Dictionary (8th ed.2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-4

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UNITED STATES COURT OF FEDERAL CLAIMS THE BOEING COMPANY, SUCCESSOR- ) IN-INTEREST TO ROCKWELL ) INTERNATIONAL CORPORATION, ) ) Plaintiff, ) ) v. ) ) THE UNITED STATES OF AMERICA, ) ) Defendant. )

No. 91-1362 C (Judge Lettow)

DEFENDANT'S REPLY TO PLAINTIFF'S MEMORANDUM IN REPLY TO DEFENDANT'S OPPOSITION TO PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND IN OPPOSITION TO DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT The Government submits this memorandum in reply to plaintiff The Boeing Company, Successor-In-Interest To Rockwell International Corporation's ("Rockwell") Memorandum In Reply To Defendant's Opposition To Plaintiff's Motion For Summary Judgment And In Opposition To Defendant's Cross-Motion For Summary Judgment, served on August 28, 2006 ("Rockwell's Reply"). I. PRELIMINARY STATEMENT There is no genuine issue of material fact, and the Government is entitled to a judgment as a matter of law that it did not breach the contract. Accordingly, the Court should enter summary judgment denying Rockwell's claim. Alternatively, the Court should enter summary judgment for the Government on the grounds that (1) the amounts of the award fees paid to Rockwell were entirely within the Government's discretion and cannot be reviewed by the Court; (2) Rockwell suffered no legally cognizable damages even if DOE breached the contract; and or (3) the Government should be permitted to assert the affirmative defense of waiver -1-

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inasmuch as it is encompassed by estoppel, and the uncontroverted facts establish waiver as a matter of law. In the event the Court declines to enter summary judgment for the Government, the Court should deny Rockwell's motion for summary judgment since the issues of fact underlying Rockwell's motion are subject to genuine dispute, and Rockwell is not entitled to judgment as a matter of law. II. ARGUMENT A. Defendant's Non-Breach Theory Is Not "Newly Minted," And Is Reasonable, and Consistent With The Contract's Language, the Evidence, and the Government's Stipulation 1. The Government's Non-Breach Theory Is Not "Newly Minted"

The Government's defense that the contract permitted DOE Headquarters to act as the AFDO is not "newly minted." Rockwell's Reply at 2. Rockwell has long been on notice that the Government intended to defend this case on precisely this ground, among others. In a legal memorandum which the Government filed on April 28, 1994, the Government argued that the contract merely required that the award fee be determined by a "Contracting Officer,"1 and that "that term is defined [in the contract] in such a manner as to include a class of DOE officials arguably including then Secretary of Energy James D. Watkins and other high-level DOE headquarters officials." Indeed, the Court granted the Government leave to conduct the depositions of Mr. Beall and Mr. Iacobellis,2 based on the Government's argument that these

See Defendant United States' Memorandum In Opposition To Motion Of Plaintiff Rockwell International Corporation For A Protective Order And Motion For Leave To Take The Contested Depositions Outside Of The Court-Ordered Discovery Period, filed April 28, 1994, at 2-8, Defendant's Supplemental Exhibit ("Def. Supp. Ex.") 50 submitted herewith.
2

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depositions would demonstrate Rockwell's contemporaneous understanding that the contract permitted award fee determinations by Secretary Watkins and Headquarters officials. 2. The Government's Non-Breach Theory is Reasonable, and Consistent With The Contract's Language, the Evidence, and the Government's Stipulation

The parties apparently agree that the contract allowed someone other than Mr. Twining to act as the AFDO. Rockwell admits that if the position of Manager became "vacant" due to Manager Twining's "disability," "the individual performing the Manager's duties (i.e., "acting as Manager, Albuquerque Operations") [could] serve as the AFDO." Rockwell's Reply at 4. Rockwell's Reply at 7-8. Rockwell only takes issue with the Government's position that the contract permitted the Secretary to withdraw de facto Mr. Twining's authority to decide Rockwell's award fee, while leaving him in the position of Manager with jurisdiction over other contractors. Rockwell acknowledges that DOE could properly have designated someone other than Mr. Twining as AFDO, but says that DOE could only do so if it "chang[ed] the occupant of the position of Manager of Albuquerque Operations." Id. Rockwell's interpretation is incorrect. First, Rockwell argues that, in identifying the AFDO as the "Manager or anyone acting as Manager, Albuquerque Operations," see Pl. Ex. 3 at 2 (clause 62(b)(1)), the contract means the Manager or someone formally named to the position of "Acting Manager" who fills the Manager's position on an interim basis due to a vacancy in the Manager's position. Rockwell's Reply at 4-5, n. 2. In support of this argument, Rockwell cites Black's Law Dictionary's definition of "acting" when used it is used in the phrase "acting director." Black's Law Dictionary (8th ed. 2004) defines "acting" when used adjectivally as "[h]olding an interim position; serving temporarily." Id. However, in the phrase in question, the contract does not use "acting" as an adjective. -3-

