# ROLLS-ROYCE NORTH AMERICAN TECHNOLOGIES INC v. DYNETICS, INC.

> District Court, S.D. Indiana · January 28, 2020

URL: https://www.frixlaw.com/law-library/cases/10165972

## Case

- **Court:** District Court, S.D. Indiana
- **Decided:** January 28, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10165972

## Opinion text

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION

ROLLS-ROYCE NORTH AMERICAN )
TECHNOLOGIES INC, )
)
Plaintiff, )
)
v. ) Case No. 1:19-cv-04302-TWP-TAB
)
DYNETICS, INC., )
)
Defendant. )

ENTRY ON PLAINTIFF’S MOTION FOR INJUNCTIVE RELIEF
This matter is before the Court on Plaintiff Rolls-Royce North American Technologies,
Inc.’s (“Rolls-Royce”) Petition for Temporary Restraining Order and Preliminary Injunction.
(Filing No. 11.) Rolls-Royce is the subcontractor to Defendant Dynetics, Inc. (“Dynetics”), which
is currently fulfilling a contract with the United States Army to develop a vehicle-based high-
energy laser. As part of a Contractor Teaming Agreement (“Teaming Agreement”), Rolls-Royce
and Dynetics agreed to deal exclusively with one another when completing the power and thermal
energy portion of the government contract. The parties worked together exclusively through
multiple phases of the government contract, but in September 2019, Dynetics informed Rolls-
Royce that Rolls-Royce had breached the contract, and as a result Dynetics would no longer
observe the exclusivity provision. Hoping to maintain the status quo through an arbitration process
required by the Teaming Agreement, Rolls-Royce petitioned this Court for a temporary restraining
order and preliminary injunction.
Rolls-Royce asks the Court, among other things, to enjoin Dynetics from terminating the
Teaming Agreement and from sharing any of Rolls-Royce’s confidential trade secrets with other
entities. Because the standard for a temporary restraining order is essentially identical and because
Dynetics has had a full opportunity to respond, the Court treats Rolls-Royce’s Motion as one for
a preliminary injunction. For the following reasons, the Court grants in part and denies in part
Rolls-Royce’s Motion for Temporary Restraining Order and Preliminary Injunction.
I. LEGAL STANDARD

“A preliminary injunction is an extraordinary remedy never awarded as of right. In each
case, courts must balance the competing claims of injury and must consider the effect on each
party of the granting or withholding of the requested relief.” Winter v. Natural Res. Def. Council,
Inc., 555 U.S. 7, 20 (2008).
To obtain a preliminary injunction, a party must establish [1] that it is likely to
succeed on the merits, [2] that it is likely to suffer irreparable harm in the absence
of preliminary relief, [3] that the balance of equities tips in its favor, and [4] that
issuing an injunction is in the public interest.

Grace Schools v. Burwell, 801 F.3d 788, 795 (7th Cir. 2015); See Winter, 555 U.S. at 20. “The
court weighs the balance of potential harms on a ‘sliding scale’ against the movant’s likelihood of
success: the more likely he is to win, the less the balance of harms must weigh in his favor; the
less likely he is to win, the more it must weigh in his favor.” Turnell v. CentiMark Corp., 796
F.3d 656, 662 (7th Cir. 2015). “The sliding scale approach is not mathematical in nature, rather it
is more properly characterized as subjective and intuitive, one which permits district courts to
weigh the competing considerations and mold appropriate relief.” Stuller, Inc. v. Steak N Shake
Enters., Inc., 695 F.3d 676, 678 (7th Cir. 2012) (citations and internal quotation marks omitted).
“Stated another way, the district court ‘sit[s] as would a chancellor in equity’ and weighs all the
factors, ‘seeking at all times to minimize the costs of being mistaken.’” Id. (quoting Abbott Labs.
v. Mead Johnson & Co., 971 F.2d 6, 12 (7th Cir. 1992)).
II. BACKGROUND
A. The Parties
Plaintiff Rolls-Royce is a corporation organized under the laws of the State of Delaware
with its principal offices in Indianapolis, Indiana. Rolls-Royce builds aircraft engines and other

machinery. In addition to providing goods to private sector consumers, Rolls-Royce provides its
goods, services, and expertise to the U.S. Government pursuant to government contracts and
subcontracts, often with branches of the military. LibertyWorks, also based in Indianapolis, is a
wholly-owned Rolls-Royce subsidiary that performs a number of these government contracts,
particularly those focused on developing advanced technology for propulsion and power often
involving classified data and programs important to U.S. national security. LibertyWorks
frequently partners with other businesses to provide comprehensive research and development
services to the United States military.
Defendant Dynetics is an applied sciences and information technology company
headquartered in Huntsville, Alabama. Its primary customers are the United States Department of

Defense, U.S. intelligence agencies, and the National Aeronautics and Space Administration.
B. The Army’s HEL-TVD Program, the Prime Contract, and the Teaming Agreement
In 2017, the United States Army (the “Army”) released a Request for Proposals (“RFP”)
for development of a High Energy Laser Tactical Vehicle Demonstrator (“HEL-TVD”). Dynetics
entered into a Prime Contract with the Army for the development of the HEL-TVD program. The
Prime Contract is a Cost-Reimbursement type contract, and was divided into a base period and
three options. (Filing No. 57-54 at 8-9.) As the prime contractor, Dynetics is required to analyze
all subcontractor costs to assess reasonableness and not exceed the budget ceiling of the Prime
Contract. See 48 C.F.R. 15.404-3.
Prior to the award of the Prime Contract, on April 21, 2017, LibertyWorks and Dynetics
entered into a Contractor Teaming Agreement (“Teaming Agreement”), pursuant to which
Dynetics would submit a proposal to the Army as the prime contractor, and LibertyWorks would
serve as the exclusive subcontractor for the power and thermal energy portion of the HEL-TVD

