Opinion

Sikorsky Aircraft Corporation v. United States

122 Fed. Cl. 711
2015 U.S. Claims LEXIS 1066
2015 WL 4970553

Court: United States Court of Federal Claims
Filed: Aug 20, 2015
Status: Published
Author: Lettow
On the bench: Charles F. Lettow
Cited by: 11 cases
Authority: More cited than 60.0%

first citing Xianli Zhang v. United States, 640 F.3d 1358, 1364 (Fed. Cir. 2011); and then citing Peterson v. United States, 68 Fed. Cl. 773, 776 (2005)

How later courts described this case

first citing Xianli Zhang v. United States, 640 F.3d 1358, 1364 (Fed. Cir. 2011); and then citing Peterson v. United States, 68 Fed. Cl. 773, 776 (2005)

Written by the judges who cited it.

The opinion

In the United States Court of Federal Claims

No. 12-898C

(Filed: August 20, 2015)

**********************************

) Second litigation over a contractor’s

SIKORSKY AIRCRAFT ) compliance with Cost Accounting

CORPORATION, ) Standards pertinent to indirect

) materiel overhead costs; government’s

Plaintiff, ) “alternative” claim to that litigated to

) final judgment in the prior action;

v. ) applicability of the doctrine of claim

) preclusion

UNITED STATES, )

)

Defendant. )

)

**********************************

Jeffrey A. Hall, Bartlit Beck Herman Palenchar & Scott LLP, Chicago, Illinois, for

plaintiff. Of counsel were Katherine M. Swift, Bartlit Beck Herman Palenchar & Scott LLP,

Chicago, IL, and Karen L. Manos, Gibson, Dunn & Crutcher LLP, Washington, D.C.

James W. Poirier, Trial Attorney, Commercial Litigation Branch, Civil Division, United

States Department of Justice, Washington, D.C., for defendant. With him on the briefs were

Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Civil Division, Robert E.

Kirschman, Jr., Director, and Steven J. Gillingham, Assistant Director, Commercial Litigation

Branch, Civil Division, United States Department of Justice, Washington, D.C.

OPINION AND ORDER

LETTOW, Judge.

This action concerns the accounting practices of plaintiff, Sikorsky Aircraft Corporation

(“Sikorsky”), a government contractor, and is a reprise of a prior dispute between Sikorsky and

the United States (“the government”) over those practices. At this juncture, the question before

the court is whether the doctrine of claim preclusion bars the government from presenting an

“alternative” claim to that litigated to final judgment in the first action.

At issue in the first case was whether Sikorsky’s accounting practices were in compliance

with the Cost Accounting Standards (“CAS”) set out at 48 C.F.R. Chapter 99, Subchapter B, Part

9904, particularly those at 48 C.F.R. §§ 9904.418 to 9904.418-63 (“CAS 418”). Between 1999

and 2005 Sikorsky allocated its materiel overhead costs to contracts with both the government

and commercial customers using a direct labor base. The government’s contracting officer

issued a final decision on December 11, 2008, finding that Sikorsky’s allocations during that

time were not in compliance with CAS 418 and asserting a claim against Sikorsky for about $80

million in combined principal and interest.1 Sikorsky timely challenged that determination in

this court in accord with provisions of the Contract Disputes Act, now codified at 41 U.S.C.

§ 7104, as incorporated into the Tucker Act, 28 U.S.C. § 1491(a)(2).2 In a decision dated March

22, 2013, the court held that the government had failed to establish by preponderant evidence

that Sikorsky had violated CAS 418, see Sikorsky Aircraft Corp. v. United States, 110 Fed. Cl.

210, 214 (2013) (“Sikorsky IV”), and the Federal Circuit subsequently affirmed the court’s

judgment, see Sikorsky Aircraft Corp. v. United States, 773 F.3d 1315 (Fed. Cir. 2014)

(“Sikorsky VI”).

During the course of that litigation, on December 21, 2011, a contracting officer issued a

further “alternative” final decision asserting a second claim related to Sikorsky’s indirect-cost-

allocation methods. Specifically, the contracting officer claimed that even if Sikorsky’s

accounting practices from 1999 through 2005 were deemed compliant with CAS 418, a change

adopted in 2006 to its accounting for materiel overhead should have been processed as a

unilateral change, and demanded that Sikorsky pay approximately $34 million, including

interest, to the government. On December 20, 2012, Sikorsky filed suit in this court to challenge

the validity of the government’s alternative claim.

The case is now before the court on Sikorsky’s motion for judgment on the pleadings

pursuant to Rule 12(c) of the Rules of the Court of Federal Claims (“RCFC”). See Sikorsky’s

Mem. Supporting Its Mot. for Judgment on the Pleadings (“Pl.’s Mot.”), ECF No. 21.3 Sikorsky

CAS 418, discussed infra, sets out how contractors may distribute indirect costs, such as

overhead, relating to their government contracts. See 48 C.F.R. §§ 9904.418-20, 9904.418-50.

As amended, the Tucker Act provides in pertinent part that

[t]he Court of Federal Claims shall have jurisdiction to render judgment

upon any claim by or against, or dispute with, a contractor arising under

section 7104(b)(1) of title 41, including a dispute concerning termination

of a contract, rights in tangible or intangible property, compliance with

cost accounting standards, and any other nonmonetary disputes on which

a decision of the contracting officer has been issued under section 6 of that

Act [sic, now 41 U.S.C. § 7103].

28 U.S.C. § 1491(a)(2) (emphasis added). Paragraph (b)(1) of Section 7104 specifies that

“a contractor may bring an action directly on [a] claim in the United States Court of Federal

claims, notwithstanding any contract provision, regulation, or rule of law to the contrary.” 41

U.S.C. § 7104(b)(1). Paragraph (a)(3) of Section 7103 states that “[e]ach claim by the [f]ederal

[g]overnment against a contractor relating to a contract shall be the subject of a written decision

by the contracting officer.” 41 U.S.C. § 7103(a)(3).