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The key phrase in the contract uses "acting" not as an adjective, but as a verb, specifically a present participle. It permits the award fee to be decided by the "Manager or anyone acting as Manager" (emphasis added). This means that the award fee may be determined by anyone actually performing the function of the Manager with respect to the relevant subject matter, whether or not that individual had been formally given the nominal title of "Acting Manager." The test is functional, not formal.3 The contract clearly does not specify that the award fee may only be determined by the "Manager or Acting Manager, Albuquerque Operations," which is the terminology that would have been used if the parties had intended to limit the award fee decision to the Manager or an officially appointed "Acting Manager" of Albuquerque Operations. Thus, the language actually employed by the parties in the contract is inconsistent with Rockwell's cramped interpretation. Secretary Watkins's actions in this case were in keeping with the plain meaning of the contract language. Secretary Watkins deemed Manager Twining to be "disabled" from overseeing Rockwell, including determining its award fee, due to Mr. Twining's status as a potential "party" to the criminal investigation. Accordingly, Secretary Watkins withdrew Mr. Twining's substantive authority over Rockwell and designated others­i.e., DOE Headquarters and Mr. Ed Goldberg, Headquarters' representative at the Rocky Flats site--to perform that function, although the Secretary left intact Mr. Twining's title and his authority over other contractors under his jurisdiction. Thereafter, Mr. Twining ceased to function as the Manager within the terms of the contract with Rockwell. In place of Mr. Twining, Headquarters officials commenced "acting as the Manager" of Albuquerque Operations" for purposes of

For the same reason, Rockwell's citation of DOE regulations on the interim appointments of "acting" officials to fill vacant positions is inapposite. -4-

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Rockwell and Rocky Flats.4 Under the language of the contract, those officials were permitted to decide Rockwell's award fee. Second, Rockwell's interpretation is unreasonable because it is predicated on the notion that the Secretary was required to take an "all or nothing" approach to displacing officials who became unable to perform one of their functions, but were perfectly capable of continuing to perform other functions. In this case, Secretary Watkins was responding to a situation in which DOE's Albuquerque Operations officials, including Mr. Twining, were suspected of possible misconduct with respect to Rocky Flats and Rockwell only. Mr. Twining was not suspected of misconduct in regard to any of the other facilities and contractors under his jurisdiction. Secretary Watkins tailored his corrective action to this relatively narrow concern: he removed Mr. Twining's substantive authority over the Rocky Flats facility and over its operator, Rockwell, while leaving intact the rest of his authority. This was a reasonable response, and the Government's reading of the pertinent contract language, which would construe the contract as leaving room for the Secretary to take such action, is the more reasonable reading. Rockwell next asserts that the Government's reading of the contract is unreasonable and contrary to the parties' intent because it is overly broad. According to Rockwell, the Government's reading would "permit[] any number of persons in addition to the Albuquerque Operations Manager, regardless of their `on-the-ground knowledge of Rockwell's performance,' to qualify and serve as AFDO at the Secretary's discretion." Rockwell's Reply at 6-8. As noted

Rockwell acknowledges the substance of many of the pertinent facts supporting the Government's contentions in its Responses To Defendant's Proposed Findings Of Uncontroverted Fact ("Rockwell's Resp. To DPFUF"), although it sometimes quibbles with the Government's specific formulation of the proposed findings. See, e.g., Rockwell's Resp. To DPFUF, ¶¶ 27-29 and 32-34. -5-

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in the Government's Opp. Memo., the language of the contract was open-ended, and literally indicated that any duly designated contracting officer(s) acting in the function of Manager of Albuquerque could determine the award fee. Government's Opp. Memo. at 19 (emphasis added) The contract's use of the term "anyone," considered together with the statute and regulations granting the Secretary plenary authority over the appointment of subordinate Department officers and over its contracting activities,5 means that the Secretary possessed the discretion to designate any DOE contracting officer he deemed appropriate to perform the function of Manager of Albuquerque for all purposes or for a single, more limited purpose (such as, in this case, overseeing Rockwell and Rocky Flats only). Rockwell misperceives the contract's references to the AFDO and contracting officer as somehow altering the Secretary's congressionally conferred authority to administer the Department of Energy. The contract did not purport to impose qualification requirements on the Government employees who the Secretary may appoint to carry out the Government's responsibilities under the contract. The establishment of such qualification requirements is solely within the discretion of the Secretary. Rockwell asks this Court to read the AFDO provision as impliedly limiting the Secretary's discretion in this regard. This is particularly unreasonable and legally incorrect, where, as here, the contract was executed for DOE by a subordinate Contracting Officer (who received his authority not from Congress directly, but from a chain of delegations from the Secretary­see Government's Opp. Memo. at 21) and

5

The statute and regulations are set forth at pages 20-21 of the Government's Opp. -6-

Memo.

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contains no clear language that even attempts to limit the Secretary's authority.6 Rockwell's interpretation is inconsistent with the statute and regulation and therefore improper. See Manson Constr. Co. v. United States, 64 Fed. Cl. 746, 751 (Fed. Cl. 2005) (court declined to adopt an interpretation of a statute which would infringe upon an agency's ability to exercise its discretion­established by other regulations--in determining the price reasonableness of bids). See also Helix Elec., Inc. v. United States, 68 Fed.Cl. 571, 585-86 (Fed. Cl. 2005) (contractor's interpretation of a contract was "untenable" because it was inconsistent with statutes and regulations governing the subject matter). That being said, as it happened, the individuals whom the Secretary charged with deciding Rockwell's award fee in Mr. Twining's place did possess full "on-the-ground" knowledge of Rockwell's performance, and therefore Rockwell cannot reasonably argue that it was deprived of the benefit of that for which it claims it bargained. The Government has submitted evidence that the DOE Headquarters officials who were involved in the determinations at issue here were more informed, not less so, than Mr. Twining, regarding Rockwell's performance. This evidence stands uncontroverted by Rockwell (see further below). The Government agrees with Rockwell that the parties' contemporaneous construction of the contract, before it became a subject of dispute, is entitled to great weight in its interpretation. Rockwell's Reply at 11, citations omitted. Here, the uncontroverted facts demonstrate that Rockwell agreed with DOE's contemporaneous construction of the contract as permitting the

