# Petition — Newport News Shipbuilding & Dry Dock Co. v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_1080%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1978 - **Citation:** 439 U.S. 875 ## Text —_——_ -— —- —- —— IN THE Supreme Court, U. S, FILED 1978 AGL RODAK, JR., CLERK Supreme Court of the Unite Ocrover Term, 1977 No. 77-1696 NeEwrvort NEWS SHIPBUILDING AND Dry Dock ComPANY. AND TeENNECO INC., Petitioners, Vv. Unirep States or America, Respondent. PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT —— WituiAM McL. Ferouson 225- 28th Street Newport News, Virginia 23607 K. Martin Worruy JoHN G. DeGooyver Mark Svutuivan IIT JoHN H. SpeELLMAN JEFFREY M. PerrasH Larry H. MircHe.yi HAMEL, Park, McCase & SaunpERS 1776 F Street, N.W. Washington, D.C. 20006 Counsel for Petitioners FCR STORY CLADS: LITTON, NEWPORT NEWS SEEK SUPREME COURT REVIEW ON FRAUD INDICTMENT , FRIGATE SETTLEMENT Two shipbuilders, unhappy with rulings by the U.S. Court of Appeals for the Fourth Circuit, are ésking the Supreme Zuxe Court to become involved in their claims battles with the Navy. Newport News Shipbuilding and Dry Dock Co. tupammk seeks review of the (721 FCR A-19) appea ls court's reamns that the Government isn't bound by the settlement negotiated by Gordon Rule requiring the Navy to pay an edditional $22.7 million for construction of the DICN4] xuetemupqottet «4 nuclear-powered guided missile frigate. (Newport News Shipbuilding and Dry Dock Co, and Tenneco Inc. v. U.S., Sup. Ct. No. 77-16%, petition filed, 5/26/78) Litto Sy stems Chuo. wants the Court to consider ak the lower court's (729 FCR C-1) muctutemxteet finding/theat the Yovernment's implied threst to continue mm e fraud atrce J To had ' indictment unless Litton, reopened an ASBCA case in which it jon a $17 million judgement, doesn't require dismissal of the indictment . U.S., Sup. Ct. No. 771689, petition filed, 5/26/78) (Litton Sy stens, Inc. v. In the Newport News case, the district court held that the parties had ax agreed to the settlement and tint the Justice Department, having refused to aor participate in the negotiations , was estopped to deny it. The court of appeals, however, found no basis Sor, estoppel and said that the Attorney General had authority 4 ° to disapprove the prepexxix “proposed compromise,® The Fourth “ircuit decision temtwwre-tamet, Newport News states in its putt is The Tirst Ove iY petition, holding that an ujency of the United “tetes lacks the power, without a a approval of the Attorney General, to take action otherwise authorized by law, if that action has the effect of mooting pending litigation. The Attorney General's authority is ba _sed on 28 U.S.C. Sections 516 and 519, which state that the "conduct of litigation” is reserved to the Justice Bepartment and that the Attorney General is to “superivise all litigation® involving the Government. Executive Orier 6166 authorizes the Attorney Generel to compromise litigation/ The Attorney Seneetgpgey ine Gntimmnattan, has no authority ot News rmeintoains. bey@nd that delegated to nin, fs Since the Defense Department and the Navy have the authority to contract for ships regardless of whether the United States and a shipbuilder are in litigation, exercise of that agency authority can't be vetoed by the Attorney General. In S & E Contractors v. U.S., 406 U.S. 1 (426 FCR Sp Supp), the Court rejected the argument that the Attorney General was authorized, under 28 #ixix fit tiodikipdsas Bx executive officers. "'Where the responsibility for rendering a decision is U.S.C. 516 and 519, to override the decisions of other vested in a coordinate branch of Government, the duty of the Department of Justice is to implement that decision and not to repudiate it,'® the Court stated. Litton, in its peitition, complains of an abuse of the Sovernment's 5 dual role as defendant in a contract action and criminal prosecutor, 4 A indictment he a ot appeals characterized wry threat as “plea bargaining” and -similar to omer. ween permitted in Bordenkircher v. Hayes, @idum 6 °.Ct. 463, > — axx “ut, in plea bargaining, Litton argues, nothing is involved beyond the criminal Le its fair and mx expeditious administration. The "extortionate discussions" between Litton and the Government prosecutors eset A the ASBCA case had none of the ch... :*eristics of plea bargaining book ith fegard. * term is used in Bordenkircher, xtetex In a case such as the present one, mmoctmcemnteramtkxex in contrast to every case involving plea bargaining, the Sovernment's role as a fair contractor, bound by contract law - the rules governing contract disputes, is a crucial an factor, Litton states, Jy vacating the trdal court's }mempmeatimarboox "proper disciplining" of the “overnment for its extortion and vindictiveness, the appeals court “gave the green light for abusé in the future.” Er ere te er ear INDEX Page I a Sa ee a id 1 ES ok Seo or ee seeensounseriee 2 CN TU oo cc oc ccvccccccdcccsecccccecens 2 ConsTITUTIONAL AND Statutory Provisions Invotvep.. 