Program. (See Filing No. 57-1.) The Teaming Agreement is valid “through the period of the
contract should the Prime win award of the Contract” from the Army. Id. at 5.
The Teaming Agreement’s exclusivity provision provides as follows:
Dynetics agrees that where Subcontractor can meet: (1) pricing targets established
by [Dynetics]; (2) schedule requirements; and (3) technical capabilities,
Subcontractor shall be Dynetics’ exclusive source for the scope listed in Exhibit A
Section 6 (Power and Thermal Management) and shall not pursue or use other
proposals for this scope (Power and Thermal Management) of the Contract during
the term of this Agreement subject [sic] the exceptions noted above.
Id. The Teaming Agreement is governed by Alabama law. Id. at 8. It also provides for a dispute
resolution process that culminates in binding arbitration enforceable under the Federal Arbitration
Act, conducted pursuant the rules of the American Arbitration Association. Id. Amongst other
triggering events, the Teaming Agreement shall be terminated if the Parties are unable “after good
faith negotiation to reach agreement on the price and terms and conditions of the subcontract within
ninety (90) days from award of the prime contract . . . to Dynetics.” Id. at 6.
C. Team Dynetics Selected as the Exclusive Contractor and the Subcontract
The Army awarded contracts to five teams, including Team Dynetics, to begin developing
separate HEL-TVD efforts under the Base Contract period. (Filing No. 61-39 at 7-17.) Team
Dynetics included Dynetics, LibertyWorks, and Lockheed Martin. Id. at 20. At each phase (or
Option) of the Program, the Army “downselected” the teams that would move on in the
competition. Team Dynetics was downselected to Option 1 and Option 2. Id. at 17-20. On
February 5, 2019, Team Dynetics was the only team downselected to perform Option 3. Id. at 20-
21.
On July 2, 2018, after award of the Prime Contract, Dynetics issued a Subcontract (the
“Subcontract”) to LibertyWorks for Option 2 of the Prime Contract, which is known as the

Preliminary Design Review phase. (Filing No. 57-2.) For Option 3 (the Critical Design Review
phase), LibertyWorks submitted a proposal to Dynetics to negotiate price, technical, and schedule.
D. LibertyWorks’ Performance under the Subcontract
In May 2017, Dynetics provided LibertyWorks with its pricing targets for Option 3.
LibertyWorks and Dynetics negotiated a total price of $15,016,342.00 for the thermal and power
work for Option 3. In early 2018, Dynetics decided that a Two Phase Pump Loop cooling
technology would be used in the HEL-TVD system design instead of the turbine-based solution
initially included in LibertyWorks’ proposal. (Filing No. 57-3 at 8.) LibertyWorks submitted a
revised proposal in September 2018, raising its price to $17.4 million. LibertyWorks refused to

meet Dynetics’ proposed pricing targets for the design solution. (Filing No. 57-41.)
On January 31, 2019, after completion of the Preliminary Design Review, Dynetics
received the contract award from the Government for Option 3. On February 8, 2019, Dynetics
again requested a revised proposal from LibertyWorks for Option 3 work. LibertyWorks
submitted a revised proposal on March 13, 2019 for $20.2 million. (Filing No. 57-6; Filing No.
57-42.) Dynetics found this proposal was lacking in basic cost substantiation information, and
thus could not evaluate LibertyWorks’ March 13, 2019 proposal. LibertyWorks was also
exceeding the funding authorized by Dynetics for work in advance of definitizing a modification
to the Subcontract. As a result, Dynetics issued a stop work order until the Parties could reach an
agreement on price. (Filing No. 57-44.) The stop work order noted that “Dynetics was unable to
evaluate the submitted proposal due to lack of pricing details” and included a request for
LibertyWorks to provide those details. Id. LibertyWorks complied.
After further negotiations, on April 25, 2019, LibertyWorks offered to lower its price to
approximately $13.4 million for work to be performed by LibertyWorks and $1.5 million of

material to be purchased by Dynetics. (Filing No. 1-2 at 25-27.) Dynetics accepted that offer.
(Filing No. 61-39 at 110-11.) The agreement was confirmed in multiple written communications.
(Filing No. 61-10 at 2; Filing No. 61-22; Filing No. 61-24.) LibertyWorks subsequently sent
Dynetics a Basis of Estimate on May 17, 2019, that broke down its price line-by-line. (Filing No.
61-34.)
E. Dynetics’ Solicitation of Other Subcontractors
During Option 2 and Option 3 of the Prime Contract, Dynetics was losing patience with
LibertyWorks. In September 2018, while the Parties were still working under Option 2, Dynetics
personnel began floating the idea in internal emails of replacing LibertyWorks if Team Dynetics
was selected as the sole contractor to perform Option 3. (Filing No. 61-1.) In late March, after

