BAE Systems Land & Armaments L.P.

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeals of - )

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BAE Systems Land & Armaments L.P. ) ASBCA Nos. 62703, 62704

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Under Contract No. W56HZV-05-G-0005 )

APPEARANCE FOR THE APPELLANT: David Z. Bodenheimer, Esq.

Nichols Liu LLP

Washington, DC

APPEARANCES FOR THE GOVERNMENT: Scott N. Flesch, Esq.

Army Chief Trial Attorney

Robert B. Neill, Esq.

Harry M. Parent III, Esq.

MAJ Nichole M. Venious, JA

Trial Attorneys

OPINION BY ADMINISTRATIVE JUDGE STINSON ON THE

GOVERNMENT’S MOTION TO STRIKE AFFIRMATIVE DEFENSE OF LACHES

Pending before the Board is the Department of the Army’s motion to strike the

affirmative defense of laches, which appellant BAE Systems Land & Armaments L.P.

(BAE Systems) asserts in its complaint. The government’s motion to strike is set forth in

its answer to the complaint. Appellant filed a brief opposing the government’s motion,

and the government filed a reply brief. For the reasons set forth below, we grant the

government’s motion.

STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION

1. On March 31, 2005, the Army Contracting Command, Detroit Arsenal (ACC -

DTA), entered into a Basic Ordering Agreement (BOA) with BAE Systems wherein all

orders placed under the BOA “constitute individual contracts” (R4, tab 1 at 1, 11).

2. On July 26, 2006, the Army awarded Delivery Order No. 0009 in the amount of

$192,628,556, for remanufacture of Bradley Fighting Vehicles and acquisition of TOW

Missile Control Systems (R4, tab 2 at 1, 3, 6-7, 27). 1 On July 12, 2007, the Army issued

Modification No. 05 to Delivery Order No. 0009 in the amount of $404,307,844, for the

remanufacture of an additional 172 Bradley Fighting Vehicles (R4, tab 3 at 1-3).

1 “TOW” is an anti-tank, tube-launched, optically-tracked, wire-guided missile system.

Hughes Aircraft Co., ASBCA No. 30570, 90-2 BCA ¶ 22,780 at 114,411.

3. In 2007, BAE Systems submitted to the government a giveback proposal for

Delivery Order No. 0009, which appellant subsequently updated (compl. ¶ 33). In 2014,

the parties negotiated a settlement of that giveback proposal (compl. ¶ 34). 2 In 2015, the

Defense Contract Audit Agency (DCAA) issued post-award audit reports regarding both

Delivery Order No. 0009 and Modification No. 05 (compl. ¶¶ 39-40, 89-91).

4. On September 15, 2020, Contracting Officer Scott L. Follen (ACC – Warren)

issued a demand letter and final decision seeking payment of $3,224,623, plus interest,

“for defective pricing as a result of BAE Systems’ non-compliance with 10 USC 2306a,

Cost or Pricing Data,” during negotiation of Delivery Order No. 0009 (R4, tab 41 at 3).

On October 15, 2020, BAE systems filed a notice of appeal of that final decision pursuant

to the Contract Disputes Act (CDA), 41 U.S.C. § 7104(a), and on October 21, 2020, the

Board issued a “Notice of Docketing” designating the appeal as ASBCA No. 62703.

5. On September 22, 2020, Mr. Follen issued a demand letter and final decision

seeking $9,450,215, plus interest, “for defective pricing as a result of BAE Systems’

non-compliance with 10 USC 2306a, Cost or Pricing Data,” during negotiation of

Modification No. 05 to Delivery Order No. 0009 (R4, tab 42 at 3). On October 15, 2020,

BAE Systems filed a notice of appeal of that final decision pursuant to the CDA, and on

October 21, 2020, the Board issued a “Notice of Docketing” designating the appeal as

ASBCA No. 62704.

6. Appellant filed its complaint on January 19, 2021, asserting, in part, that the

government’s “defective pricing claims for Delivery Order 0009 and Modification 05 are

barred by the doctrine of laches” (compl. ¶ 144). Appellant also asserts that the

government’s claims are barred by the six-year statute of limitations set forth in the CDA,

41 U.S.C. § 7103 (compl. ¶ 139). As to both affirmative defenses, appellant alleges that

“[b]ased upon Army knowledge, DCAA audits, and BAE Systems’ disclosures between

2006 and 2013, the Government knew, or should have known, the basis for any potential

defective pricing claims for Delivery Order 0009 and Modification 05 not later than

2013” (compl. ¶¶ 139, 141).