As explained in the Government's Opp. Memo. At 17-19, this contract is unlike the contracts involved in the cases cited by Rockwell. This contract did not explicitly and expressly single out one and only one Government official by name or by title and purport to limit decision making to that single official, but, rather explicitly and expressly provided that any Contracting Officer acting as Manager of Albuquerque could serve as the AFDO. -7-

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Secretary of Energy and DOE Headquarters to take over the role of AFDO once Mr. Twining was disqualified. This is demonstrated by the acquiescence of Rockwell's highest corporate officers, Mr. Beall and Mr. Iacobellis, in DOE Headquarters' role in determining Rockwell's award fees, ample evidence of which was presented in the exhibits to the Government's Opp. Memo. See, e.g., Exs. 38-49. Next, Rockwell asserts that "the record is devoid of any proof that the Secretary removed Mr. Twining from the position of AFDO and transferred that role to himself or others." Rockwell's Reply at 12. Rockwell argues that there are no documents formally identifying Headquarters officials as the AFDO. Rockwell further contends that contemporaneous documents indicate that Mr. Twining and Headquarters continued to treat Mr. Twining as AFDO. Id. To the contrary, the record is replete with evidence that the Secretary removed Mr. Twining's substantive role of deciding Rockwell's award fees (although he did not remove his title as Manager or his authority over other plants) and vested that authority in himself and others of his choosing. See, e.g., Def. Ex. 11, pp. 14-15, 65, 96, and 100; Ex. 10, pp. 33-35, 67-68, 133-134, 138; Ex. 16, p. 272; Ex. 17, pp. 27-29; Ex. 18; Ex. 22, pp. 36-37; Ex. 31, pp. 41-43; Ex. 40; Ex. 43; Ex. 46; and Ex. 49. At another point in its reply, Rockwell appears to concede as much when it agrees that "[a]fter Secretary Watkins `was briefed on the contents of the search warrant affidavit,' he `removed Mr. Twining from substantive oversight responsibility' of Rocky Flats, including Mr. Twining's contractual obligation to determine Rockwell's award fees." Rockwell's Reply at 19. The fact that Mr. Twining was removed de facto as AFDO, such that there is no memorandum stating this fact explicitly, is of no moment inasmuch as the contract

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language refers to functions, rather than titles, in identifying the officials who may properly determine award fees. Rockwell argues that "[t]he Stipulation belies the government's current interpretation" of the contract. Rockwell's Reply at 10. Specifically, Rockwell argues that the Stipulation bars the Government's interpretation because it refers to the Manager of Albuquerque Operations during the 89/1 period, and the Manager of the Rocky Flats Office during the 89/2 period, as "the AFDO." Therefore, says Rockwell, the Government may not now argue that someone else (i.e., Secretary Watkins and/or DOE Headquarters) became the AFDO de facto and could decide the award fees. However, a careful review of the Stipulation, and the context within which it employed the term "AFDO," shows that this usage was incidental and was never intended as a substantive admission regarding who could act as the AFDO, and who could not. The Stipulation starts off: 1. In May 1989, the Department of Energy's ("DOE's") Manager of Albuquerque Operations (the Award Fee Determination Official or "AFDO") concluded that Rockwell International Corporation's ("Rockwell's") award fee for Plant Operations . . . for the 89/1 period should be $5,176,482 and forwarded his conclusion to DOE headquarters for concurrence.

See Pl. Ex. 5, Stipulation, ¶ 1. From that point on, the Stipulation uses the term "AFDO" as a short-hand abbreviation for the Manager of Albuquerque Operations, or, in the case of paragraphs 9-12, as short-hand for "DOE's Manager of the Rocky Flats Office." See Pl. Ex. 5, Stipulation, ¶ 9. The use of the term "AFDO" in these paragraphs conveys the same meaning as would have been expressed, had the parties used the longer phrasing "Manager of Albuquerque Operations" in every place where "AFDO" is mentioned from paragraph 2 through paragraph 8, and the term "Manager of the Rocky Flats Office" in every spot where "AFDO" is used in -9-