In deciding this motion, the court may consider, inter alia, prior court decisions and

other public records. See Curtin v. United States, 91 Fed. Cl. 683, 686 (2010) (“When deciding a

motion for judgment on the pleadings, the court may review ‘the content of the competing

avers that the government’s claim is precluded because common transactional facts appertain to

the government’s 2008 claim for noncompliance and its alternative 2011 claim now at issue. See

Sikorsky’s Reply Supporting Its Mot. for Judgment on the Pleadings (“Pl.’s Reply”), ECF No.

29. The government resists Sikorsky’s motion, arguing that the timing of its alternative 2011

claim renders claim preclusion inapplicable. See Def.’s Response to Pl.’s Mot. for Judgment on

the Pleadings (“Def.’s Opp’n”), ECF No. 25.

BACKGROUND4

Sikorsky holds a number of contracts with the government and commercial customers to

furnish aircraft and spare parts. Compl. ¶ 11; see also Sikorsky Aircraft Corp. v. United States,

102 Fed. Cl. 38, 40 (2011) (“Sikorsky I”). The dispute between the parties stems from

Sikorsky’s method for allocating its materiel overhead costs. Compl. ¶ 12; see also 48 C.F.R.

§ 9904.418-50.5 This court conducted a detailed canvass of the applicable regulations and

established facts in this case. See Sikorsky I, 102 Fed. Cl. 38; Sikorsky Aircraft Corp. v. United

States, 105 Fed. Cl. 657, 661 (2012) (“Sikorsky II”); Sikorsky Aircraft Corp. v. United States,

106 Fed. Cl. 571 (2012) (“Sikorsky III”); Sikorsky IV, 110 Fed. Cl. 210; Sikorsky Aircraft Corp.

v. United States, 112 Fed. Cl. 313 (2013) (“Sikorsky V”). Presuming familiarity with the series

of prior opinions, the court will provide only a summary of the regulatory framework and factual

background constituting the context for the pending motion.

pleadings, exhibits thereto, matters incorporated by reference in the pleadings, whatever is

central or integral to the claim for relief or defense, and any facts of which the . . . court will take

judicial notice.’”) (alteration in original) (quoting Crusan v. United States, 86 Fed. Cl. 415, 417

(2009), aff’d, 374 Fed. Appx. 18 (Fed. Cir. 2009) (in turn citing 5C Wright & Miller, Federal

Practice and Procedure § 1367 (2008))); see also Bristol Bay Area Health Corp. v. United

States, 110 Fed. Cl. 251, 259 (2013) (“[I]n deciding whether to dismiss a complaint upon the

basis of claim preclusion or res judicata under RCFC 12(b)(6), this court can consider prior court

decisions and court filings between the same parties, which are matters of public record.”)

(citations omitted).

The recitation of facts is drawn from the pleadings in this case and the findings of fact

and rulings on mixed questions of fact and law set out in the prior decision in Sikorsky IV, 110

Fed. Cl. 210.

CAS 418, and particularly 48 C.F.R. §§ 9904.418.50(d) and (e), can be confusing at first

because the text uses the word “material” in two different ways—first as an adjective and then as

a noun. To clarify description and analysis, the court has used “materiel” as a noun to refer to

aircraft components, and “material” as an adjective to indicate significance. See Sikorsky I, 102

Fed. Cl. at 43 n.7 (“‘Material’ is an adjective meaning significant, and in the second usage,

‘material’ means components or supplies, and is equivalent to the noun ‘materiel.’”).

A. Cost Accounting Standards

The CAS are a set of nineteen cost-accounting criteria promulgated by the Cost

Accounting Standards Board (“CASB”). Sikorsky I, 102 Fed. Cl. at 41; see also Compl. ¶¶ 34-

38. Since its inception, the CASB has had “exclusive authority to prescribe, amend, and rescind

cost accounting standards, and interpretations of the standards, . . . [which govern] measurement,

assignment, and allocation of costs to contracts with the [f]ederal [g]overnment.” 41 U.S.C.

§ 1502; see also 48 C.F.R. §§ 9900.000 to 9904.420-63; see generally Darrell J. Oyer,

Accounting for Government Contracts-Cost Accounting Standards §§ 1.01 to 1.05 (2010).

Pertinent to Sikorsky’s motion is CAS 418 governing the “[a]llocation of [d]irect and [in]direct

costs.” 48 C.F.R. § 9904.418-20. More specifically, CAS 418 recites accounting practices for

“consistent determination of direct and indirect costs,” “the accumulation of indirect costs . . . in

indirect cost pools,” and “the selection of allocation measures based on the beneficial or causal

relationship between an indirect cost pool and cost objectives.” Id.6

B. Sikorsky’s Accounting Practices, Audits, and Reviews

Materiel overhead costs are types of indirect costs; they consist of the costs to purchase

materiel used by Sikorsky to manufacture and assemble aircraft and spare parts, store the

materiel in warehouses, and supply the materiel to the manufacturing labor. See Sikorsky IV, 110

Fed. Cl. at 215-16. Sikorsky allocates materiel overhead costs to both government and

commercial contracts. See Compl. ¶ 12. Prior to 1999, Sikorsky allocated materiel overhead

costs using a hybrid allocation base of direct materiel costs less the costs of commercial aircraft

engines and used helicopters. Compl. ¶ 6. The commercial costs were removed from the

calculus “to compensate for the exclusion of [government furnished materiel (‘GFM’)] from the

direct materiel cost base.” Sikorsky VI, 773 F.3d at 1319.7 In 1998, Sikorsky concluded that its

A direct cost is “any cost which is identified specifically with a particular final cost

objective[, e.g., a contract]. . . . Costs identified specifically with a contract are direct costs of

that contract.” 48 C.F.R. § 9904.418-30(a)(2). Relatedly, an indirect cost is “any cost not

directly identified with a single final cost objective, but identified with two or more final cost

objectives or with at least one intermediate cost objective.” 48 C.F.R. § 9904.418-30(a)(3).

Direct and indirect costs are both allocated to cost objectives. Id. Indirect costs accumulate in

indirect cost pools, see Sikorsky I, 102 Fed. Cl. at 42, and are apportioned according to an

allocation method that guides how the cost will be distributed among multiple cost objectives,

see Sikorsky IV, 110 Fed. Cl. at 214; see also Sikorsky VI, 773 F.3d at 1318 (“The allocation base

allows measurement of the quantity of costs in an indirect pool attributable to a given cost

objective.”). CAS 418-50 provides a framework for acceptable allocation methods. 48 C.F.R.