7. In support of its assertion of laches as an affirmative defense, appellant

alleges that the government “unreasonably delayed by waiting until September 2020 to

make its defective pricing claims for Delivery Order 0009 and Modification 05”

(compl. ¶¶ 141-142). BAE Systems also alleges it “has been prejudiced by the Army’s

delays in making its defective pricing claims for Delivery Order 0009 and

Modification 05” (compl. ¶ 143). Appellant’s complaint includes allegations of

2 The government avers that the giveback proposal settlement was negotiated between

December 2, 2014, and February 9, 2015 (answer ¶ 37).

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prejudice that the government “has failed to preserve records relating to the negotiation

of Delivery Order 0009” (compl. ¶ 77).

8. Appellant’s complaint also asserts the affirmative defense of accord and

satisfaction, alleging “[a]fter DCAA performed an audit and the Army conducted

negotiations regarding BAE Systems’ Giveback proposals for Delivery Order 0009, the

Army and BAE Systems executed a modification resolving potential defective pricing,

thus barring the Army’s claims for defective pricing relating to Delivery Order 0009”

(compl. ¶ 146).

9. The government filed its answer to the complaint on April 16, 2021, which

included a motion to strike appellant’s affirmative defense of laches (answer at 81,

Part III). Appellant filed its brief in opposition to the government’s motion on May 17,

2021, and the government filed its reply brief on June 16, 2021.

DECISION

I. Burdens of Proof

Although the government bears the burden of proof on its claim of defective

pricing, Alloy Surfaces Co., Inc., ASBCA No. 59625, 20-1 BCA ¶ 37,574 at 182,443,

BAE Systems filed the complaint in these appeals, asserting the doctrine of laches as an

affirmative defense to the government’s claims (SOF ¶ 6). 3 As its proponent, BAE

Systems bears the burden of proving its affirmative defense. Bridgestone Firestone

Research, Inc. v. Automobile Club De L'Ouest De La France, 245 F.3d 1359, 1361 (Fed.

Cir. 2001).

II. The Government’s Motion to Strike

Our Board Rules do not address motions to strike. Fru-Con Const. Corp.,

ASBCA Nos. 53544, 53794, 03-2 BCA ¶ 32,275 at 159,673. Although we look to the

Federal Rules of Civil Procedure for guidance, as an administrative tribunal, we are not

bound by them. Supreme Foodservice GmbH, ASBCA No. 57884 et al., 16-1 BCA

¶ 36,426 at 177,580. Pursuant to FED. R. CIV. P. 12(f), a “court may strike from a

pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous

matter.” “The applicable legal standard in considering a motion to strike pursuant to

3 Appellant’s inclusion in its complaint of an affirmative defense to the government’s

claims is in keeping with the requirements of Board Rule 6(b) (requiring the

government to “set forth simple, concise, and direct statements of the

Government’s defenses to each claim asserted by the appellant, including any

affirmative defenses”) and FED. R. CIV. P. 8(c)(1) (providing that affirmative

defenses, including laches, must be stated in a party’s response to a pleading).

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FED. R. CIV. P. 12(f) is whether the pleading asserts an ‘insufficient defense.’” Kellogg

Brown & Root Services, ASBCA No. 56358 et al., 17-1 BCA ¶ 36,779 at 179,247. “Only

if a defense is insufficient as a matter of law will it be stricken.” Id.

As a tribunal, we have “considerable discretion in deciding such a motion.” ASCT

Group, Inc., ASBCA No. 61955, 20-1 BCA ¶ 37,540 at 182,289 (citing Godfredson v.

JBC Legal Group, 387 F. Supp. 2d 543, 547-48 (E.D.N.C. 2005)). A motion to strike is

properly granted where we lack jurisdiction to consider the allegations asserted. Alfajer,

Ltd., ASBCA No. 62125, 20-1 BCA ¶ 37,660 at 182,859 (granting motion to strike where

the Board did not possess jurisdiction over claim in quantum meruit).

III. The Contention of the Parties

The government argues that the “Supreme Court has definitely and repeatedly held

that a governing statute of limitations precludes a party from asserting a laches defense”

(answer at 82). In support of its motion, the government cites SCA Hygiene Prods.

Aktiebolag v. First Quality Baby Prods., LLC, 580 U.S. ___, 137 S. Ct. 954 (2017), and

Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663 (2014). Noting that the CDA

contains a six-year statute of limitations governing such appeals, 41 U.S.C. §

7103(a)(4)(A), the government asserts that “[t]o comply with Supreme Court precedent,

the Board has no choice but to strike the affirmative defense of laches” (answer at 83).

In opposing the government’s motion, appellant argues that “the Army has not

shown that BAE Systems' laches defense is certain to fail; as such, the Board should deny

the Army's motion to strike BAE Systems’ affirmative defense of laches” (app. resp.

at 2). Appellant asserts, inter alia, that it “has not found any cases applying Petrella or

its progeny to a defective pricing claim before the Board, nor has the Army cited any

such case” (id.). Appellant asserts also that motions to strike are not favored, and that

striking the affirmative defense of laches at this point in the proceedings is premature

(app. resp. at 1, 6).