2 FeperaL Rute or Civic Procepure INVOLVED ......... 3 ee ee eaeeheeuas haere 3 Reasons ror GRANTING THE Writ I. The holding of the Court of Appeals, that a de- partment or agency of the United States can take no action rendering pending litigation moot with- out the approval of the Attorney General, con- travenes law and public policy and presents im- portant questions of federal law requiring reso- ES Ge SY ES ddcnudcccectcsaceeueseees 15 A. The decision below conflicts with decisions of RES ers Prer ake B. The decision below conflicts with a decision of the United States Court of Appeals for the RR SE a et ele ae prae eee 19 C. The decision below contravenes the public policy in favor of compromise of litigation and threatens the efficiency of the executive and judicial branches of the federal govern- EG SEC GK 0G ad an ee edeeesebendehsckheenss 20 II. The decision of the Court of Appeals is based on a standard of review inconsistent with the deci- sions of this Court and the Federal Rules of Civil ee ee es Le bane ee edieeeeeese 21 EE RE er Ee were 29 ii Index Continued Page BOM, oc nccesesnsntessesitesseseeeeeeeee la A. Opinion of the United States Court of Appeals for the Fourth Circuit. .......ccccccscccvcees la B. Opinion and Order of the United States Dis- trict Court for the Eastern District of Vir- GE. ccccccseedvnesentecesuue ene 13a C. Constitutional and Statutory Provisions In- CURUGED ce cccccccocccesceciceeekueusete 47a D. Rule 52(a) of the Federal Rules of Civil Pro- GUD, 0 00 0k. ceeveecesesednedeenee 53a E. August 29, 1975 Order of the United States District Court for the Eastern District of Vir- GM, cccccccccecesevevensedeeedenenee 54a CITATIONS CASES: Commissioner v. Duberstein, 363 U.S. 278 (1960) ...22, 26 The Confiscation Cases, 74 U.S. (7 Wall.) 454 (1869) . 18 The Grey Jacket, 72 U.S. (5 Wall.) 342 (1867) ...... 19 Leonard v. United States Postal Service, 489 F.2d 814 (Set Gi, BOWe occcccnccscssceuanseuns mane 19, 20 Lockheed Shipbuilding & Construction Co., 75-2 BCA DRED 00060000060080 60000 000nn ene 15 S & E Contractors v. United States, 406 U.S. 1 (1972) 18, 19 United States v. Morris, 23 U.S. (10 Wheat) 246 (ERED ccccccccsnecesgechetesennennaae 18, 19 United States v. National Ass’n. of Real Estate Boards, 339 U.S. 485 (1950) ...............- 21, 22, 23 United States v. Oregon State Med. Soc., 343 U.S. SD CUUUED cccccecnevcssescusiunensneee 22, 23 United States v. Sandstrom, 22 F. Supp. 190 (N.D. Cin, SGD 0 o+cceneseeseccnsnnsarenaneeeene 19 Umted States v. Singer M fg. Co., 374 U.S. 174 Soa . 21 United States v. United States Gypsum Co., 333 U.S. See CHOU cicccctscccescenacuenneneneeeee 21 United States v. Yellow Cab Co., 338 U.S. 338 (1949) .21, 22 Wiliams v. First National Bank, 216 U.S. 582 (1910) .. 20 Zenith Radio Corp. v. Hageltine Research, Inc., 395 Uae BOO GHREED cccccescvecesesecessmee 21, 22 — ‘ Citations Continued iii Page Unritep States ConstitTvuTion: U.S. Constitution, Art. I, §8, Cl. 13 ................ 2,15 STaTuTEs: EEE EESES SESS SS OPP PPOTOLTETTET TLE TY 2,15 10 UB.C. $6 18B(a), (b), (4) .cccccccccccccccccccees 2,15 EES ESSELTE SESE POP TETTTTTTT EET Y 2 19 U.S.C. § 2308(a)(2), (b)(4) .... cece eee eeees 2,15 10 U.S.C. §$ 2304(a)(13)-(14) .... cece ccc eee eens 3,15 cic ee sececcccceccsccccces 3,15 EEE ESTES ISS OPO OTTTOTT TELE TTT TT 3,15 EEE SES IEP PET OTTTTTETTTTTET YE 3, 16, 18 EET OTTTTTTTTTTT TTT Te 3, 16, 18 Bee e sac cceceecscoccccccccece 2 eee coc c ccd ccccesceccecocceces 3 EE SLES SEES IPP ETTOTTETTET TET 3, 15 FeperaL Ruues or Crvm Procepure: Fed. R. Civ. P. 52(a) .......... <> + 2/3, 21, 22, 23, 25, 28 REGULATIONS: ES EES ETE CETTULETTEE ETE EE 15 Executive OrpERs: Ex. Ord. 6166, June 10, 1933 .............. cee eeeee. 17 IN THE Supreme Court of the United States OcrToBeR TERM, 1977 No. NEwportT NEws SHIPBUILDING AND Dry Dock CoMPANY, AND TENNECO INc., Petitioners, Vv. Unirep States oF America, Respondent. PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT The Petitioners, Newport News Shipbuilding and Dry Dock Company (‘‘Newport News’’) and Tenneco Inc., respectfully pray that a writ of certiorari be issued to review the judgment and opinion of the United States Court of Appeals for the Fourth Cir- cuit entered in this proceeding on February 27, 1978. OPINIONS BELOW The opinion of the Court of Appeals, reported at 571 F.2d 1283, is reproduced in its entirety as Adden- dum A hereto, pp. la-12a. The opinion of the United e States District Court for the Eastern District of Vir- ginia, which is not reported, is reproduced in its en- -tirety as Addendum B hereto, pp. 13a-46a. 2 JURISDICTION The judgment of the Court of Appeals for the Fourth Circuit was entered on February 27, 1978, and this petition for certiorari is filed within 90 days of that date. This Court’s jurisdiction is invoked under 28 U.S.C. § 1254(1). QUESTIONS PRESENTED 1, Whether agency action, taken pursuant to duly delegated authority, can be set aside by the Attorney General solely because it would have the effect of com- promising or rendering moot pending litigation in which the Attorney General represents such agency. 