§ 9904.418-50.

GFM includes aircraft components, such as engines and other high-dollar items, which

the government purchases from other manufacturers and provides to Sikorsky at no cost. Compl.

¶ 16. Sikorsky is prohibited from assigning a value to this GFM. Compl. ¶ 16. Consequently,

Sikorsky’s materiel costs omit all GFM used in government aircraft. Compl. ¶ 16. However,

similar components in Sikorsky’s commercial aircraft were assigned a value at full cost and were

therefore reflected in the company’s direct materiel costs. Compl. ¶ 16.

allocation method only partially mitigated the GFM distortion. See Compl. ¶ 19. “Sikorsky

officials felt that the pre-1999 compromise was not entirely effective because the company used

substantial amounts of GFM beyond engines, and the removal of the cost of commercial engines

from the base did not deal with the remaining GF[M] that [Sikorsky] still [had] in [its] factory

that [was] still being handled and moved around and not receiving any allocations.” Sikorsky IV,

110 Fed. Cl. at 216 (alteration in original) (citations and quotations omitted). To avoid the

perceived distortions caused by the substantial volume of GFM, starting in January 1, 1999,

Sikorsky began allocating indirect materiel costs by using a direct labor cost base. Compl. ¶ 19.

Sikorsky alerted the government to “these accounting changes before they took effect,

submitting a revised cost-accounting Disclosure Statement to Ms. [Joan] Sherwood, then its

C[orporate Administrative Contracting Officer (‘CACO’)], on August 12, 1998.” Sikorsky IV,

110 Fed. Cl. at 216.8 Ms. Sherwood approved the use of the direct labor cost base but provided

the caveat that this method for allocating materiel overhead costs would be continually

monitored for compliance with CAS 418. Compl. ¶ 20.

On October 29, 2004, the Defense Contract Audit Agency (“DCAA”) issued its final

report for an audit that began in August 2002. Compl. ¶¶ 21-22. The report, principally

authored by Robert Boyer, determined “that Sikorsky’s use of a direct labor cost base to allocate

materiel overhead was ‘in potential noncompliance’ with CAS 418 . . . and that Sikorsky was in

fact ‘in noncompliance with CAS 418’ during the calendar year 2003.” Sikorsky IV, 110 Fed. Cl.

at 218 (quoting 2004 Final Audit Report). The materiality of the potential noncompliance was

not addressed in the final report, and although Sikorsky did not believe that its accounting

method was noncompliant with CAS 418, it changed its method of materiel overhead allocation

as part of a broader accounting overhaul scheduled to go in effect on January 1, 2006. Id.; see

also Compl. ¶¶ 22, 25. Under the revised accounting method, Sikorsky established a new

materiel overhead pool and allocated that pool according to a base of direct materiel costs less

the costs of commercial engines. See Sikorsky IV, 110 Fed. Cl. at 218; see also Compl. ¶ 27.9

Sikorsky discussed the changes with CACO Edward Weisman, who had succeeded

Ms. Sherwood, and he approved the changes in February 2006, identifying the accounting

method’s compliance with the applicable CAS. See Sikorsky IV, 110 Fed. Cl. at 218; see also

Compl. ¶ 27. The discussions between CACO Weisman and Sikorsky encompassed both

DCAA’s 2004 audit report finding Sikorsky in compliance with CAS 418 and Sikorsky’s newly

proposed system. See Sikorsky IV, 110 Fed. Cl. at 218.

C. Government’s 2008 Claim for Noncompliance

In 2007, Frank Colandro, who succeeded Mr. Weisman as Sikorsky’s CACO, became

aware of Sikorsky’s audit from 2004 that found the accounting practices from 1999 to 2005 to be

potentially noncompliant with CAS 418. See Compl. ¶ 28-29. Mr. Colandro subsequently

Ms. Sherwood was an official with the Defense Contract Management Agency

(“DCMA”). See Sikorsky IV, 110 Fed. Cl. at 214 n.8.

The new materiel overhead pool “included purchasing, receiving, inspection, and

supplier quality costs, but not materiel handling costs, which remained in the manufacturing

overhead pools.” Sikorsky IV, 110 Fed. Cl. at 218.

submitted a notice of potential noncompliance to Sikorsky in March 2007 and issued a final

decision against Sikorsky on December 11, 2008. Compl. ¶¶ 28-29; see also Pl.’s Reply Ex. A,

at 1-3 (Letter from Colandro to Joseph Chancio, Sikorsky’s former Assistant Controller,

Government Accounting (Dec. 11, 2008)). The 2008 final decision claimed that “the manner in

which [Sikorsky] allocated [m]ateri[e]l [o]perations expenses to final cost objectives using a base

of direct labor [from 1999 through 2005] did not comply with CAS 418,” and stated that

Sikorsky’s alleged noncompliance practice “ceased” by the change in 2006. Pl.’s Reply Ex. A,

at 1-2; see also Def’s Reply to Pl.’s Response to Def.’s Mot. for Leave to Serve Interroggs. at 7,

ECF No. 74 in No. 09-844C, the first Sikorsky action (“[T]he amended allocation base for

materi[e]l overhead costs set forth in . . . 2006” “corrects the noncompliance”). Based on

Sikorsky’s alleged noncompliance, the contracting officer asserted a claim against the company

for about $80 million ($65 million in principal plus $15 million in interest). Compl. ¶¶ 28-29.10

On December 8, 2009, Sikorsky filed suit challenging the CACO’s determination.