IV. Supreme Court Precedent Dictates that the Affirmative Defense of Laches is

No Longer Viable in Appeals of CDA Claims

Laches is an equitable doctrine developed by courts “to protect defendants against

‘unreasonable, prejudicial delay in commencing suit.’” SCA Hygiene, 580 U.S. at ___,

137 S. Ct. 954 at 960 (quoting Petrella, 572 U.S. at 667). Six days after completion of

the parties’ briefing on the government’s motion to strike, this Board issued a decision in

Lockheed Martin Aeronautics Co., ASBCA No. 62209, 21-1 BCA ¶ 37,886 at 183,992,

granting Lockheed’s motion for partial summary judgment on the issue of laches. The

Board held that the Supreme Court’s decisions in SCA Hygiene and Petrella precluded

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the affirmative defense of laches in CDA appeals, and that laches no longer remains an

allowable affirmative defense. Id. 4

Both SCA Hygiene and Petrella stand for the proposition “that laches is not an

available defense where there is a legislatively-enacted statute of limitations.” Lockheed,

21 BCA ¶ 37,886 at 183,996. As noted above, Congress enacted a six-year statute of

limitations governing CDA appeals. 41 U.S.C. § 7103(a)(4)(A).5 In Lockheed, we

heeded the Supreme Court’s warning in SCA Hygiene, “that it is inappropriate for a judge

to allow an equitable doctrine such as laches to limit a party’s rights where that party

complied with a Congressionally-enacted statute of limitations,” and that judges should

not be allowed “to usurp Congressional power by permitting parties continued reliance on

laches where the controlling statute set a time limit.” 21-1 BCA ¶ 37,886 at 183,996

(citing SCA Hygiene, 580 U.S. at ___, 137 S. Ct. at 960-61). Allowing appellant to

maintain a defense of laches here would be an inappropriate usurpation of Congressional

power to statutorily establish a limitation period for the assertion of CDA claims, and we

decline appellant’s invitation to do so.

Although our decision in Lockheed concerned the government’s assertion of

laches as an affirmative defense to a contractor claim, our reasoning in Lockheed likewise

applies to appellant’s assertion of laches as an affirmative defense to a government claim.

The CDA statute of limitations, which continues as a time bar to claims that were not

presented within the defined period, applies equally to contractor and government claims.

41 U.S.C. § 7103(a)(4) (“[e]ach claim by a contractor against the Federal Government

relating to a contract and each claim by the Federal Government against a contractor

relating to a contract shall be submitted within 6 years after the accrual of the claim”); see

McDonnell Douglas Servs., Inc., ASBCA No. 56568, 10-1 BCA ¶ 34,325 at 169,529

(dismissing government’s defective pricing claim as time barred under CDA’s statute of

limitations). Congress having provided a statute of limitations for CDA claims, precludes

us from invoking the doctrine of laches or deciding an appeal based upon that doctrine,

regardless of the party that asserts it as an affirmative defense. Moreover, it remains an

affirmative defense before the Board. Lockheed, 21-1 BCA ¶ 37,886 at 183,995 (citing

Kamaludin Slyman CSC, ASBCA No. 62006 et al., 21-1 BCA ¶ 37,849).

4 In Lockheed, appellant requested, in the alternative, that the Board strike the

government’s assertion of laches as an affirmative defense. Because the Board

granted appellant partial summary judgment on the issue of laches, the Board

found it unnecessary to address appellant’s motion to strike. 21-1 BCA ¶ 37,886

at 183,998 n.1.

5 Congress added the six-year statute of limitations to the CDA with enactment of the

Federal Acquisition and Streamlining Act of 1994, Pub. L. No. 103–355,

§ 2351(a), 108 Stat. 3243, 3322 (1994). The limitation period is applicable to

contracts entered into on or after October 1, 1995. 48 C.F.R. § 33.206(a) (“6-year

time period does not apply to contracts awarded prior to October 1, 1995”).

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In support of appellant’s argument that it should be allowed to proceed with its

defense of laches, appellant suggests that the government failed to maintain certain

records relevant to these appeals (app. resp. at 2). Appellant argues that the resulting

alleged prejudice justifies our not striking appellant’s affirmative defense at this stage of

the litigation (app. resp. at 2). 6 Quoting Petrella, appellant states that “[i]n extraordinary

circumstances, [] the consequences of a delay in commencing suit may be of sufficient

magnitude to warrant, at the very outset of the litigation, curtailment of the relief

equitably awardable” (app. resp. at 2 (quoting 572 U.S. at 685) (bracketed omission

provided by appellant)). Thus, according to appellant, “while laches may not prevent

adjudication during a statutory of limitations period, it may still affect the relief granted”

(app. resp. at 2 (citing Petrella, 572 U.S. at 685)).