Team Dynetics was chosen as the sole contractor for Option 3, unbeknownst to LibertyWorks,
Dynetics sought proposals from two of LibertyWorks’s competitors for the power and thermal
management portion of the Program. (Filing No. 61-2; Filing No. 61-3.) On March 29 and 30,
2019, the competitors responded to Dynetics’ proposal requests and both competitors expressly
used the title “Proposals” on their responses. (Filing No. 61-4; Filing No. 61-5.) Dynetics also
referenced the documents as “Proposals” in its follow-up communications. (Filing No. 61-8;
Filing No. 61-9.) Dynetics falsely denied reaching out to any other vendors in a call with
LibertyWorks on October 7, 2019. (Filing No. 61-10 at 3.) Dynetics was positioning and pursuing
at least two of LibertyWorks’ competitors as “backups” for the HEL-TVD Program while the
Teaming Agreement and exclusivity requirements with LibertyWorks were in place. (Filing No.
61-39 at 78, 84.)
The Teaming Agreement provides that “[e]ach Party shall own all right, title and interest
in any Intellectual Property if developed, authored, conceived or reduced to practice by that Party

during the performance of this Agreement.” (Filing No. 57-1 at 6 ¶9.) With the competitor
proposals in hand, again unbeknownst to LibertyWorks, Dynetics scrubbed LibertyWorks’ name
and other insignia from the proposal documents. (Filing No. 61-6.) The purpose of removing
LibertyWorks’ name and insignia from the documents was to send them “to another vendor who
might be able to do the same scope of work” as LibertyWorks. (Filing No. 61-39 at 88.) Dynetics
did not, however, remove LibertyWorks’ proprietary information from these documents. (Filing
No. 61-6; Filing No. 61-10 at 3; Filing No. 61-30; Filing No. 61-31.) At least one of the scrubbed
documents was prepared by LibertyWorks. None of these documents were sent to LibertyWorks’
competitors, but Dynetics was prepared to send this information out in an RFP after successfully
terminating exclusivity. (Filing No. 61-39 at 88-90.)

F. Termination of Exclusivity
On September 17, 2019, LibertyWorks was caught off-guard when it received a letter from
Dynetics informing “… Rolls-Royce that it had not met the requirements to qualify for continued
exclusivity for Power and Thermal Management work under Section 6 Exclusivity of the …
Teaming Agreement.” (Filing No. 1-1 at 101.) Among the reasons Dynetics cited as the basis for
this conclusion were LibertyWorks’ inability to come to a price agreement with Dynetics, the lack
of information LibertyWorks provided to substantiate its costs, and LibertyWorks’ decision to
deny Dynetics access to review project specifics. Id.
On September 26, 2019, LibertyWorks responded to Dynetics’ letter by stating its
disagreement with the claim that it had not met the requirements to maintain exclusivity. (Filing
No. 1-2 at 31.) In that letter, LibertyWorks expressly invoked the dispute resolution procedure
detailed in Section 10.10 of the Teaming Agreement. Id. Section 10.10 states

Any dispute, controversy or disagreement arising out of, relating to or resulting
from this Agreement which is not disposed of by mutual agreement within a period
of ten (10) days after one party has provided written notice of the dispute to the
other, shall be subject to Executive Level review by Dynetics and Subcontractor. If
this review process is not successful within a reasonable period of time (normally
15-30 days, unless extended by agreement of the Parties), then the matter shall be
designated as a dispute and shall be submitted to and settled by final and binding
arbitration ….
(Filing No. 57-1 at 8.) On September 30, 2019, Dynetics sent a letter to LibertyWorks
acknowledging receipt of the September 26, 2019 letter and purporting to begin “scheduling the
executive management meeting as required under Section 10.10 of the Teaming Agreement.”
(Filing No. 1-2 at 36.)
The parties held a telephone call on October 7, 2019. Later that day, Dynetics sent a letter
to LibertyWorks stating that “[t]he Parties discussed and could not reach an agreement. Dynetics
considers the Executive Level Review process complete with the Parties unable to reach an
agreement. Consequently, Dynetics shall enforce its determination that LibertyWorks no longer
qualifies for exclusivity under the Teaming Agreement.” (Filing No. 1-2 at 38.) LibertyWorks
responded on October 10, 2019, stating that it did not consider the single telephone call to
constitute a full executive level review under the Teaming Agreement. (Filing No. 1-2 at 40.) The
October 10, 2019 letter also stated LibertyWorks’ position that the Teaming Agreement required
Dynetics to engage in arbitration before terminating exclusivity. Id. Dynetics responded on
October 15, 2019, officially terminating exclusivity and indicating it did not intend to wait until
the resolution of arbitration to do so. (Filing No. 1-2 at 44.) LibertyWorks filed an arbitration
demand disputing the termination on October 20, 2019. (Filing No. 1-2 at 47.)
G. Procedural History

Also on October 20, 2019, LibertyWorks filed a complaint for injunctive relief and
damages in Marion Superior Court. (Filing No. 1-2.) Dynetics removed the action to this Court
on October 22, 2019. (Filing No. 1.) On October 23, 2019, LibertyWorks filed the instant motion
for temporary restraining order and preliminary injunction, asking the Court to enjoin Dynetics
from (1) terminating the Teaming Agreement, (2) treating the exclusivity provision of the Teaming
Agreement as of no effect, (3) negotiating with any other entities regarding the work to be
exclusively performed by LibertyWorks under the Teaming Agreement, and (4) sharing any of
LibertyWorks’ confidential and/or proprietary trade secrets with any other entities. (Filing No.
11.) Both parties briefed the Court and designated evidence on the Motion for Preliminary
Injunction. On December 4, 2019 the Court held a hearing on the motion.1

III. DISCUSSION
The Court will first address Dynetics’ threshold argument that any dispute between the
Parties must be resolved by arbitration rather than litigation, then turn to the preliminary injunction
factors. By provision of the Teaming Agreement, the Court applies substantive Alabama law.
(Filing No. 57-1 at 9.)
H. Jurisdiction to Issue a Preliminary Injunction
Dynetics contends that any dispute between the Parties must be resolved through
arbitration, rather than litigation. (Filing No. 57 at 37.) The dispute resolution clause in the