Compl. ¶ 30. The complaint contended that the 2008 final decision was null and of no effect,

and that Sikorsky’s challenged allocation method was in compliance with CAS 418. See

Sikorsky I, 102 Fed. Cl. at 40. Sikorsky also pleaded various defenses, viz., accord and

satisfaction, waiver, laches, and statute of limitations. See id.11 The government filed its answer

and counterclaim on May 4, 2010, alleging that Sikorsky had violated CAS 418 through its

materiel overhead accounting method from 1999 through 2005 and seeking the same $80 million

that Sikorsky was said to owe. See Compl. ¶ 30. Seven months after Sikorsky filed its

complaint, the Federal Circuit issued a decision in M. Maropakis Carpentry, Inc. v. United

States, 609 F.3d 1323 (Fed. Cir. 2010). In light of the court of appeals’ holding in that case, and

out of abundance of caution, Sikorsky filed a second claim with its contracting officer seeking a

decision regarding the merits of the affirmative defenses it had previously raised. See Sikorsky I,

102 Fed. Cl. at 40. The contracting officer rejected the claim with respect to those defenses,

stating that he lacked authority to act because of the related litigation in this court. See id.

Sikorsky considered the contracting officer’s response to be a denial of its claims and

subsequently brought a second suit seeking review of the denial and asserting its affirmative

defenses anew. See id. (referring to No. 10-741C, the second Sikorsky action). The court

consolidated the two cases on November 19, 2010. See Order of Nov. 19, 2010, ECF No. 26 in

No. 09-844C.

The 2008 final decision had not been approved by a DCMA review board; instead, this

administrative step was waived because DCMA “was concerned that it would not be able to

assert its claim against Sikorsky within the C[ontract Disputes Act]’s prescribed statute of

limitations.” Sikorsky IV, 110 Fed. Cl. at 219.

Sikorsky’s accord-and-satisfaction affirmative defense was premised on an allegation

that in response to the 2004 audit showing a potential noncompliance, Sikorsky negotiated an

agreement with the government, in which the government “agreed to consider the non[-]

compliance issue resolved in exchange for Sikorsky’s decision to change its accounting practice

going forward.” Sikorsky II, 105 Fed. Cl. at 674; see also Pl.’s Reply at 3 (“Sikorsky . . .

contended that the 2006 change was the product of an agreement with the government to resolve

the claim.”) (citing Compl. ¶¶ 61-64 in No. 09-844C).

The government never answered Sikorsky’s second complaint. Instead, on December 27,

2010, the government filed a motion to dismiss the second complaint on the ground that the

juridical prerequisite of a contracting officer’s final decision had not been met for Case No. 10-

741C, the second action. See Sikorsky I, 102 Fed. Cl. at 47. The government’s motion was

denied on November 30, 2011. See id. at 47-48 & n.14. In February 2012, the government filed

motions for summary judgment on Sikorsky’s affirmative defenses based upon statute of

limitations and accord and satisfaction. See Sikorsky II, 105 Fed. Cl. at 660. On July 18, 2012,

the court found that genuine issues of material fact precluded summary judgment on those two

affirmative defenses. See id. at 674, 678 (holding that genuine factual issues existed relating to

the accrual of the government’s claim and respecting the parties’ accord and satisfaction entered

by and between Sikorsky and the contracting officer attendant to the 2006 accounting change).

The court thereafter held a five-day trial on the merits of the government’s CAS-noncompliance

claim and Sikorsky’s statute-of-limitations defense. See Sikorsky IV, 110 Fed. Cl. at 213.12 In

March 2013, this court held that the government’s claim was timely but that the government had

failed to establish by a preponderance of the evidence that Sikorsky had violated CAS 418. See

id. at 210. The Federal Circuit affirmed on the merits in December 2014. See Sikorsky VI, 773

F.3d 1315.

D. Government’s Alternative 2011 Claim

During the pendency of the litigation over the government’s 2008 claim, a new CACO,

DCMA contracting officer Mark Sadlon, who had replaced Frank Colandro, issued a further final

decision on December 21, 2011, asserting a claim related to Sikorsky’s materiel overhead costs

during 2006 and thereafter. Pl.’s Mot. Ex. A (Letter from Mark Sadlon to Chancio (Dec. 21,

2011)). In his 2011 final decision, Mr. Sadlon “explicitly acknowledg[ed] that this second claim

constitute[d] an ‘alternative’ to the government’s CAS 418 claim as to Sikorsky’s 1999-2005

materiel overhead accounting method.” Pl.’s Mot. at 5 (emphasis added) (citing Compl. ¶ 47;

Pl.’s Mot. Ex. A). In Mr. Sadlon’s view, “Sikorsky made a change from one compliant [materiel

overhead] accounting practice to another compliant [materiel overhead] accounting practice,

which is the definition of a unilateral accounting practice change [as set forth in] CAS 201-

6(b)(2).” Pl.’s Mot. Ex. A, at 5.13 He therefore claimed that if “Sikorsky’s 1999-2005 [materiel

The accord-and-satisfaction issue was not tried with the CAS-applicability and statute-

of-limitations issues because the court determined that “resolution of these two consolidated

cases [wa]s possible without reaching the accord-and-satisfaction defense.” Sikorsky IV, 110

Fed. Cl. at 213 n.2.

A unilateral accounting practice change is defined in the CAS as “a change in cost

accounting practice from one compliant practice to another compliant practice that a contractor

with a CAS-covered contract(s) elects to make that has not been deemed desirable by the

cognizant [f]ederal agency official and for which the [g]overnment will pay no aggregate

increased costs.” 48 C.F.R. § 9903.201-6(b)(2) (incorporated in Federal Acquisition Regulation

48 C.F.R. [“FAR”] § 52.230-6). A further provision of the FAR specifies the method for

determining the cost impact of a unilateral accounting change. See FAR § 30.604(h). The FAR

also provides that “a contracting officer shall not combine the cost impacts of several unilateral

overhead] accounting practice is determined to have been compliant with CAS 418, then

Sikorsky’s January 1, 2006 [materiel overhead] accounting practice change should [have] be[en]

processed as a ‘unilateral’ accounting practice change pursuant to the CAS clause, 48 C.F.R.

§§ 9903.201-4, FAR 52.230-2, and FAR 52.230-6.” Id. Ex. A, at 1.14 In effect, the contracting

officer concluded that “the 1999-2005 method was compliant with CAS 418, and that the 2006

change was a ‘voluntary’ change.” Pl.’s Reply at 4 (emphasis in original) (citations omitted).