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paragraph 9 through paragraph 12. If the parties had used the longer titles, instead of the shorthand abbreviation "AFDO," it would be clear that the Stipulation was never intended to constitute an admission by the Government that only the two Managers, and not DOE Headquarters, could exercise the function of AFDO consistently with the terms of the contract. The Government entered into the Stipulation because it did not intend to contest the facts that (a) DOE Headquarters, and not the field officials, determined the award fees in question; and (b) in so doing, DOE Headquarters overrode "conclusions" the field officials had reached based upon imperfect knowledge of Rockwell's performance. The Government never intended that the Stipulation should speak to the issue of contract interpretation, or bind the Government from arguing that its actions were proper as a matter of law. Nothing in the Stipulation purports to address the contract interpretation issue or preclude the Government's legal argument. Rockwell further complains that the Government is "run[ning] away from" the Stipulation by using the term "recommendations" to describe the actions of Mr. Twining (and Mr. Simonson during the 89/2 period) regarding award fees. Rockwell insists that the field officials' actions were "determinations," Rockwell's Reply at 10, n. 5, and, therefore, that they form a proper basis for the calculation of damages. Id. at 14 ("Rockwell seeks damages measured by the AFDO's award fee determinations."). Rockwell notes that its counsel rejected the insertion of the term "recommendation" into the Stipulation. However, the term "determination" is not used in the Stipulation either. The Stipulation states that the field officials "concluded" what they thought Rockwell's award fees should be. It further states that the field officials "forwarded [their] conclusion[s] to DOE headquarters for concurrence," Pl. Ex. 5, Stipulation, §§ 1 and 9, thereby plainly indicating an acknowledgment by Rockwell that those actions were merely interim conclusions that never - 10 -

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became final determinations. Thus, Rockwell's quibble with the Government's use of the term "recommendations" to refer to the field officials' actions is semantics. The record is clear that the field officials never entered final determinations. Finally, the Government's "assertions about Mr. Twining" are not "an attempt to resurrect the proposed impossibility/justification defense this Court denied the government leave to assert . . . ." Rockwell's Reply at 13. The Government does not raise these points by way of an affirmative defense. The Government certainly does not concede that it breached the contract but was justified in doing so, or that it was legally impossible for the Government not to breach. Rather, the Government's assertions about Mr. Twining are part of the Government's defense that it did not breach the contract. The Government is arguing that the contract language permitted a DOE contracting officer other than the Manager to function as AFDO (as long as he or she was the functional equivalent to the Manager with respect to knowledge of Rockwell's performance), where, as here, the individual holding the Manager title was disabled from deciding the award fee due to a conflict of interest or a lack of impartiality. For these reasons, and those explained in the Government's Opp. Memo., the Court should grant summary judgment that the Government did not breach the contract. B. The Award Fee Amounts Paid to Rockwell Were Entirely Within the Government's Discretion and Not Reviewable by the Court

Rockwell argues that the Court does have power to review the award fee decisions by DOE notwithstanding the precedents cited by the Government--George Sollitt Constr. Co. v. United States, 64 Fed. Cl. 229, 305 (2005) and Burnside-Ott Aviation Training Center v. Dalton, 107 F.3d 854, 859-60 (Fed. Cir. 1997)­holding otherwise.

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Rockwell argues, first, that it "is not challenging the AFDO's award fee determinations in either of the award fee periods at issue. Rather, Rockwell seeks damages measured by the AFDO's award fee determinations." Rockwell's Reply at 14. By "AFDO's" in this passage, Rockwell means Mr. Twining for the 89/1 award fee period, and Mr. Simonson for the 89/2 period. However, as already explained, the conclusions reached by these two field officials never became "determinations." The only "determinations" present on the record of this case were the award fee decisions by DOE Headquarters. Second, Rockwell attempts to distinguish this case from George Sollitt Constr. Co. and Burnside-Ott by arguing that this case, unlike those, involves "DOE's breach of an explicit contractual requirement" Rockwell's Reply at 16, n. 9, "to wit, that award fees be determined by the AFDO, the Manager, Albuquerque Operations." Rockwell's Reply at 15.7 Obviously, though, Rockwell will not be satisfied with an adjudication simply finding that the wrong official decided the award fee. What Rockwell really seeks is an adjudication that Rockwell was due award fees for the two periods in question that were higher than it was actually paid. But the question of the amount of an award fee paid a contractor under a contract committing that decision to the Government's discretion is precisely the issue that George Sollitt Constr. Co. and Burnside-Ott hold that the Court may not review (in the absence of an allegation that the agency abused its discretion, which Rockwell has not alleged­see the Government's Opp. Memo. at 3, n. 1). Even if, theoretically, the Court has authority to rule that DOE deviated

Rockwell states that "[t]he contract required that several procedures be followed in determining award fees." Rockwell's Reply at 14. But Rockwell goes on to clarify that its "claims arise [solely] from DOE's [alleged] breach of one of those contractual requirements, to wit, that award fees be determined by the AFDO, the Manager, Albuquerque Operations." Rockwell's Reply at 15. - 12 -

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from the procedure it should have followed in determining Rockwell's award fees, the Court lacks authority to substitute its judgment about what award fees Rockwell should have received for the discretionary determinations made by DOE Headquarters officials. The Court should enter summary judgment for the Government on the ground that it lacks the authority to overrule DOE's discretionary determinations of Rockwell's award fees where, as here, Rockwell has not alleged an abuse of discretion. C. Rockwell Suffered No Legally Cognizable Damages Even If DOE Breached the Contract

The Government's Opp. Memo. argues that Rockwell suffered no legally cognizable damages because, even though DOE Headquarters determined its award fees, those officials were as fully informed, or even more informed, about Rockwell's performance as the field officials whom Rockwell says were required to make the decisions. Rockwell presents no evidence to counter the Government's proof that DOE Headquarters officials were as fully informed as field officials regarding Rockwell's performance. The only information Rockwell manages to muster that remotely relates to this proposition is its citation to testimony by Admiral Watkins that "I didn't know an award fee from the man in the moon when I got [to DOE]." Rockwell's Reply at 21, n. 13. As amply demonstrated in the Government's Opp. Memo. and the exhibits submitted therewith, after Admiral Watkins got to DOE, he and other Headquarters officials made a very concerted, and successful, effort to fully inform themselves about Rockwell's performance, and based their award fee determinations on that information. Rockwell also asserts that "[i]n the process actually employed, Rockwell's award fees were "mandated" and "determined" by DOE headquarters in Washington, D.C., by persons - 13 -