1 No evidence was admitted at that hearing. Thus, throughout this Order the Court cites the designated evidence by
docket number. If either party referenced any document at that hearing that does not appear on the docket, the Court
only considered it as demonstrative.
Teaming Agreement requires that “[a]ny dispute, controversy or disagreement arising out of,
relating to or resulting from” the Teaming Agreement “shall be submitted to and settled by final
and binding arbitration.” (Filing No. 57-1 at 9.) Alabama courts strive to interpret contracts
according to their clear and plain meaning and presume that the Parties intended to do what the

terms of the agreement clearly state. The Dunes of GP, L.L.C. v. Bradford, 966 So. 2d 924, 927
(Ala. 2007) (internal quotation omitted). The Teaming Agreement’s arbitration provision is
mandatory. (Filing No. 57-1 at 9.) Dynetics points out that nothing in the Teaming Agreement
requires arbitration as a precursor to termination. (Filing No. 57 at 38-40.)
The courts in Alabama have settled the question of whether a court can issue injunctive
relief in a case subject to arbitration. Alabama courts have explained that the “majority of federal
courts … have concluded that in limited situations a binding arbitration clause does not bar a
plaintiff from seeking emergency injunctive relief or other provisional remedies in court.” Drago
v. Holiday Isle, L.L.C., 537 F. Supp. 2d 1219, 1221 (S.D. Ala. 2007) (citations omitted), see also
Spinks v. Automation Pers. Servs., Inc., 49 So. 3d 186, 188 (Ala. 2010). Following the Fourth

Circuit, Alabama has determined these “limited situations” to be ones “where an arbitral award
could not return the parties substantially to the status quo.” Drago at 1222. “The analysis of
whether an arbitral award could return the parties substantially to the status quo would appear to
be identical or at least very similar to the analysis of irreparable harm ….” Id. This rule holds even
where “the arbitration clause … does not reserve to the trial court any jurisdiction for temporary
or preliminary equitable relief.” Holiday Isle, LLC v. Adkins, 12 So.3d 1173, 1176 (Ala. 2008).
As for the duration of these injunctions, Spinks concluded that the court’s jurisdiction allowed for
“a preliminary injunction to preserve the status quo pending completion of the arbitration
proceeding,” precisely the same duration Rolls-Royce asks for here. Spinks at 190.
Dynetics’ threshold argument fails to acknowledge Alabama’s conclusive caselaw on this
issue, opting instead to rely on broader cases that stand for the enforcement of unambiguous
contractual language. (Filing No. 57 at 37-38.) Dynetics also argues that because it is a
government contractor, forcing it to maintain the status quo despite looming government deadlines

is inconsistent with the spirit of the Teaming Agreement. However, it cites no Alabama caselaw
to support its statement that the rule announced by the Alabama Supreme Court in Spinks does not
apply to federal government contractors. Dynetics has failed to present relevant authority on this
issue. The Court is not persuaded by Dynetics’ assertion that it is without jurisdiction to enter an
injunction here. Under Alabama law, a court may issue an injunction if an arbitral award would
be insufficient to substantially return the parties to the status quo ante. As that inquiry is similar
if not identical to an irreparable harm inquiry, the Court addresses it below.
I. Preliminary Injunction Factors
To obtain a preliminary injunction, Rolls-Royce must establish the following four factors:
(1) that it is likely to succeed on the merits, (2) that it is likely to suffer irreparable harm in the

absence of preliminary relief, (3) that the balance of equities tips in its favor, and (4) that issuing
an injunction is in the public interest. Planned Parenthood of Ind. And Ky., Inc. v. Comm’r, 194
F.Supp.3d 818, 825-26 (S.D. Ind. 2016). The first two factors are threshold determinations: “[i]f
the moving party meets these threshold requirements, the district court ‘must consider the
irreparable harm that the nonmoving party will suffer if preliminary relief is granted, balancing
such harm against the irreparable harm the moving party will suffer if relief is denied.” Stuller,
Inc. v. Steak N Shake Enter., Inc., 695 F.3d 676 (7th Cir. 2012) (quoting Ty, Inc. v. Jones Group,
Inc., 237 F.3d 891, 895 (7th Cir. 2001)). Because this case involves an arbitration clause, under
Alabama law, resolution of the irreparable harm factor also determines whether the Court has
jurisdiction to issue an injunction. Drago at 1222.
1. Likelihood of Success on the Merits
Each party argues that the other breached the Teaming Agreement. Rolls-Royce argues

Dynetics breached the exclusivity clause of the Teaming Agreement when it pursued proposals
from Rolls-Royce’s competitors for Option 3 of the Prime Contract. (Filing No. 12 at 17.)
Dynetics argues that Rolls-Royce breached the agreement by failing to meet its technical, schedule,
and pricing targets. (Filing No. 57 at 42.) Dynetics also contends that contrary to Rolls-Royce’s
assertion, the parties did not reach an agreement as to price and terms of an Option 3 contract
within 90 days of the award of the Prime Contract. Id.
“The elements of a breach-of-contract claim under Alabama law are (1) a valid contract
binding the parties; (2) the plaintiffs’ performance under the contract; (3) the defendant’s
nonperformance; and (4) resulting damages.” Shaffer v. Regions Financial Corp., 29 So.3d 872,
880 (Ala. 2009) (internal quotation omitted). Prongs (1) and (4) are not in dispute. The remaining