The contracting officer demanded that Sikorsky pay the government more than $34 million in

principal and interest on this “alternative claim” and identified Contract No. DAAH23-02-C-006,

referred to as the Multi-Year VI contract (“The Multi-Year Contract” or “the contract”) between

Sikorsky and the government as a representative contract. Id.; see also Compl. ¶ 53.15 The

contract, executed in September 2002, was also the representative contract cited in the 2008 final

decision. See Compl. ¶ 77 in No. 09-844C (“The [g]overnment[’s] demand of almost $80

million includes increased costs that the [g]overnment claims to have paid under contracts it

awarded . . . including Contract No. DAAH23-02-C-0006, the Multi-Year VI [C]ontract.”).

Sikorsky challenged the 2011 final decision on the alternative claim by filing a complaint

in this court on December 20, 2012. Sikorsky’s complaint sets out eight counts against the

government. See Compl.16 The government subsequently counterclaimed on March 4, 2013,

accounting changes unless all of the cost impacts are increased costs to the [g]overnment.” Pl.’s

Mot. Ex. A, at 4 (citing FAR § 30.606(a)(3)(ii)).

Subparagraph (a)(4)(ii) of CAS 201-4 addresses “unilateral” (previously called

“voluntary”) practice changes. It requires a contractor to

[n]egotiate with the [c]ontracting [o]fficer to determine the terms and

conditions under which a change may be made to a cost accounting practice,

other than a change made under other provisions of subparagraph (a)(4) of

this clause; provided that no agreement may be made under this provision

that will increase costs paid by the United States.

48 C.F.R. § 9903.201-4(a)(4)(ii) (incorporated in FAR § 52.230-2).

The Multi-Year Contract is a fixed-year and price contract for the sale of particular

helicopters to the United States Army and Navy. Compl. ¶ 53.

The counts set forth in the complaint draw upon the context presented in both the 2008

and 2011 claims made by the government: Count I – the contracting officer had no authority to

issue another final decision while litigation was pending on the 2008 claim; Count II – the

contracting officer lacked authority to issue a final decision claiming that Sikorsky’s pre-2006

practice was both noncompliant and compliant with CAS 418; Count III – the government’s

claim asserted in the 2011 final decision constituted a compulsory counterclaim in the then-

pending litigation and is barred because it was not brought in that litigation; Count IV – the 2011

final decision asserting an alternative claim is barred by the doctrine of claim preclusion; Count

V – it was erroneous for the contracting officer to conclude that the materiel overhead

accounting change in 2006 was a “unilateral change” for purposes of 48 C.F.R. § 52.230-6;

seeking to recover the amount of the CACO’s 2011 final decision. See Def.’s Answer and

Counterclaim (“Counterclaim”) ¶ 142, ECF No. 13 (“Plaintiff is liable to the United States for an

immediate payment of $26,554,660.00, plus interest, or such other amount as may be

demonstrated at trial.”).

On April 24, 2015, Sikorsky filed a motion for judgment on the pleadings pursuant to

RCFC 12(c). See Pl.’s Mot. This motion draws upon Count IV of Sikorsky’s complaint, i.e., the

preclusive effect of the final judgment in the previous litigation. See id. at 10-12; Pl.’s Reply at

2-11; Compl. ¶¶ 67-70.17 Sikorsky’s motion has been fully briefed,18 and it was addressed at a

hearing held on August 18, 2015. The case is now ready for disposition.

STANDARDS FOR DECISION

A. Judgment on the Pleadings

RCFC 12(c) is identical to Federal Rule of Civil Procedure 12(c) and provides that

“[a]fter the pleadings are closed—but early enough not to delay trial—a party may move for

judgment on the pleadings.” RCFC 12(c). On a motion under Rule 12(c), the court must assume

“each well-pled factual allegation to be true and indulge in all reasonable inferences in favor of

the nonmovant.” Owen v. United States, 851 F.2d 1404, 1407 (Fed. Cir. 1988). After drawing

all reasonable inferences from the factual allegations contained in the complaint, judgment on the

pleadings is proper when “there are no material facts in dispute and the [movant] is entitled to

judgment as a matter of law.” RQ Squared, LLC v. United States, 119 Fed. Cl. 751, 757 (2015)

(citing New Zealand Lamb Co. v. United States, 40 F.3d 377, 380 (Fed. Cir. 1994)); see also

Forest Labs., Inc. v. United States, 476 F.3d 877, 881 (Fed. Cir. 2007).

Count VI – in the event that the materiel overhead change is found to be “unilateral,” then

Sikorsky is entitled to an equitable adjustment in the amount to offset the government’s demand

under the 2011 final decision; Count VII – the 2006 change was a “desirable” adjustment to

correct an alleged noncompliance with the CAS; and Count VIII – any cost impact of the 2006

change should be limited to “aggregate increased costs.” See Compl. ¶¶ 54-95.

In addition to raising the ground of claim-preclusion in its motion, Sikorsky also moved

for judgment on the pleadings based on the government’s alleged failure to assert a compulsory

counterclaim in the previous litigation (Count III). See Pl.’s Mot. at 7-10. This defense contends

that the government’s counterclaim was compulsory. The court finds it unnecessary to reach the

merits of this argument and therefore declines to address it. The defense is preserved and not

waived, as are the other defenses asserted in the complaint. See id. at 6 n.5 (citing RCFC 12(h)).

After the government filed its response to Sikorsky’s motion, the court invited the

parties to address in further briefing the application of the claim preclusion doctrine as explicated

in Bowers Inv. Co. v. United States, 695 F.3d 1380 (Fed. Cir. 2012). See Order of June 18, 2015,

ECF No. 26. The parties then filed their answering briefs. See Pl.’s Reply; Def.’s Sur-Reply to

Pl.’s Mot. for Judgment on the Pleadings (“Def.’s Surreply”), ECF No. 31.

Sikorsky’s complaint in this case sets out defenses to the government’s claim, which is

the reverse of the posture of a typical complaint that initiates litigation. Consequently, the court

looks to Sikorsky’s defenses as it would those raised by a defendant’s motion in a standard case.