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following their own agenda and reacting to a highly publicized and politically-charged investigation founded on `baseless' and `discredited' allegations." Rockwell's Reply at 21. It sounds as though Rockwell is attempting to constructively amend its complaint to add an allegation that DOE Headquarters officials acted arbitrarily and capriciously. As pointed out in the Government's Opp. Memo. at 3, n. 1, Rockwell did not allege in its complaint that DOE Headquarters officials acted arbitrarily and capriciously regarding the amounts of award fees they decided to pay Rockwell. Rockwell should not be permitted to amend its complaint at this late date to add such a claim, especially in view of the Court's refusal to allow the Government to amend its affirmative defenses. Accordingly, the Court should not even entertain Rockwell's suggestion that DOE officials were motivated by "political" or otherwise inappropriate considerations. That being said, we further note that Rockwell does not proffer a scintilla of evidence to support an assertion that Headquarters' motivations were improper. Instead, Rockwell lists a litany of immaterial "facts" in an attempt to distract from its failure to discredit the actual award fee decision-making process carried out by Headquarters. For example, Rockwell notes that the search warrant allegations which triggered the raid were wrong. Rockwell's Reply at 20. So what. Rockwell asserts that all of DOE's facilities had environmental problems, and DOE Tiger Teams sent to other facilities also found violations. Id. So what. None of these points disprove the Government's contention that DOE Headquarters' award fee determinations were based upon full "on-the-ground" knowledge regarding Rockwell's performance. The Government's contention that Headquarters' award fee determinations were based upon a full, fair, and fully informed assessment of Rockwell's performance stands unchallenged by any opposing proof. Consequently, the Court should hold that Rockwell suffered no legally - 14 -

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cognizable damages by reason of the fact that it was Headquarters that made the award fee determinations. D. The Government's Defense of Waiver Is Encompassed by Estoppel and, Therefore, Is Not Barred; The Summary Judgment Proof Submitted By the Government Establishes That Rockwell Waived Its Purported Right to Have Field Officials Determine its Award Fees

The term "estoppel" as a matter of law does encompass waiver. "A waiver is in the nature of an estoppel . . . [they] have some elements in common, are maintained on similar principles, and generally the relief asked under each doctrine is the same, i.e., preclusion . . . `[w]aiver belongs to the family of `estoppel.'" Moncel Realty Corp. v. Whitestone Farms, 68 N.Y.S.2d 673, 677 (N.Y. Sup. 1947). "Waiver is based upon a species of the principle of estoppel and where applicable it will be enforced as the estoppel would be enforced." AFSCME, Council 4, Local 704 v. Department of Public Health, 866 A.2d 582, 585 (Conn. 2005). "Estoppel is a species of waiver and where a public official may not waive a public right he cannot be estopped from asserting that right on the part of the general public." See also Kline v. San Francisco Unified School Dist., 104 P.2d 661, 663 (Cal. App. 1940). Therefore, the Government's waiver defense is not barred under the Court's earlier order. And, the summary judgment proof submitted by the Government in the exhibits to the Government's Opp. Memo. establishes waiver as a matter of law. Rockwell essentially admits that it acquiesced in DOE Headquarter's post-raid decisions to assume direct oversight over, and require management changes, at Rocky Flats, and to delay the timing of the award fee decision, Rockwell's Reply at 28, but argues that it never acquiesced in Headquarters' action of actually determining the award fees. The uncontroverted proof submitted by the Government belies this assertion. DOE placed Rockwell clearly on notice that - 15 -

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it was "the Department" and "the Secretary," to wit Headquarters officials, not Mr. Twining, who were actually deliberating over what its award fees should be. To take but one example, Def. Ex. 42 is a letter dated June 20, 1989 from W. Henson Moore, DOE's Deputy Secretary, to Mr. Sam Iacobellis, Rockwell's then President, Aerospace Operations. In this letter, Mr. Moore advised Mr. Iacobellis (emphasis added): This letter will confirm our conversation of last week regarding the status of the Department's determination of Rockwell's award fee for the most recent completed evaluation period . . . As I mentioned during our conversation, the final determination has been suspended pending receipt by the Secretary of the report of the special departmental team that he dispatched to Rocky Flats. I anticipate that this report will have been rendered in sufficient time so that the Department may make its determination of Rockwell's award fee in approximately two to three weeks. I am sure you appreciate our need to review this matter with care, and the Department will make its determination as promptly as possible. "[O]ur need to review this matter with care" clearly meant that Secretary Watkins, Deputy Secretary Moore, and other Headquarters officials were reviewing "this matter," i.e., the award fee determination, with care. Having been fairly and fully informed that DOE Headquarters was going to decide the award fee, Rockwell's failure to object was "wholly inconsistent" with its purported contract right to have the decision made by field officials, and "indicat[ed] its intent to abandon the [purported] contractual right." Rockwell's Reply at 28, citing Sphere Drake Ins. Ltd. v. Am. Gen. Life Ins. Co., 376 F.3d 664, 679 (7th Cir. 2004). Rockwell's conduct constituted a waiver of this right, and the Court should enter summary judgment for the Government on that ground.