2. Whether a Court of Appeals can substitute its judgment as to a District Court’s findings of fact, made on the basis of depositions, documentary evi- dence and concessions of counsel before the District Court, concerning the meaning and extent of compli- ance with an order of the District Court entered at the request of both parties. CONSTITUTIONAL AND STATUTORY PROVISIONS INVOLVED The following constitutional and statutory provi- sions involved are reproduced in Addendum C hereto, pp. 47a-52a. U.S. Constitution, Art. I, §8, Cl. 13 10 U.S.C. §131 10 U.S.C. §133(a),(b),(d) 10 U.S.C. § 134 10 U.S.C. § 2303(a) (2),(b) (4) ee a 3 10 U.S.C. § 2304(a) (13)-(14) 10 U.S.C. § 5011 10 U.S.C. § 5031 28 U.S.C. § 516 28 U.S.C. §519 50 U.S.C. § 401 FEDERAL RULE OF CIVIL PROCEDURE INVOLVED Rule 52(a) of the Federal Rules of Civil Procedure is reproduced as Addendum D hereto, p. 53a. STATEMENT This action was brought by the United States in the United States District Court for the Eastern District of Virginia on August 29, 1975, under 28 U.S.C. § 1345, for specific performance of an alleged contract for the construction of a nuclear-powered guided missile frig- ate designated DLGN-41.‘ Work continued on the DLGN-41 pursuant to a court order consented to by the parties and requiring them to negotiate their dif- ferences in good faith. Nearly one year later the parties, through their duly authorized agents, arrived at what the negotiators on both sides believed to be an agree- ment settling the litigation. Upon Petitioners’ motion the District Court enforced this settlement agreement, ruled that the United States had acted in bad faith, and dismissed the case. On appeal by the United States, the Court of Appeals for the Fourth Circuit reversed. 1 The Navy has changed the designation DLGN to CGN and the terms ‘‘DLGN-41’’ and ‘‘CGN-41’’ have been used interchange- ably in the pleadings, evidence and arguments before the courts below. 4 Petitioners now seek review by this Court of the action of the Court of Appeals. Background—Pre-August 29, 1975 On December 21, 1971, Newport News entered into a contract (Contract Modification P00007) with the United States Navy for the construction of three nuc- lear-powered guided missile frigates designated as DLGN’s 38, 39, and 40, [App. 5; App. Ex. 1-27].* The contract included a provision captioned ‘‘Option for Increased Quantity’? [App. Ex. 27] which stated in part that the Navy had an option, exercisable before February 1, 1973, for the construction of an additional such frigate, the DLGN-41. On February 1, 1973, the parties executed a docu- ment, Contract Modification P00018, which purported to extend the ‘‘Option for Increased Quantity’’ on new terms to February 1, 1975, but only if certain prior conditions were met. [App. Ex. 28-40]. One such condi- tion was that the parties ‘‘negotiate in good faith to reach an agreement as rapidly as possible” on various matters, eight of which were specifically enumerated in the modification and upon which the parties had pre- viously been unable to agree. [App. Ex. 31-32]. Almost a year passed in which the Navy made no effort to ne- gotiate. [App. Ex. 233-35; also see Affidavit of F. Hunter Creech, dated August 29, 1975, pp. 4-8 (Record 29-33) ]. In 1974, Newport News made repeated, un- successful attempts to get the Navy to negotiate and agree on such matters. [App. Ex. 233-35; also see Affi- davit of F. Hunter Creech, dated August 29, 1975, pp. * References are tc the Appendix, Appendix Exhibits and Record before the Court of Appeals. 