prongs are in dispute as Dynetics argues Rolls-Royce failed to perform under the contract and that
it met its own obligations under the contract.
a) Dynetics’ Nonperformance
Rolls-Royce has submitted evidence to support its contention that it has a better than
negligible chance of succeeding on the merits, based on Dynetics unilateral termination of
exclusivity. See Meridian Mut. Ins. Co. v. Meridian Ins. Grp., Inc., 128 F.3d 1111, 1114 (7th Cir.
1997) (in the preliminary injunction context, a “likelihood of success” exists if the party seeking
injunctive relief shows that it has a “better than negligible” chance of succeeding on the merits).
The exclusivity provision of the Teaming Agreement provides that
where Subcontractor can meet: (1) pricing targets established by Prime; (2)
schedule requirements; and (3) technical capabilities, Subcontractor shall be
Dynetics’ exclusive source for the scope listed in Exhibit A Section 6 (Power and
Thermal Management) and shall not pursue or use other proposals for this scope
(Power and Thermal Management) of the Contract during the term of this
Agreement subject to the exceptions noted above.

(Filing No. 57-1 at 5.) The evidence in the record establishes a timeline for Dynetics’ breach of
this provision. On September 26, 2018, before Team Dynetics had been selected as the only team
to move on to Option 3, Dynetics’ personnel began musing about the idea of replacing Rolls-
Royce. (Filing No. 61-1.) On March 22 and 25, 2019, after Team Dynetics had won the Option
3 phase but before it had negotiated a final price point for Option 3 with Rolls-Royce, Dynetics
staff reached out to two of Rolls-Royce’s competitors with a “statement of work.”2 (Filing No.
61-2; Filing No. 61-3). Both competitors responded in late March by sending “Proposals” to
Dynetics.3 (Filing No. 61-4; Filing No. 61-5.)
In April 2019, Dynetics began to scrub documents prepared by Rolls-Royce in preparation
for providing those documents to other potential subcontractors. (Filing No. 61-6; Filing No. 61-
30; Filing No. 61-31.) Dynetics then offered Rolls-Royce a $6.43 million contract for Option 3.
(Filing No. 61-17.) Rolls-Royce countered with an offer of “approximately $13.4 million” plus
$1.5 million in hardware purchases.4 (Filing No. 61-20.) On April 26, 2019, Dynetics “agreed
to” this offer but did not formally accept it. (Filing No. 61-39 at 140.) That same day, Dynetics’
Subcontracts Administrator Rachel Cope e-mailed Rolls-Royce personnel to thank him for his
team’s effort working “to come to a resolution on Option Year 3” and to inform him that Dynetics

2 Mike Marcel (“Marcel”), Dynetics’ Corporate Designee characterized these communications as a “request for work,”
(Filing No. 61-39 at 69) but the e-mails themselves purport to enclose a “statement of work.”

3 Marcel quibbled with these semantics as well, stating in his deposition that the documents submitted by Rolls-
Royce’s competitors were cost estimates despite their self-identification as proposals. (Filing No. 61-39 at 72.)

4 On May 31, 2019, Rolls-Royce revised this figure upward by $52,000 for a total budget of $13.452 million. (Filing
No. 57-50.)
was providing incremental funding for Option 3 in the amount of $250,000.00. (Filing No. 61-
22.) Additional communications between and among the parties indicate an agreement was
reached on Option 3. (Filing No. 61-24; Filing No. 61-28.) The evidence supports Rolls-Royce’s
assertion that because the Parties proceeded into Option 3, the documents that Dynetics had

scrubbed of Rolls-Royce’s watermark were never sent to other potential subcontractors.
The evidence in the record also supports Rolls-Royce’s contention that Dynetics breached
the exclusivity provision of the Teaming Agreement when it sent Statements of Work to other
potential subcontractors and received proposals from those companies in late March 2019. These
statements of work constitute a pursuit of other proposals for the Power and Thermal Management
portion of the Contract, solicited in violation of the Teaming Agreement’s exclusivity provision.
This evidence supports a better than negligible likelihood of success on the merits because
Dynetics clearly pursued other proposals for the Power and Thermal Management scope of the
Contract and failed to perform according to the contract when it breached exclusivity.
b) Rolls-Royce’s Performance under the Contract

Dynetics argues that Rolls-Royce’s “own poor performance justified Dynetics’ termination
of the exclusivity provision.” (Filing No. 57 at 38.) It asserts that Rolls-Royce failed to “perform
under the contract within price, schedule, and technical requirements as far back as March 2019.”
Id. More importantly, Dynetics argues that “the parties had not reached an agreement as to price
and terms and conditions of an Option 3 contract within 90 days of Dynetics’ prime contract award
at the end of January.” Id. According to Dynetics, this failure to reach an agreement justified
termination of exclusivity under Section 8(g) of the Teaming Agreement, which triggers
termination upon the “[i]nability of Dynetics and Subcontractor after good faith negotiation to
reach agreement on the price and terms and conditions of the subcontract within ninety (90) days
from the award of the prime contract for the Contract to Dynetics.” (Filing No. 57-1 at 5-6.)
The difficulty with this argument is its lack of support in the record. Rolls-Royce has
presented evidence that Dynetics was not negotiating in good faith to reach an agreement on price

and terms for Option 3. Dynetics’ offer of $6.43 million is very low compared to the $14.9 million
it ultimately agreed to. In light of internal communications indicating Dynetics was considering
replacing Rolls-Royce with a different subcontractor, the Court is inclined to accept Rolls-Royce’s
assertion that Dynetics hoped it would be so discouraged by the low offer that Rolls-Royce would
walk away from the negotiations.
Second, the Parties did come to an agreement within ninety days of the award of the Option
3 contract—on April 26, 2019.5 The Parties agreed to a price of approximately $13.4 million plus
$1.5 million in hardware that Dynetics committed to providing, and Dynetics approved an
incremental payment of $250,000.00 so that Rolls-Royce could continue its work. Dynetics’
argument that the agreement was not finalized until May 21, 2019 when Rolls-Royce submitted a