- 16 -

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III.

CONCLUSION For the foregoing reasons, and those set forth in the Government's Opp. Memo., the

Court should enter summary judgment for the Government. Alternatively, the Court should deny Rockwell's motion for summary judgment inasmuch as Rockwell has not demonstrated an absence of genuine issues of material fact and that it is entitled to judgment as a matter of law.

Respectfully submitted, PETER D. KEISLER Assistant Attorney General DAVID M. COHEN Director DONALD E. KINNER Assistant Director

s/ John A. Kolar JOHN A. KOLAR DONALD WILLIAMSON Trial Attorneys Commercial Litigation Branch Civil Division Department of Justice P.O. Box 261 Ben Franklin Station Washington, D.C. 20044 Tele: (202) 305-9301 Attorneys for Defendant Dated: September 14, 2006

- 17 -

Case 1:91-cv-01362-CFL

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Page 1 of 11

Exhibit 50

Case 1:91-cv-01362-CFL

ORiGiNAL
STATES COURT

Document 202-2

Filed 09/14/2006

Page 2 of 11

IN

THE

UNITED

OF FEDERAl

ROCKWELL INTERNATIONAL CORPORATION,

APR 28 ]994
Plaintiff, v. THE UNITED STATES, Defendant. DEFENDANT UNITED STATES' MEMORANDL~ IN OPPOSITION TO MOTION OF PLAINTIFF ROCKWELL INTERNATIONAL CORPORATION FOR A PROTECTIVE ORDER AND MOTION FOR LEAVE TO TAKE THE CONTESTED DEPOSITIONS OUTSIDE OF THE COURT-ORDERED DISCOVERY PERIOD Defendant tion's 1994. depositions and Chief opposes plaintiff For Rockwell International Order, will dated inquire of the CorporaApril in 18, the No. 91-1362C (Judge Yock) ....

U. S, COURT OF FEDERAL CLAIMS

("Rockwell") The of

Motion into R.

A Protective defendant Rockwell's Sam F.

matters Donald

which

Beall, and and matter

Chairman Iacobellis, Major the

Board

Executive Vice to the

Office,

Rockwell's Programs, action to the are

Executive "relevant

President subject appear

Deputy involved

for in

pending to are

land/or] discovery and proper

reasonably evidence,

calculated therefore, their

lead

of admissible under upon of the the RCFC key

" and, . Indeed,

permissible will interof award has in

26(b) issue

(i)

testimony the the

directly pretation Energy fee

in this provision

proceeding: regarding authorized reason that

proper

contract

Department the

("DOE")

official It is

or officials for of this

to make the

determination. the

Government not

noticed order as

depositions Rockwell in

these waste

two the

Rockwell time in

officials, top

to "harass

and

of its

offiders," Accor~

Rockwell

asserts

its

Memorandum 1

Support

(at

4-5).

Case 1:91-cv-01362-CFL

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dingly,

the

Court that

should the

deny

Rockwell's deny

protective

order

motion. defendant

Assuming moves period for

Court

does

Rockwell's

motion, the

leave May

to

take

these

depositions

outside

discovery

ending I. A.

i, 1994. To Motion For A Protective Order

Opposition

The Depositions Of Beall And Iacobellis Are Relevant Both To The Issues Rockwell Has Raised In The Complaint And To The Government's Defenses filed under the this action to recover alleged ("the breach of

Rockwell contract with plant from the damages DOE

Contract operation

DE-AC04-76DP03533 of the Rocky Flats

Contract") weapons for and type. to be DOE its DOE paid (See,

for

nuclear plant

near 1975

Denver, to

Colorado. 31,

Rockwell pursuant a cost

managed to plus the the

the

December The the its

1989, was

Contract fee fee

modifications. paid all of for

Contract and

award award

costs,

determined efforts on

Rockwell e.g.,

management ~ 13.) that,

a~semi-annual

basis.

Complaint, Rockwell

contends in field

during

fiscal

year

1989,

officials influenced New

in or

DOE

headquarters DOE

Washington, officials and the ~

D.C. in the

"improperly Albuquerque, Flats office 31,

coerced" Operations its award

Mexico

Office fees the

[ALOO]

Rocky 13, seeks

[RFO] and award

to reduce thereby fees in it the

(Complaint, Rockwell DOE

26-28, to

35), the

breached alleges award

Contract. when

recover

it fee

lost

headquarters

officials

intervened

decision. avers be the that, under the Contract, the of award the fee was of

Rockwell required to

"subjective

determination"

Manager

2

Case 1:91-cv-01362-CFL

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ALOO,

but

that,

during and and

the

two

semi-annual in argues one fee. and

award question, that only This

fee it

periods was not. indiDOE who of

(10/1/88-3/31/89 (Complaint, vidual, was the ~ 12 Manager to

4/1/89-9/30/89) 13.) Rockwell was the

a single person is in

of ALO0, decide the

permitted

award

a question

contract

interpretation. 54, entitled M087 "Allowable Contract, Costs, Base Fee and Award Fee," a