In that respect, when considering a motion under RCFC 12(c), the court applies substantially the

same test as it does for a motion to dismiss for failure to state a claim under RCFC 12(b)(6). See

Xianli Zhang v. United States, 640 F.3d 1358, 1364 (Fed. Cir. 2011) (“When reviewing a

decision of the Court of Federal Claims to grant judgment on the pleadings under RCFC 12(c),

‘we apply the same standard of review as a case dismissed pursuant to Rule 12(b)(6) . . . .’”)

(quoting Cary v. United States, 552 F.3d 1373, 1376 (Fed. Cir. 2009)); see also Peterson v.

United States, 68 Fed. Cl. 773, 776 (2005) (“The legal standard applied to evaluate a motion for

judgment on the pleadings is the same as that for a motion to dismiss.”).

As a starting point, factual allegations set forth in the complaint regarding the claimed

defenses must be enough to raise a right to relief above the speculative level. Bell Atlantic Corp.

v. Twombly, 550 U.S. 544, 557 (2007). The court must inquire whether the complaint “plausibly

suggest[s] (not merely [is] consistent with)” a showing of entitlement to relief. Cary, 552 F.3d at

1376 (citing Twombly, 550 U.S. at 557). Further, the court must not “accept as true a legal

conclusion couched as a factual allegation[, which is entitled to a favorable inference.]”

Papasan v. Allain, 478 U.S. 265, 286 (1986) (citations omitted). While a plaintiff is not required

to set out in detail the facts upon which the claim or defense is based, “[t]o survive a motion [of

this nature], a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim

to relief [here, a claimed defense] that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662,

678 (2009) (alteration in original) (emphasis added) (quoting Twombly, 550 U.S. at 570); see

also Henry Hous. Ltd. P’ship v. United States, 95 Fed. Cl. 250, 254 (2010). Plausibility is “a

context-specific task that requires the reviewing court to draw on its judicial experience and

common sense.” Iqbal, 556 U.S. at 679.

B. Claim Preclusion19

Under the doctrine of claim preclusion, “a judgment on the merits in a prior suit bars a

second suit involving the same parties or their privies based on the same cause of action.”

Parklane Hosiery Co. v. Shore, 439 U.S. 322, 327 n.5 (1979). As the Supreme Court said in

Commissioner v. Sunnen, 333 U.S. 591, 597 (1948):

As a matter of nomenclature, this court shall use the term “claim preclusion” instead of

the more general term “res judicata.” See Migra v. Warren City School Dist. Bd. of Educ., 465

U.S. 75, 77 n.1 (1984). While the term “res judicata” originally conveyed the concept of claim

preclusion, Acumed LLC v. Stryker Corp., 525 F.3d 1319, 1323 n.2 (Fed. Cir. 2008), it has

evolved to include “any preclusion of litigation arising from a judgment, including collateral

estoppel,” Foster v. Hallco Mfg. Co., Inc., 947 F.2d 469, 478 (Fed. Cir. 1991); see also Acumed,

525 F.3d at 1323 n.2 (citing Restatement (Second) of Judgments, Introductory Note before ch. 3

(1982) (discussing the terminology of res judicata); 18 Charles Alan Wright, Arthur R. Miller &

Edward H. Cooper, Federal Practice and Procedure § 4402 (2d ed. 2002) (same)).

The rule [of claim preclusion] provides that when a court of

competent jurisdiction has entered a final judgment on the merits

of a cause of action, the parties to the suit and their privies are

thereafter bound not only as to every matter which was offered and

received to sustain or defeat the claim or demand, but as to any

other admissible matter which might have been offered for that

purpose. The judgment puts an end to the cause of action, which

cannot again be brought into litigation between the parties upon

any ground whatever, absent fraud or some other factor

invalidating the judgment.

Id. (emphasis added) (citations and quotations omitted); see also Brain Life, LLC v. Elekta Inc.,

746 F.3d 1045, 1053 (Fed. Cir. 2014) (claim preclusion bars relitigating “a claim, or cause of

action, or any possible defense to the cause of action which is ended by a judgment of the court”)

(quoting Nystrom v. Trex Co., 580 F.3d 1281, 1284-85 (Fed. Cir. 2009)). The doctrine therefore

serves to “foreclose[] matters that, although never litigated or even raised, could have been

advanced in an earlier suit.” Carson v. Department of Energy, 398 F.3d 1369, 1375 n.8 (Fed.

Cir. 2005); see also Chapman Law Firm Co. v. United States, 72 Fed. Cl. 14, 16 (2006) (“Claim

preclusion refers to the effect of a judgment in foreclosing litigation of a matter that has not been

litigated, because of a determination that it should have been advanced in an earlier suit.”) (citing

Sharp Kabushiki Kaisha v. Thinksharp, Inc., 448 F.3d 1368 (Fed. Cir. 2006) (in turn citing

Migra, 465 U.S. at 77 n.1)). In that respect, it prevents a party from “split[ting] a cause of action

into separate grounds of recovery and [then] rais[ing] the separate grounds in successive

lawsuits.” Mars Inc. v. Nippon Conlux Kabushiki-Kaisha, 58 F.3d 616, 619-20 (Fed. Cir. 1995)

(citations omitted); see, e.g., Restatement (Second) of Judgments § 24 cmt. d (“When a defendant

is accused of successive but nearly simultaneous acts, or acts which though occurring over a

period of time were substantially of the same sort and similarly motivated, fairness to the

defendant as well as the public convenience may require that they be dealt with in the same

action.”).

For purposes of evaluating alleged claim preclusion, the court applies the following

tripartite test: whether “(1) there is identity of parties (or their privies); (2) there has been an

earlier final judgment on the merits of a claim; and (3) the second claim is based on the same set

of transactional facts as the first.” Nasalok Coating Corp. v. Nylok Corp., 522 F.3d 1320, 1324

(Fed. Cir. 2008) (quoting Jet, Inc. v. Sewage Aeration Sys., 223 F.3d 1360, 1362 (Fed. Cir.

2000)); see also Phillips/May Corp. v. United States, 524 F.3d 1264, 1268 (Fed. Cir. 2008).