5 4-8 (Record 29-33)]. Also, despite the fact that the Navy had made over 300 separate drawing design and specification changes for the three earlier ships then under construction and even though the option related to an ‘‘Increased Quantity’’, the Navy repeatedly re- fused to incorporate such changes into the drawings and specifications for the DLGN-41. [App. Ex. 234; also see Affidavit of F. Hunter Creech, dated August 29, 1975, pp. 3-9 (Record 28-34) ]. Meanwhile Newport News undertook certain preliminary work on the DLGN-41. Finally in August 1974, Newport News formally ad- vised the Navy that for numerous reasons—including the Navy’s refusal to fulfili its obligations to negotiate under Modification P00018—Newport News regarded the option to be a nullity, void and of no legal effect. (App. 142, 595; also see Affidavit of F. Hunter Creech, dated August 29, 1975, pp. 6-8 (Record 31-33) ]. Never- theless, the Navy purported to exercise the option by notice to Newport News on January 31, 1975. [App. Ex. 46-46a]. Newport News immediately notified the Navy that it considered the alleged option and its pur- ported exercise to be void and unenforceable, but ex- pressed its continuing interest in reaching a mutually acceptable arrangement for construction of the DLGN- 41. [App. Ex. 47]. Upon discovering shortly thereafter that the Navy had previously determined (in October 1974) that the total cost of the DLGN-41 would exceed the appropriation then available therefor, Newport News advised Navy that it considered the purported exercise of the option invalid for the additional reason that it violated the Anti-Deficiency Acts. [App. Ex. 358-63 ]. 6 In light of the Navy’s insistence that Newport News proceed with construction, and Newport News’ insist- ence that it had no obligation to do so, the parties en- tered into a January 31, 1975 Memorandum of Under- standing which was subject to cancellation by either party at the end of 30 days and pursuant to which: (a) Newport News agreed to continue its work on the DLGN-41 for the time being; (b) the Navy agreed to pay for subsequent work as it had for past work; (c) the parties agreed not to institute any action in any admin- istrative or judicial tribunal ; and (d) the parties agreed ‘‘to negotiate in good faith to reach an agreement as rapidly as possible to modify those contract provisions requiring amendment or to take other appropriate ac- tion.’’ [App. Ex. 49-50; App. 145, 598]. Notwithstanding its initial agreement to discuss all issues between the parties, the Navy refused in early 1975 to negotiate with respect to the validity of the option or on any matters other than the eight items enumerated in Modification P00018 without some show- ing of government fault or unless new consideration flowed to the government. [App. 121-22, 148-50, 300; App. Ex. 236-39, 358-67]. In June 1975, the Navy re- fused to make any further payments for work being done by Newport News under the Memorandum of Understanding. [App. 53, App. Ex. 238-39]. The Navy also refused to agree with a request previously made by Newport News that the Navy join it in asking for an opinion of the General Accounting Office with respect to the sufficiency of the available appropriation. [ App. 46-48, 51-53, 58-60, 63-66; App. Ex. 52]. Since Newport News was prohibited by the terms of the Memorandum of Understanding from seeking such an opinion on its own, it exercised its right to terminate the Memoran- 7 dum of Understanding effective August 27, 1975, and on that day filed a request with the General Account- ing Office for an opinion on the anti-deficiency ques- tions. [App. 52-53, 62]. Newport News also advised the Navy that ‘‘[p]ending a resolution of the questions as to the validity of the option and its exercise, all ma- terial procurement, shop fabrication and other prelim- inary work on the DLGN41 which has been continuing pursuant to the Memorandum of Understanding will be suspended and the DLGN41 construction effort will not begin.’’ [See Affidavit #2 of Vincent F. Ewell, dated August 29, 1975, Appendix A, Exhibit M, p. 10 (Record 168) ]. August 29, 1975—March 7, 1977 On August 29, 1975, the government brought this action for an injunction to compel Newport News to construct the DLGN-41, and the District Court heard argument on the government’s Motion for Temporary Restraining Order. [ App. 14-77].’ After a hearing and recess, during which counsel for the parties engaged in extensive discussion, the parties by counsel entered into a stipulation which, at the request of counsel, was en- tered as an order of the District Court in lieu of a Tem- porary Restraining Order. [Addendum E hereto, pp. 54a-55a]. This order required Newport News to con- tinue its efforts with respect to the DLGN-41, required the Navy to pay for those efforts in the same manner as under the Memorandum of Understanding, and re- quired that the changes made in the plans and speci- * The government was represented by Mr. Jeffrey Axelrad, United States Department of Justice, and by Mr. E. Grey Lewis, United States Department of Navy. 8 fications for DLU.N’s 38, 39 and 40 be incorporated into the plans and specifications for DLGN-41. Addition- ally, after reciting Newport News’ contention as to the invalidity of the option and its exercise, the order pro- vided : ‘‘The parties agree to negotiate in good faith to reach an agreement as rapidly as possible to modify those contract prewisions requiring amend- ment or to take other appropriate action.’’ [Ad- dendum E hereto, p. 54a] At the time this order was entered, counsel for the Department of Justice and the Navy assured the Dis- trict Court that, ‘‘Mr. E. Grey Lewis [General Coun- sel of the Navy] on behalf of the Navy has agreed to undertake to ensure the Navy’s obligation hereunder.’’ [App. 70-71, 150]. In response to a question from the court, Mr. Lewis confirmed his and the Navy’s assump- tion of this obligation. [App. 71]. The Navy did not carry out its obligations under the stipulation and order to negotiate in good faith with Newport News during the succeeding 11 months. The Navy failed to provide Newport News with informa- tion essential to meaningful negotiations, and also or- dered Mr. Lewis, who was responsible for its obliga- tions under the consent order, out of the settiement ne- gotiations in October 1975. [App. 152, 155-58]. The Deputy Secretary of Defense subsequently determined that from the date of the court order until July 1976, the Navy did not negotiate in good faith on the DLGN- 41 dispute. [App. Ex. 253]. A subsequent negotiator of the Navy, Mr. Gordon W. Rule, who was appointed in July 1976, also characterized the Navy as having had during such period a ‘“‘complete adversary attitude, complete lack of good faith, at all times a lack of good faith.’’ [App. 345-49]. The Navy’s failure to negotiate in good faith caused Newport News to file a motion in the District Court on July 13, 1976, requesting, among other things, that the government be ordered to comply with its obligations under the August 29, 1975 order. [App. 112-17]. The Deputy Secretary of Defense held a meeting in his of- fice within hours after the Newport News motion was filed, as a result of which Gordon W. Rule was ap- pointed to negotiate with Newport News concerning the DLGN-41 dispute. [App. 286-88, 294; App. Ex. 251, 256, 277]. Newport News was subsequently advised of Mr. Rule’s appointment and repeatedly told by the Navy that he had complete authority to resolve this controversy. [App. 222-23, 240-41, 291-92, 295, 306-07, 358, 373-75]. Mr. Rule was appointed with the knowl- edge and concurrence of the Department of Justice, and Justice confirmed Newport News’ understanding that Mr. Rule had authority ‘‘to resolve all issues be- tween the parties.’’ [App. Ex. 277; App. 639-39a, 658]. Following Mr. Rule’s appointment, both he and the Department of Justice requested that Newport News withdraw its July 13, 1976 motion because of Mr. Rule’s appointment as negotiator. [ App. 224-25, 294-95, 639-39a]. Acting on government representations that Mr. Rule had been appointed with full authority to reach agreement with Newport News resolving all is- sues between the parties, Newport News requested that the District Court hold the July 13 motion in abey- ance pending further advice from Newport News. [App. 225, 639a, 658]. Immediately following Mr. Rule’s appointment, he and Newport News commenced negotiations in good 10 faith to reach an agreement resolving the issues in dis- pute between the parties. [App. 223-29, 291-300]. Con- siderable information and data were requested from, and provided by, Newport News. [Jd.]. On August 19, 1976, Gordon W. Rule received a contracting officer’s warrant granting him: ‘‘Unlimited authority with respect to negotiations with Newport News rnin po | and Dry Dock Company for construction of CGN 41 under Con- tract N00024-70-C-0252.”’ [App. Ex. 276; App. 230, 301, 306-07, 361, 374-75]. On the morning of August 20, 1976, Mr. Rule and other representatives of the Navy met with representatives of Newport News and an agreement was reached as to all substantive matters in issue, which was subsequently upheld by the District Court. [App. 230-35, 248, 300-06, 312-13, 407, 409, 460-61; App. Ex. 482; Addendum B hereto, pp. 13a-46a]. With the concurrence of the Navy, Newport News issued a press release announcing the settlement. [App. 236-38]. After reaching agreement on August 20, 1976, the parties began work on a written document expressing the terms of their agreement. [App. 239, 241-44, 307, 313-14]. At the same time, persons within the Navy eommenced efforts to disavow the agreement and to place purported restrictions on Mr. Rule’s authority. [ App. 236-41, 243-45, 309-14, 320-23, 358-66, 372-74, 447- 51; App. Ex. 502, 528]. Notwithstanding these efforts, Mr. Rule, on behalf of the Navy, and Mr. Dart, on behalf of Newport News, executed a final written con- tract modification on October 7, 1976, constituting a written settlement