The Supreme Court’s decision in Petrella is unequivocal: “in the face of a statute

of limitations enacted by Congress, laches cannot be invoked to bar legal relief.” 572

U.S. at 679. Whether there exist extraordinary circumstances that might affect the relief

granted does not support a finding that laches, as an affirmative defense, survives the

government’s motion to strike. Indeed, the decisions cited by the Supreme Court in

Petrella as representing “extraordinary circumstances” did not apply laches as a bar to

the suit, but rather simply limited the type of relief awarded. See, e.g., Petrella, 572 U.S.

at 685-86 (discussing, inter alia, Chirco v. Crosswinds Communities, Inc., 474 F.3d 227,

235-36 (6th Cir. 2007) (order mandating destruction of housing project unenforceable

where owners of copyrighted architectural design who were aware of infringing project

delayed filing suit until project substantially constructed and partially occupied)).

Appellant likewise argues that its defense of laches should not be stricken at this

juncture in the proceedings because it “is necessarily intertwined with its claim that the

Army has failed to preserve negotiation records” (app. resp. at 2). However, appellant is

not foreclosed from seeking other appropriate relief based upon the alleged harm it

claims to have experienced; it simply may not rely upon the defense of laches in this

litigation to underpin the relief it seeks. 7 Indeed, as noted above, appellant’s complaint

asserts the statute of limitations as an affirmative defense to the government’s claims

(SOF ¶ 6). The unavailability of laches as a defense does not somehow limit appellant’s

6 Prejudice to the party asserting the defense of laches is one of two factors the proponent

must establish to prevail on a defense of laches. Sihota v. Internal Revenue

Service, 908 F.3d 1284, 1291 (Fed. Cir. 2018) (citation omitted).

7 BAE Systems alleges “that due to the Army's loss, deletion and/or destruction of

relevant records, the Army will not be able to establish nondisclosure and/or lack

of government knowledge and, as such, its defective pricing claims must be denied

for lack of proof” (app. resp. at 6). Appellant is not somehow foreclosed from

making this argument simply because the affirmative defense of laches is not

available to it in these appeals.

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ability to pursue its statute of limitations defense. At bottom, Supreme Court precedent,

and our decision in Lockheed, makes clear that because Congress has instituted a CDA

statute of limitations, we do not have the authority to issue a decision barring the

government’s claims based upon laches. Whether the government’s claims are timely-

filed depends upon the government’s compliance with the statute of limitations, not

application of the equitable doctrine of laches.

Citing Board precedent, appellant notes that motions to strike an affirmative

defense “are not favored and will be denied if the defense fairly presents a question of

law or fact” (app. resp. at 1 (quoting Niking Corp., ASBCA No. 60731, 17-1 BCA

¶ 36,639 at 178,450 (additional citation omitted))). Appellant notes also that “a defense

is good unless it appears to a certainty that [the opposing party] would succeed despite

any state of facts which could be proved in support of the defense” (app. resp. at 1

(quoting Niking, 17-1 BCA ¶ 36,639 at 178,450 (additional citation omitted))).

Unfortunately for appellant, no matter what facts appellant could establish in support of

its affirmative defense, with the addition by Congress of a statute of limitations for CDA

appeals, the defense of laches is now foreclosed by Congressional statutory mandate.

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CONCLUSION

Exercising our considerable discretion in deciding motions to strike pursuant to

FED. R. CIV. P. 12(f), we find appellant’s affirmative defense of laches insufficient as a

matter of law and grant the government’s motion to strike. We have carefully considered

appellant’s remaining arguments and are not persuaded by them. The affirmative defense

of laches is not properly available as a defense to the government’s affirmative CDA

claims, and is stricken from appellant’s complaint.

Dated: September 23, 2021

DAVID B. STINSON

Administrative Judge

Armed Services Board

of Contract Appeals

I concur I concur

RICHARD SHACKLEFORD OWEN C. WILSON

Administrative Judge Administrative Judge

Acting Chairman Vice Chairman

Armed Services Board Armed Services Board

of Contract Appeals of Contract Appeals

I certify that the foregoing is a true copy of the Opinion and Decision of the

Armed Services Board of Contract Appeals in ASBCA Nos. 62703, 62704, Appeals of

BAE Systems Land & Armaments L.P., rendered in conformance with the Board’s

Charter.

Dated: September 27, 2021

PAULLA K. GATES-LEWIS

Recorder, Armed Services

Board of Contract Appeals

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