Clause

of Modification copy of which (a)

of the

effective A, provided

January

i, 1986, part:

is attached

as Exhibit

in pertinent

Compensation for Contractor's Services. Payment for the allowable costs as hereinafter defined and of the base fee and so much, if any, of the award fee as may be determined by the Contracting officer . . . shall constitute full and complete compensation for the performance of the work and furnishing of services under the this contract. [Emphasis added.] M087 defines the Contract defines the

Clause

1 of

Modification Officer" as

"Contracting

a person with the authority to enter into, administer, and/or terminate contracts and make related determinations and findings.' The that the subsection the Manager to of Clause of ALOO 54 was upon the which single fee Rockwell individual relies in arguing under

permitted

Contract (b)

decide (I)

the

award

states:

Base Fee and Award Fee. The amount of the award fee actually to be paid to the Contractor shall be determined by the Award Fee Determination Official (Manager, or anyone acting as Manager, Albuquerque Operations)

3

Case 1:91-cv-01362-CFL

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~ [Emphasis Thus, by the Clause 54(a) states that

added.] the and of award that DOE fee term decision is is to be made in such a

Contracting as to include

Officer, a class James Clause

defined arguably

manner then

officials and states as the The

including DOE

Secretary

of Energy officials.

D. Watkins 54(b) (i)

other that

high-level the award

headquarters

is to be determined "anyone contract case acting as

by the the

AFDO,

defined [of key

Manager meaning

of ALOO, of in

or

Manager are

ALOO]." to

these this

provisions

- which

Rockwell's

claim

- is subject It is

to interpretation. that, must in construing from the the terms of a

well-established parties' intent

contract, as Ct.

"the

be gathered Corp.

instrument States, 201

a whole." Cl. 282,

Kenneth 288,

Reed 475 the any

Construction F.2d 583, 586

v. United

(1973).

Moreover, interpretation entitled United to of great 867

determining a contract, weight. F.2d 212 488

intent, before

parties' disputi

contemporaneous has Serv. Truonq arisen, Corp. Xuan is v. Truc States,

Lear-Siqler 603 (Fed.

Manaqement Cir. 1989);

States,

600, Ct. F.2d

v. United 203 Ct. v.

States, Cl. 347,

Cl.

51 (1976); (1973);

Petrof~ky Inland 424

v. United Empire F.2d 1370

1394 191

Builders, (1970).

Inc. The

United and and this key

States, statements

Ct.Cl. of

742,

actions Beall when of the

Rockwell's the

top period

executive just on the prior

officials, to the time

Iacobellis, dispute

during bear

arose,

directly

interpretation

i Language found in Appendix

similar

to

that

found Fee

in

Clause

54(b)

(i)

is

D entitled

"Award

Plan."

Case 1:91-cv-01362-CFL

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provisions By sent DOE way

of

the

Contract. on award March May fee 31, 31, 1989, the Manager for the of ALOO

of

background, his

headquarters I, 1988

recommendations 1989 for various

period

October under Troy his E.

through

contractors of days, Defense that held 5.)

supervision Wade, (whom II,

including the Acting

Rockwell. Assistant this

Within

a couple for was

Secretary week), Plant who

Programs the up The FBI the

Rockwell to raid award of by until

is deposing the fee Rocky

aware

planned Rockwell

Flats

on June

6, 1989, B, p.

determination. award fee

(See was

Exhibit

determination advisement issued the

Rockwell's DOE

subsequently and the

taken decision C.) converMoore award and

under was

headquarters September, Beall and and

officials, 1989. (See had

not

late

Exhibit numerous

During sations about fee. Moore with a wide

interim,

Iacobellis Deputy

Secretary range of

Watkins contract

secretary

w. Henson Rockwell's Iacobellis

issues

including the FBI

In mid-June had

1989,

shortly ~ after "regarding award i, 1988 that by

raid,

a conversation of

the fee for

status the

of the most

Department's completed . o has by " been the

determination evaluation Moore

Rockwell's [October

recent

period

through final

March

31, 1989]

informed

Iacobellis receipt team you

"the the

determination of the report

suspended special added: with

pending department

Secretary

that

he

dispatched our will need make 1989

to Rocky to its review

Flats." this

Moore matter as to

"I care,

am

sure

understand

and

the

Department (See

determination from Moore

promptly Iacobellis

as

possible."

June

20,

letter

attached

as Exhibit

D hereto.)

5

Case 1:91-cv-01362-CFL

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Page 7 of 11

On August raise certain

17,

1989,

Iacobellis by Rockwell for

initiated about the

contact exposure of the E.)

with of

Moore

to

concerns

Rockwell

employees laws at

to criminal the of Rocky

liability Plant. 1989, action

violations (See Exhibit advised be to

environmental In Moore's that Plant in

Flats 28,

response Rockwell's compliance Moore bring as

August course the "We

Moore would laws that

Iacobellis operate the

best with

of

environmental fully of We expect Rocky be F.) Beall that it

as required all actions full with

by the will be

Contract. taken to

stated: the

operations

Flats

into

compliance you to

as quickly this

possible. (See

will

working

achieve

objective."