Regarding the third prong, a claim cannot be split from another claim that arises from the same

series of transactional facts. See Hyperion, Inc. v. United States, 120 Fed. Cl. 504, 510 (2015);

Restatement (Second) of Judgments § 24(2). The Federal Circuit in Bowers explained:

Courts decide whether two claims involve the same transactional

facts “pragmatically, giving weight to such considerations as

whether the facts are related in time, space, origin, or motivation,

whether they form a convenient trial unit, and whether their

treatment as a unit conforms to the parties’ expectations or

business understanding or usage.” In contract disputes, the rule

has been refined to create a presumption that all claims arising

from the same contract should be brought together.

695 F.3d at 1384 (citations omitted) (quoting Phillips/May, 524 F.3d at 1271 (in turn quoting

Restatement (Second) of Judgments § 24(2))). These precepts are susceptible to exceptions,

based upon temporal and jurisdictional limitations. See Gillig v. Nike, Inc., 602 F.3d 1354, 1363

(Fed. Cir. 2010) (“The [claim preclusion] doctrine does not apply to new rights acquired during

the action which might have been, but which were not, litigated.”); see also Restatement

(Second) of Judgments § 26(1)(c) (stating that a claim in a second action is not extinguished if

the party “was unable to rely on a certain theory of the case . . . because of the limitations on the

subject matter jurisdiction of the courts . . . and the [party] desires in the second action to rely on

that theory . . . .”).

ANALYSIS

A. Claim Preclusion

The first two requirements for claim preclusion are not in dispute. See Pl.’s Mot. at 10.

Respecting prong one, the parties in this action are the same as those in the prior action.

Compare Compl. in No. 09-844C, ¶¶ 12-13, and Compl. in No. 10-741C, ¶¶ 14-15, with Compl.

in No. 12-898C, ¶¶ 1-2. For prong two, these same parties litigated to final judgment the

government’s claim that Sikorsky’s materiel overhead accounting method was noncompliant

with CAS 418. See Sikorsky IV, 110 Fed. Cl. 210, aff’d, Sikorsky VI, 773 F.3d 1315. As a result,

the salient question concerns the third requirement, i.e., whether the government’s alternative

claim is based on the same set of transactional facts as its first claim concerning CAS 418.

In the prior action, the government argued that Sikorsky’s allocation method used from

1995 to 2005 violated CAS 418 and indicated that the accounting change in 2006 corrected the

noncompliance. See supra, at 5-6. In the present action, the government again addresses these

accounting methods, but characterizes them differently. See Counterclaim ¶¶ 98-141; see also

Def.’s Opp’n at 4-5. The government now argues that the allocation method Sikorsky used

during 1999 through 2005 was compliant with CAS 418 and that the change in 2006 was a

“unilateral” change from one compliant practice to another. See Pl.’s Mot. Ex. A, at 5; see also

Counterclaim ¶ 140. Sikorsky avers that “the transactional facts underlying the alternative claim

are the 1999-2005 method and the 2006 change, including the appropriate characterization of the

change.” Pl.’s Reply at 4. It argues that the facts supporting both claims “are not merely ‘related

in time, space, origin, or motivation,’ . . . they are essentially the same.” Id. at 4-5 (quoting

Bowers, 695 F.3d at 1384). In Sikorsky’s view, the government’s claims “would have formed ‘a

convenient trial unit,’ and they satisfy the transactional test for claim preclusion set forth in

Bowers.” Id. at 2-4 (quoting Bowers, 695 F.3d at 1384); see also Pl.’s Mot. at 11-12. The

government responds that the claim it raised in 2008 relating to noncompliance with CAS 418

and the alternative claim it raised in 2011 are based on different transactional facts because the

claims involve different regulations, and the calculation for compensation due for the alleged

unilateral change in 2006 is calculated differently from the calculation for compensation due for

a change from a noncompliant practice. See Def.’s Opp’n at 6, 12-13; Def.’s Surreply at 5.

The government’s argument is unavailing because “[a]ltering the theory of recovery does

not create a new claim under the transactional approach.” Tindle v. United States, 56 Fed. Cl.

337, 347 (2003); see also Lyons v. United States, 45 Fed. Cl. 399, 404 (1999). This rule, as

stated in the Restatement, applies to situations where a party, “[h]aving been defeated on the

merits on one action . . . attempts another action seeking the same or approximately the same

relief[,] but adducing a different substantive law premise or ground.” Restatement (Second) of

Judgments § 25 cmt. d; see also id. § 25 illus. 8-9. For example, in Lyons, a military retiree

brought separate actions against the government under different theories of recovery, but based

on an “identical factual scenario.” 45 Fed. Cl. at 403. The plaintiff had originally alleged that an

alteration in his retirement status was invalid, but after being denied recovery on that ground, he

filed a second lawsuit claiming that his discharge was invalid and involuntary. Id. at 401-02.

The court held that claim preclusion barred the second action because “[c]hanging the theory of

recovery does not form a new claim under the transactional approach. These remedies, and all

other remedies which could have been alleged in the first action, are extinguished and may not

be asserted in later claims.” Id. at 404; see also PCL Const. Servs., Inc. v. United States, 84 Fed.

Cl. 408, 422 (2008) (“[W]hile purporting to advance a new claim, [plaintiff] is merely advancing

a different theory of recovery, and perhaps better developed evidence, for the same set of

transactional facts.”). In essence, claim preclusion will bar a party from relitigating different

theories of recovery based on the same set of facts. Although the government argues that “[t]he

non-compliance claim and the voluntary change claim are not the same claim,” Def.’s Opp’n at

14; see also Def.’s Surreply at 5, that is irrelevant to the issue of whether “the second claim is

based on the same set of transactional facts as the first claim” as found in the three-part test for

claim preclusion, Hyperion, 120 Fed. Cl. at 510 (emphasis added).20 The second claim does not

In contending that the government’s alternate claim is not the same as its original claim,

the government suggests that the facts pertinent to the different theories diverge insofar as the

amounts claimed are concerned. See Def.’s Surreply at 5 (citing United States v. Haytian

Republic, 154 U.S. 118, 124 (1894)). Haytian Republic indeed applied the “same evidence”

standard to a second suit involving the same parties. As the Supreme Court said in that case, the

test “for . . . determining whether or not the causes of action should have been joined in one suit

is whether the evidence necessary to prove one cause of action would establish the other.” Id. at

125. This standard has been superseded, however, by evolving precedents. As the Supreme

Court observed in 1983, 89 years after Haytian Republic was decided, “[d]efinitions of what

constitutes ‘the same cause of action’ have not remained static over time.” Nevada v. United

States, 463 U.S. 110, 130 (1983) (comparing Restatement of Judgments § 61 (1942), with

Restatement (Second) of Judgments § 24 (1982)).