“completely revised price proposal” that was roughly $52,000.00 higher that the agreed-upon
$13.4 million, is not persuasive. Rolls-Royce’s initial price proposal was for “approximately
$13.4M,” and the additional $52,000.00 added later that month represents an increase of just .4%
of that number. (Filing No. 61-20.) Moreover, after receiving this revision, Dynetics continued
to work with Rolls-Royce for four months before announcing that it terminated exclusivity in
September 2019. Dynetics’ continued performance under the contract does not support its
argument that termination was triggered on May 21, 2019 when Rolls-Royce submitted its revised
estimate.

5 Team Dynetics won the primary contract for Option 3 on January 31, 2019, making the ninety-day deadline for
reaching an agreement May 1, 2019.
Dynetics’ arguments that Rolls-Royce failed to meet scheduling and technical
requirements are not supported by the evidence. As Rolls-Royce points out, there is no evidence
that the Army was dissatisfied with Rolls-Royce’s schedules or technical proficiency because it
awarded Team Dynetics the sole prime contract on Option 3 over four competing teams. In

addition, Dynetics does not recall ever communicating to the Army that LibertyWorks had failed
to meet the exclusivity requirements and concedes that LibertyWorks “did a fair job at the PDR
presentation.” (Filing No. 61-39 at pp. 43-44.)
When viewed as a whole, the evidence paints a picture of minor friction between Dynetics
and Rolls-Royce on scheduling issues, but neither party believed this friction was serious enough
to trigger termination of the contract. Team Dynetics’ success in winning the Prime Contract for
Option 3 and Dynetics continued relationship with Rolls-Royce through September 2019 indicate
these minor squabbles—like the fuss over the small budget adjustment in May 2019—are a pretext
to allow Dynetics to terminate exclusivity and enlist the services of a different subcontractor.
Rolls-Royce’s evidence is sufficient to support a successful breach of contract claim based on the

Teaming Agreement’s exclusivity clause. Rolls-Royce has a high likelihood of success on the
merits.
2. Irreparable Harm
Rolls-Royce identifies three irreparable harms it will suffer if an injunction does not issue
to maintain the status quo through the arbitration process. First, it contends that the HEL-TVD is
a first-of-its-kind technology, and the advantage of being first to market with this product cannot
be remedied by any arbitral award. (Filing No. 61 at 29.) Second, Rolls-Royce will suffer
reputational harm if Dynetics is allowed to terminate exclusivity. Id. at 29-30. And third, if
Dynetics shares Rolls-Royce’s proprietary information with its competitors, Rolls-Royce would
be deprived of the benefit of years of time that it spent to develop that information. Id. at 30. None
of these harms are compensable by monetary damages, according to Rolls-Royce.
Dynetics responds that the normal remedy for breach of contract is monetary damages.
(Filing No. 57 at 44.) The Seventh Circuit has identified four scenarios where monetary damages

might be inadequate: (a) where the damages award would come too late to save the plaintiff’s
business; (2) where the plaintiff may not be able to finance the lawsuit without the revenues the
defendant’s conduct is placing at risk; (3) where a defendant is at risk of becoming insolvent before
a final judgment; and (4) where monetary damages are difficult to calculate due to the nature of
the plaintiff’s loss. Roland Mach. Co. v. Dresser Indus., Inc., 749 F.2d 380, 386 (7th Cir. 1984).
Rolls-Royce seeks injunctive relief arguing that monetary damages are inadequate. In contrast,
Dynetics argues there is nothing to suggest any of these scenarios is present here. Dynetics also
argues that contracts where proprietary information will change hands often have injunctive relief
clauses. Because the Teaming Agreement has no such clause, Dynetics urges the Court to infer
that Rolls-Royce agreed that monetary damages would be a sufficient remedy when it signed the

Teaming Agreement. (Filing No. 57 at 45.)
Alabama law holds “that a preliminary injunction should be issued only when the party
seeking the injunction can demonstrate that, without the injunction, he or she would suffer
irreparable injury for which there is no adequate remedy at law.” Ex parte B2K Systems, LLC, 162
So.3d 896, 904 (Ala. 2014). “Irreparable injury is an injury that is not redressable in a court of
law through an award of money damages.” Id. (internal quotations and citations omitted). The
injury must be imminent; a mere threat of irreparable injury will not suffice. Id. “The party seeking
the injunction has the burden of demonstrating that it lacks an adequate remedy.” Id.
The Teaming Agreement also contains a mutual limitation of liability clause that states as
follows:
10.9 Limitation of Liability. IN NO EVENT SHALL EITHER PARTY
BE LIABLE TO THE OTHER PARTY FOR CONSEQUENTIAL, INCIDENTAL
OR PUNITIVE LOSS, DAMAGES OR EXPENSES (INCLUDING LOST
PROFITS OR SAVINGS) EVEN IF ADVISED OF THEIR POSSIBLE
EXISTENCE.