agreement. Mr. Rule’s contracting officer’s warrant was immediately thereafter revoked. li [App. 197, 333-34, App. Ex. 279]. Deputy Secretary of Defense Clements then found the agreement to be a reasonable resolution to the dispute and sent the agreement to the Attorney General for implementa- tion. [Addendum B hereto, pp. 27a, 35a]. The Attorney General subsequently, however, purported to disap- prove the settlement and refused to recognize its va- lidity. [Addendum B hereto, p. 27a]. Newport News thereupon filed a Motion for Entry of Judgment (on the ground that the case had been settled by the agreement with Mr. Rule) or, In the Alternative, for Dismissal with Prejudice (on the ground of bad faith on the part of the government in failing to carry out the District Court’s order). [ App. 192-248]. The Decisions Below In a March 8, 1977 Memorandum Opinion and Or- der, the District Court held that the parties had reached an agreement on August 20, 1976, the government was bound by its agreement, and the government had acted in bad faith. Accordingly, the District Court granted Newport News’ motion and dismissed the case. [Ad- dendum B hereto, p. 46a]. The District Court supported its decision by making extensive findings of fact based on a voluminous record, containing testimony, affidavits and documentary evi- dence, and the appearance and concessions of counsel before it. The court found that: Deputy Secretary Clements appointed Mr. Rule as chief negotiator with authority to bind the United States to a compromise agreement, and, on August 19, 1976, the Navy had issued Mr. Rule a contracting officer’s warrant grant- ing him ‘“‘unlimited authority”’ to negotiate with New- port News concerning the dispute; serious negotiations 12 had begun July 15, 1976, and continued on an almost daily basis through August 20, 1976; on August 20, 1976, the parties came to an oral agreement on all of the outstanding substantive issues concerning the CGN- 41 and agreed to prepare a written agreement; and that the parties intended to be bound by their August 20, 1976, agreement. [Addendum B hereto, p. 23a-25a]. On the basis of these findings, the District Court con- cluded that a binding agreement between the parties existed on August 20, 1976. The District Court made additional findings of fact concerning the conduct of the government and the De- partment of Justice in the settlement negotiations. It found that the government had agreed on three sepa- rate occasions to negotiate in good faith to resolve all its differences with Newport News: when it entered into the January 31, 1975 Memorandum of Under- standing; when it sought entry of the August 29, 1975 consent order; and when Mr. Rule was appointed and Newport News was induced to request the District Court to stay action on Newport News’ July 13, 1976 motion. [Addendum B hereto, pp. 19a; 14a, 21-22a, 39a; 23a-24a, 39a]. The court found that in August 1975, the Department of Justice had represented to it that the United States was bound to negotiate in good faith and had joined with Newport News and requested the court to enter its August 29, 1975 consent order. [Addendum B hereto, pp. 21a-22a, 39a]. At that time the Department of Justice stipulated to the court that the Navy’s General Counsel would ‘‘undertake to en- sure the Navy’s obligation’’ to negotiate pursuant to the consent order. [Addendum B hereto, pp. 22a, 39a]. The court further found that, the United States through the Department of Justice had made ‘‘a de- liberate decision not to seek an immediate judicial de- Bie oe es 13 termination of its rights under the disputed option contract’’ when it requested entry of the August 29, 1975, consent order. [Addendum B hereto, p. 39a]. The Department of Justice was found to have reaffirmed its agreement when it consented to the appointment of Mr. Rule. [Addendum B hereto, p. 40a]. The Depart- ment of Justice refused to participate directly in any negotiations for the next seventeen months. [ Adden- dum B hereto, p. 15a]. On the basis of these findings the court held the United States ‘‘estopped to deny the authority of the Department of Defense to bind the United States to a compromise agreement.’’ [Jd.]