Exhibit 6, 1989,

On September ating Rocky (See call Rockwell's Flats Exhibit to

wrote

to Secretary to suspend from

Watkins

reiterat

position

intended

operations prosecution.

unless G.) On

Rockwell September

received 18,

immunity Beall

1989,

initiated to

a phone 15

Secretary

Watkins. Secretary by

~Beall Watkins stating

alluded had

a September

conversation threat the

in which

responded "DOE

to Rockwell's terminate advised for the

to suspend if

operations Rockwell

that

might Beall

contract that

shopped

operations." with

Watkins time

Rockwell Watkins "[i]f

intended stated could

to continue DOE might his

operations Rockwell the Rocky

being.

that not

replace eye on

as the Flats

contractor operations

Beall

keep H.)

" (See 20,

Exhibit

On September that that "[a]fter an award [a] fee

1989,

Wat~kins review,

wrote the

to

Beall

informing has of

him

thorough that

Department 40%

concluded the total

reflects

approximately

6

Case 1:91-cv-01362-CFL

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Page 8 of 11

possible dingly,

award Rockwell

fee

is

the in fee

proper the near

determination future, be

.... advised Department procedure."

Accorof the

will, award

particulars appropriate Exhibit C.)

of the

determination as is the

of the normal

by the (See

contracting

officer,

This Rockwell

course and the

of

dealing

between of the

the DOE

highest reflects

officials the

of

highest

officials of

parties" upon

contemporaneous which Rockwell's were

interpretation claim initiated respect such the by turns. by to

Contract the fact

provisions that some is the DOE in

Indeed, Beall the and issue only fee and and

of these itself

contacts

Iacobellis of whether echelon

significant-with should were be

Contract officials Thus, the upon

interpreted to make

that award

lower

allowed

determination. Iacobellis their bears

information the central

possessed issue under note at

Beall case, (i)~

directly are

in this RCFC 26(b)

depositions

clearly

authorized

We also in Support

that,

contrary

to Rockwell's and Beall were of

argument kept the

(Memorandum apprised of

3),

Iacobellis to an "the

information Plant." Plant ''2 others,

relating I is

operations 5, 1988 to

[Rocky from

Flats]

Exhibit President, entitled

August Sanchini,

memorandum

Rockwell's among

D.J.

Iacobellis

and Flats

Beall, Plant.

"Monthly

Activity

Report--Rocky

2 This memorandum was provided to counsel for defendant by the Environment and Natural Resources Division of the Department of Justice from the non-grand jury criminal investigative files on April 19, 1994, subsequent to the conversation alluded to in Rockwell's Memorandum in Support at 3, in which defendant's counsel stated that he did not intend to depose Beall and Iacobellis on the day-to-day operations of the Plant. In view of the reference to 7

Case 1:91-cv-01362-CFL

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Page 9 of 11

Thus, and top

it

is

clear not to

that

the

Government Rockwell and at

seeks waste

to the

depose time

Beall of its these to

Iacobellis, officers" have

"harass in

(Memorandum information lawsuit.

Support,

4-5), and

but

because

officials the issues

that

is directly

clearly

relevant

in this

Rockwell's Burdensomeness Objection Should Be Rejected By This Court Rockwell's order and for is that that it only Beall be this the other and argument in are and See support Rockwell's of a protective officers" to sit

Iacobellis

"top for

would in of

"burdensome matter. that of

oppressive" In

them

deposition In view on the

Memorandum officials Contract high

Support, have

at 4-6.

fact

these the the no

information upon which in be in top

bearing

interpretation claim turns, is

provision they

Rockwell's the Rockwell an of

breach

positions the

occupy should true the

organization to

reason them. will

Government is especially

denied light

opportunity the of fact DOE, that former

depose

This

Rockwell Secretary

this

week D.

be deposing former and

officers Secretary Acting (See

James

Watkins, C.

Deputy former

Moore,

former Secretary Notice

Undersecretary for Defense

John Programs attached

Tuck, John L.

Assistant Rockwell's

Meinhardt. as Exhibit

of

Deposition,

hereto

J.)
pondcrete on page 1 of Exhibit I, defendant's counsel now intends to question Beall and Iacobellis regarding pondcrete, which is one subject of defendant's theory that Rockwell officials concealed and misrepresented environmental problems at the Plant. See Defendant United States' Motion And Memorandum In Support Of Motion To Determine The Sufficiency Of Plaintiff Rockwell International Corporation's Objections To Discovery And To Compel Responses, dated April 18, 1993. 8

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Exhibit 51

Case 1:91-cv-01362-CFL

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No. 91-1362C

MAY 4 Igo~ ) 2
ROCKWELLINTERNATIONAL CORPORATION MAY 4 ~994 2.
Vo

TIlE UN1TEDSTATES ORDER OnApril 19, 1994, the plaintiff filed a Motionfor a Protective Order. On April 28, 1994, the defendant filed its Memorandum Opposition to Motionof in Plaintiff Rockwell/ntemationalCorporation for a Protective Order and Motionfor Leave to Take the Contested Depositions Outside ofthe Court-Ordered Discovery Period. The plaintifffs Motionfor a Protective Order is hereby denied. The defendant's Motionfor Leaveto Take the Contested Depositions Outside of the Court-OrderedDiscovery Period is hereby allowed. The deposition~s of Mr. DonaldR. Beall, plaintiffs Chairmanof the Boardand Chief Executive Officer, and Mr. SamF. Iacobellis, plaintiffs Executive Vice President and Deputyfor Major Programs, shall be completedon or before July 29, 1994. 1T IS SO ORDERED.

Robert J. Yock Judge