(Filing No. 57-1 at 8) (emphasis in original). Dynetics argues that this clause prohibits equitable
relief for either party. Rolls-Royce responds that Dynetics has offered no precedential authority
to support its interpretation of the limitation-of-liability clause. Rolls-Royce relies on McRoberts
Software, Inc. v. Media 100 Inc., 2001 WL 1224727 (S.D. Ind. Aug. 17, 2001) and Terminex
Intern. Co., LP v. Palmer Ranch Ltd. P’ship, 432 F.3d 1327 (11th Cir. 2005), to establish that
injunctive relief is still allowed, even in contracts with a limitation-of-liabilitiy damage clauses,
unless a party has expressly waived the right to equitable relief. In other words, Rolls-Royce
asserts that here, because the Limitation of Liability provision does not specifically “say anything
by way or precluding equitable relief” the Court may provide equitable relief damages if they can
meet the four requirements for a preliminary injunction. See McRoberts at 15. The Court is
persuaded by Rolls-Royce’s argument and will proceed with its analysis despite the limitation-of
liability-clause.
With respect to Rolls-Royce’s loss of the first-to-market advantage, he Court is not
convinced that it could not be remedied by monetary damages. LibertyWorks CEO provided on
speculative evidence of first to market damages. 6

6 When asked at his deposition what the value of being first to market is, Mark Wilson, CEO of LibertyWorks replied:

Extremely important. As I mentioned, you know, when you are on a program like this, you get to
develop the system, you get to test the system, you get exposure to the customer, eventually your
position for a program of record, that would then lead toward qualification, fielding. And so you
would be in the position of having that capability through the full system on a playform that then is
With respect to Rolls-Royce’s loss of goodwill and reputation, LibertyWorks argues these
damages would be difficult to quantify. LibertyWorks invested a decade of effort and millions of
dollar in development of the HEL-TVD technology. At the hearing, LibertyWorks argued it would
lose its ability to say, “we were a partner in the successful launch of this weapon” and the loss of

client confidence and customer goodwill in this market could not be measured in monetary
damage. (See Filing No. 67 at 31.) Although the Court is convinced that damages for loss of
goodwill and reputation would be hard to quantify, Rolls-Royce has not presented evidence that
danger of reputational damage is actual or imminent. It simply argues that if Dynetics were to
terminate exclusivity and enlist another subcontractor, “negative impact on LibertyWorks’s
reputation and loss of customer goodwill…would inevitably follow.” (Filing No. 12 at 23.) If
reputational damage were an inevitable result of termination, Rolls-Royce should have designated
evidence supporting that supposition. This speculative injury, though perhaps likely, cannot
support the issuance of an injunction without some evidence to support the suggestion that is actual
and imminent.

However, a disclosure of Rolls-Royce’s confidential information and trade secrets to its
direct competitors, which evidence shows Dynetics was planning in April 2019 when it scrubbed
Rolls-Royce’s documents of their watermark, would certainly constitute irreparable harm. As the
Alabama Supreme Court has said, “[p]rotectible interests certainly include, but are not limited to
… valuable customer relationships and goodwill … and confidential information, such as trade
secrets and confidential business practices.” Ormco Corp. v. Johns, 869 So.2d 1109, 1119 (Ala.

fielded. And so that’s extremely valuable. One of the reasons we were very interested in teaming
and finding the right partners to team with to go win the program.

(Filing No. 61-40 at 54.) He went on to say that the first to market advantage would allow Rolls-Royce to operating a
“defense business unit” that would boost company profits just like “[a]ny production program does in the end.” Id. at
54-55.
2003). In oral argument, Rolls-Royce argued the evidence shows Dynetics “has our intellectual
property sitting in an RFP ready to go to their competitors, that was purportedly sanitized and
scrubbed” for that reason. (Filing No. 67 at 35.)
This potential harm rises above the level of “mere possibility,” which is insufficient to

constitute irreparable injury under Alabama law. Ormco at 1113-14. It rises to the level of
imminence because the evidence shows that, more than mere threats to release Rolls-Royce’s
confidential information to its competitors, Dynetics took active steps in preparation of releasing
the information by sanitizing documents. (Filing No. 61-6; Filing No. 61-10 at 3; Filing No. 61-
30; Filing No. 61-31.) Dynetics’ corporate designee admitted that the purpose of removing
LibertyWorks’ name and insignia from the documents was possibly to send them “to another
vendor who might be able to do the same scope of work” as LibertyWorks. (Filing No. 61-39 at
88.) Confidential information and trade secrets are protectible interests under Alabama law, and
an injunction can properly issue when their exposure is imminent. Ormco at 1119. Here, the threat
of their exposure is imminent, rather than speculative, because Dynetics took active steps to

publish Rolls-Royce’s confidential information to its competitors.
If Dynetics were to terminate exclusivity and bring on another subcontractor, and
especially if it were to provide that subcontractor with Rolls-Royce’s confidential information,
damages would be difficult if not impossible to quantify, should Rolls-Royce ultimately succeed
on its breach of contract claim. Nevertheless, the Court is left with the question of whether this
specific irreparable injury—exposure of its confidential information—requires an injunction as
broad in scope as the one Rolls-Royce requests. Rolls-Royce asks the Court to enjoin Dynetics
from (1) terminating the Teaming Agreement, (2) treating the exclusivity provision of the Teaming
Agreement as of no effect, (3) negotiating with any other entities regarding the work to be
exclusively performed by LibertyWorks under the Teaming Agreement, and (4) sharing any of
LibertyWorks’ confidential and/or proprietary trade secrets with any other entities. (Filing No.
11.) The Court believes the the imminent irreparable harm Rolls-Royce will suffer could be
stopped by granting just the last request.