In Nevada, the Supreme Court explained the evolution of the criteria for application of

claim preclusion by reference to the change in the Restatements:

Under the first Restatement of Judgments § 61 (1942), causes of

action were to be deemed the same “if the evidence needed to sustain

the second action would have sustained the first action.” In the

Restatement (Second) of Judgments (1982), a more pragmatic approach,

one “not capable of a mathematically precise definition,” was adopted.

Id. § 24, comment b. Under this approach causes of actions are the

same if they arise from the same “transaction;” whether they are

have to be the same claim, i.e., based upon the same theory, as the first claim to be precluded.

See Restatement (Second) of Judgments § 25(1) & cmt. d.

While the government’s theory of recovery in this action is distinct from its earlier,

litigated claim for noncompliance, the factual overlap between the two claims readily satisfies

the transactional test explicated in Bowers. See 695 F.3d at 1384. The contracting officer

himself emphasized the virtual identicality of the factual premises for both claims in stating that

the claim made in December 2011 was an “alternative” to the claim raised in December 2008.

See Pl.’s Mot. Ex. A, at 5; see also Pl.’s Mot. at 8-9. By “focus[ing] extensively on Sikorsky’s

1999-2005 accounting method that was at issue in the CAS 418 case,” Pl.’s Mot. at 8, as well as

analyzing the reasons why Sikorsky changed its accounting method in 2006, id. at 9, the

contracting officer acknowledged and acted upon the fact that the alternative claim came from

the same series of transactional facts as the previous claim brought in 2008, see id. Ex. A, at 5;

see also Pl.’s Reply at 4 (“The alternative-claim final decision devotes most of its factual

discussion to statements about the CAS 418 claim [from 2008].”) (emphasis in original). The

contracting officer also identified the same representative contract, i.e., the Multi-Year Contract,

for both claims. Compare Compl. ¶ 77 in No. 09-844C, with Pl.’s Mot. Ex. A, at 1, and Compl.

¶ 53 in No. 12-898C. Because both claims emerged from the same contract, they are presumed

to “constitute the same claim,” Phillips/May, 524 F.3d at 1272, and the match in circumstances

supports application of the presumption.21

products of the same “transaction” is to be determined by “giving weight

to such considerations as whether the facts are related in time, space,

origin, or motivation, whether they form a convenient trial unit, and

whether their treatment as unit conforms to the parties’ expectations

or business understanding or usage.” Id. § 24.

Nevada, 463 U.S. at 130 n.12.

The presumption “that claims arising out of the same contract constitute the same

claim” is only a starting point in this analytical exercise. Phillips/May, 524 F.3d at 1272. That

presumption may be overcome by a showing that the claims are not related. Id. For example, “a

different rule may be applied on the excuse that the several obligations created by a single

contract are so far separable or divisible that each constitutes a separate claim or cause of

action.” 18 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and

Procedure § 4402 (2d ed. 2002) (emphasis added). In this instance, the government’s claims

were so closely related that the contracting officer considered that the second claim was an

alternative to the first claim. See supra, at 7-8. And, contrary to the government’s protestation

at the hearing, see Hr’g Tr. 42:3-6 (Aug. 18, 2015) (“[T]he contractors[’] bar would go crazy if

anybody ever got serious about saying you can only bring one lawsuit per contract . . . .”), the

court’s application of a presumption does not impose a blanket prohibition on bringing multiple

lawsuits under one contract. The Contract Disputes Act itself contemplates that more than one

suit may be brought regarding disputes that have a divergent origin and basis under a contract, by

providing a mechanism for consolidating those claims:

In sum, the three-part test for claim preclusion has been satisfied, and the government’s

alternative claim based on the 2011 final decision should be precluded, absent any temporal or

jurisdictional limitations.

B. Exceptions

1. Temporal limitation.

Even accepting that the factual scenarios underlying both claims are the same, the

government avers that claim preclusion is inapplicable to the present action because the

government could not have asserted the second claim “at the time the pleading was filed in the

first case.” Def.’s Opp’n at 9. Notably, even before the first litigation was initiated, the

government could have raised the alternative claim because it had all the pertinent facts then

before it. See Pl.’s Reply at 7 (“The government does not dispute that the alleged facts

supporting the alternative claim occurred before the 2008 CAS 418 final decision.”).

Moreover, it also had the option to inject its alternative claim into the first action after Sikorsky

filed its complaint in the first action. As the government observes, “concurrent consideration of

an adjustment for a voluntary change and an adjustment for a change from a non-compliant

practice is neither prohibited nor required by the regulations or contract provisions.” Def.’s

Surreply at 5 (emphasis in original). Nonetheless, the government relies on Federal Circuit

precedent for the proposition that it “[was] not required to do” either of those things, i.e.,

(1) raise the alternative claim concurrently with the first claim or otherwise assert it before that

claim was litigated, or (2) inject the alternative claim into the litigation over the first claim. It

argues that claim preclusion cannot “penalize a party for exercising the discretion granted by the

rules of civil procedure.” Def.’s Opp’n at 10 (citing Gillig v. Nike, Inc., 602 F.3d 1354, 1363

(Fed. Cir. 2010); Florida Power & Light Co. v. United States, 198 F.3d 1358, 1360 (Fed. Cir.

1999)). Sikorsky counters that the government has misapplied these precedents and that “[c]laim

preclusion turns on when a claim arises, not when a party chooses to assert it.” Pl.’s Reply at 10;