For the reasons stated herein, the Court concludes that Rolls-Royce has carried its burden
to show that an arbitral award would not restore it to the status quo ante if it succeeds on its breach
of contract claim. As the Court discussed in Section III.A. of this Order, this finding also
establishes the Court’s jurisdiction to issue a preliminary injunction in this case.
3. Balance of Harms and Public Interest
Because Rolls-Royce has established the above threshold requirements, “the court must
weigh the harm that the plaintiff will suffer absent an injunction against the harm to the defendant
from an injunction, and consider whether an injunction is in the public interest.” Planned
Parenthood of Ind. And Ky., Inc. v. Comm’r of Ind. State Dep’t of Health, 896 F.3d 809, 816 (7th
Cir. 2018). “The Seventh Circuit employs a sliding scale approach for this balancing: if a plaintiff

is more likely to win, the balance of harms can weigh less heavily in its favor, but the less likely a
plaintiff is to win the more that balance would need to weigh in its favor. Jackson v. Wexford of
Ind., LLC, 2019 WL 5566442 at *2 (S.D. Ind. Oct. 29, 2019) (internal quotations omitted).
Rolls-Royce has a significant likelihood of success on the merits. Likewise, the balance
of harms weighs in Rolls-Royce’s favor. It stands to lose goodwill, a potential first-to-market
advantage, and it risks exposure of its confidential information if Dynetics is allowed to jettison it
to another subcontractor. Dynetics contends that an injunction will force it “to allow [Rolls-Royce]
to continue to fail to meet budget, technical, and pricing requirements.” (Filing No. 57 at 52.) The
Court views the technical issues as minor, and any budget overruns are easily calculable. The
balance of harms weighs in Rolls-Royce’s favor.
Additionally, issuing an injunction would not disserve the public interest. The consequence
would be to allow the same team that won the Army Option 3 contract to continue moving forward

on the HEL-TVD project. Dynetics believes the true victims of an injunction would be the Army
and the United States government because an injunction would “delay the schedule to complete
the prime contract.” Id. at 53. But Rolls-Royce stands ready to work with Dynetics through the
arbitration process and keep the project on schedule. An injunction in this case would not harm
the public interest.
Accordingly, the Court grants in part Rolls-Royce’s Motion for Preliminary Injunction
and Temporary Restraining Order (Filing No. 11). Pending completion of the arbitration process,
Dynetics is enjoined from sharing any of Rolls-Royce’s and LibertyWorks’s confidential and/or
proprietary trade secrets with any other entities in violation of the non-disclosure agreement.
J. Bond

“The purpose of an injunction bond is to compensate the defendant, in the event he prevails
on the merits, for the harm that an injunction entered before the final decision caused him.” Ty,
Inc. v. Publ’ns Int’l Ltd., 292 F.3d 512, 516 (7th Cir. 2002). Dynetics faces minimal risk of missing
any deadlines or incurring any damages. On November 22, 2019, Dynetics issued LibertyWorks
a Stop Work Order, directing all work on Option 3 to stop. (Filing No. 61-38.) Therefore, there
will be no further charges by LibertyWorks to Dynetics unless Dynetics lifts the Stop Work Order.
A bond in the amount of $100,000.00 will more than adequately cover any potential damages that
might arise if the preliminary injunction is wrongfully issued.
Il. CONCLUSION
Rolls-Royce has demonstrated it is likely to succeed on the merits of its breach of contract
claim—that Dynetics improperly terminated the Teaming Agreement. The evidence in the record
shows that Dynetics plotted to oust Rolls-Royce as its subcontractor and, in doing so, violated the
exclusivity provision of the Teaming Agreement. Some of Rolls-Royce’s damages, should it
succeed on its breach of contract claim, would be difficult if not impossible to quantify. And the
harm to Rolls-Royce outweighs any potential harm to Dynetics. Considering these factors, it is
clear that equity demands a preliminary injunction.
Accordingly, Rolls-Royce’s Motion for Preliminary Injunction and Temporary Restraining
Order is GRANTED IN PART AND DENIED IN PART. Pursuant to Federal Rule of Civil
Procedure 65(d), the Court issues a preliminary injunction prohibiting Dynetics, through the
completion of the arbitration process, from sharing any of Rolls-Royce’s and LibertyWorks’s
confidential and/or proprietary trade secrets with any other entities in violation of the non-
disclosure agreement. Rolls-Royce shall post a bond in the amount of $100,000.00.
SO ORDERED.
Date: 1/28/2020 a W) atin seth
Osby WON
TANYA WALTON PRATT, JUDGE
United States District Court
Southern District of Indiana

23

DISTRIBUTION:

Aron J. Beezley
BRADLEY ARANT BOULT CUMMINGS LLP
abeezley@bradley.com

Sean Thomas Devenney
DREWRY SIMMONS VORNEHM, LLP (Carmel)
sdevenney@dsvlaw.com

Christopher Steven Drewry
DREWRY SIMMONS VORNEHM, LLP (Carmel)
cdrewry@dsvlaw.com

Samuel B. Gardner
ICE MILLER LLP (Indianapolis)
samuel.gardner@icemiller.com

Brett Ingerman
DLA PIPER LLP
brett.ingerman@us.dlapiper.com

Andrew J. Miroff
ICE MILLER LLP (Indianapolis)
drew.miroff@icemiller.com

Sarah Sutton Osborne
BRADLEY ARANT BOULT CUMMINGS LLP
sosborne@bradley.com

Dawn Elyse Stern
DLA PIPER LLP
dawn.stern@dlapiper.com

Robert J. Symon
BRADLEY ARANT BOULT CUMMINGS LLP
rsymon@bradley.com

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10165972. Public record. Not legal advice.