. Notwithstanding the government’s commitment to negotiate the resolution of all differences in good faith, the District Court found that the government ‘‘utterly failed”’ to so negotiate until Mr. Rule’s appointment. [Addendum B hereto, p. 14a]. It found that: the Navy had ignored not only its own January 31, 1975 Memorandum of Understanding, but the August 29, 1975 consent order as well [Addendum B hereto, p. 22a]; it had ordered the General Counsel of the Navy to stop negotiating in October of 1975 [Addendum B hereto, pp. 22a-23a]; and the Navy made efforts to un- dermine Mr. Rule’s authority after August 20, 1976. [Addendum B hereto, pp. 25a-27a]. The court further found that Navy’s position that it would only negotiate the eight items originally listed in Modification P00018 was ‘‘incredible’’ since language expressly limiting the negotiations to those items was expressly excluded from the final version of the January 31, 1975 Memo- randum of Understanding. [Addendum B hereto, p. 20a]. The court stated that it would not have entered the August 29, 1975 consent order had it been aware 14 that the government would later attempt to assert that it was not required to negotiate all differences. [ Adden- dum B hereto, p. 14a]. On the basis of these findings of fact, as well as others recited in its opinion, the District Court held the par- ties had agreed to a settlement, the government and the Department of Justice were estopped to deny it, and the government had acted in bad faith towards the court and Newport News. The government appealed the District Court’s de- cision to the United States Court of Appeals for the Fourth Circuit which reversed the lower court in a February 27, 1978 decision and remanded the case to the District Court for further proceedings consistent with the court’s opinion. [Addendum A hereto, p. 10a]. The Court of Appeals set aside the District Court’s findings of an August 20, 1976 agreement notwithstand- ing its concurrence in the trial court’s finding that on “that date ‘‘the parties reached what Rule and the Shipyard’s negotiators considered to be an oral agree- ment in principle... .’’ [Addendum A hereto, p. 3a]. Ignoring the specific findings of the District Court and without citing any principles of law involved, the Court of Appeals concluded that the Department of Justice decision not to take part in the settlement negotiations, standing alone, did not constitute ‘‘a sufficient basis for invoking estoppel.’’ [Addendum A hereto, p. 8a]. Conceding that the underlying facts were not in dispute [Addendum A hereto, pp. 5a, 10a], and that there was no need for an evidentiary hearing on the motion to en- force the settlement [Addendum A hereto, p. 5a], the Court of Appeals nevertheless held that a summary disposition of the case on the grounds of bad faith by the government towards the court at that time was Na oe, antral 15 inappropriate because there was a controversy as to the inferences that could be drawn from the undisputed underlying facts. [Addendum A hereto, p. 10a]. I, THE HOLDING OF THE COURT OF APPEALS, THAT A DE- PARTMENT OR AGENCY OF THE UNITED STATES CAN TAKE NO ACTION RENDERING PENDING LITIGATION MOOT WITHOUT THE APPROVAL OF THE ATTORNEY GENERAL, CONTRAVENES LAW AND PUBLIC POLICY AND PRESENTS IMPORTANT QUESTIONS OF FEDERAL LAW REQUIRING RESOLUTION BY THIS COURT. The decision of the Court of Appeals in this case marks the first time that any federal court has held that a department or agency of the United States lacks the power, without approval of the Attorney General, to take action otherwise authorized by law, if that ac- tion has the effect of mooting pending litigation. The Department of Defense and the Navy have spe- cific authority and responsibility for the procurement of vessels for the fleet. U.S. Const. Art. I, § 8, Cl. 13; 10 U.S.C. §§ 131, 133(a), (b), (d), 2303(a) (2), (b) (4), 2304(a)(13)-(14), 5011, and 5031; 50 U.S.C. §401; Lockheed Shipbuilding & Construction Co., 75-2 BCA 111,566 at 55,213-15, 17. That authority was exercised when Gordon W. Rule was appointed as a contracting officer pursuant to 32 C.F.R. § 1-405.2. On August 20, 1976, Mr. Rule, in his capacity as a duly designated contracting officer, and Newport News reached an agreement for the construction of the vessel known as the DLGN-41. On October 7, 1976, the parties entered into a contract modification which was approved by Deputy Secretary of Defense Clements as ‘‘a reason- ble resolution to this complex matter.’’ [ App. Ex. 259]. On October 15, 1976, the modification was sent to the 16 Attorney General for implementation,* but the Attor- ney General subsequently purported to disapprove the agreement. [Addendum B hereto, p. 27a]. The Court of Appeals, without elaboration or cita- tion to any authority which grants the Attorney Gen- eral power to do more then supervise, compromise and settle litigation, held that: ‘*The law pertaining to the Attorney General’s control over cases referred to the Department of Justice by other agencies of the government fully sustains his authority to disapprove the proposed compromise.’’ [Addendum A hereto, p. 9a]. However, contrary to this holding of the Court of Appeals, the law does not sustain any power in the Attorney General to veto any action of a department or agency of the United States which would have the effect of rendering litigation moot. The Attorney General’s authority to conduct litiga- tion on behalf of federal agencies is not inherent, but rather derives from 28 U.S.C. §§ 516, 519. Neither of these sections limits the authority of an executive agency to take actions permitted it by law which would have the effect of mooting or compromising litigation which has been referred by the agency to the Depart- ment of Justice. 28 U.S.C. § 516 states only that the “conduct of litigation’’ to which the government is a party and the ‘‘securing of evidence therefor’’ are re- served to the Department of Justice. Similarly, 28 U.S.C. §519 provides only that the Attorney General * The court order of August 29, 1975, with respect to the obliga- tions of the parties as to negotiations and as to construction and payment pending resolution of the dispute, was stil] in effect, and it was necessary for appropriate steps to be taken to obtain ratifica- tion by the District Court of the settlement negotiated pursuant to that order. Gian. - 17 will ‘‘supervise all litigation’’ involving the govern- ment and ‘‘shall direct all United States Attorneys, Assistant United States Attorneys and special attor- neys appointed under [28 U.S.C. §543] in the dis- charge of their respective duties.’’ Executive Order No. 6166, June 10, 1933, gives the Attorney General the authority to compromise litigation. No decision has been found that construes these statutory provisions, their predecessors, or Executive Order No. 6166 to ex- tend the Attorney General’s authority beyond: (1) the overseeing of the conduct of proceedings on behalf of the United States; (2) the authorizing of Department of Justice attorneys to appear as counsel of record on behalf of the United States; and (3) the ability to com- promise litigation committed to his supervision. In short, the Attorney General has no authority be- yond that which is delegated to him. Inasmuch as the Department of Defense and the Navy have the author- ity to contract for vessels irrespective of whether the United States and a shipbuilder are in litigation, the exercise of that authority cannot be prevented or ve- toed by the Attorney General. If the Attorney General is for the first time to acquire authority to block agency actions, within the scope of the agency’s authority, which have the effect of settling or mooting litigation, Petitioners contend that only the Congress can grant it. At the very least, the decision of the Court of Appeals holding that existing law grants or sustains such au- thority requires the review of this Court. A. The Decision Below Conflicts With Decisions of This Court. This Court has specifically upheld the power of an agency to take action, within the scope of its authority, 18 which has the effect of mooting pending litigation. United States v. Morris, 23 U.S. (10 Wheat) 246 (1825). In Morris, this Court upheld the authority of the Secretary of the Treasury to remit a forfeiture during pending litigation. The plaintiffs, customs collectors suing in the name of their employer, the United States, and represented by the Attorney General, brought suit against a United States Marshal for his failure to sell a vessel and its goods which had been seized and con- demned as forfeited for violation of non-intercourse acts then in existence. After condemnation, but before execution, and therefore while the matter was still in litigation, the Secretary of the Treasury remitted the forfeiture. The marshal then delivered the property back to the defendants in the condemnation action pursuant to the Secretary’s grant of remission. This Court held over objection of the plaintiffs that the Secretary did not exceed his authority when he remit- ted the forfeiture during the pendency of litigation involving validity of the forfeiture. The Morris de- cision was cited with approval and discussed at some length by the Court in The Confiscation Cases, 74 U.S. (7 Wall.) 454, 461-62 (1869). Moreover, in S & E Contractors v. United States, 406 U.S. 1 (1972), this Court rejected the government argument that 28 U.S.C. §§ 516, 519 gave the Attorney General authority to override the decisions of other executive officers: “‘[W here the responsibility for rendering a de- cision is vested in a coordinate branch of Govern- ment, the duty of the Department of Justice is to 19 om that decision and not repudiate it.’’ /d. at 13.° The conflict between the holding of the court below and the decisions of this Court in Morris and S & E Contractors fully justifies the grant of certiorari to review the judgment below. B. The Decision Below Conflicts With a Decision of the United States Court of Appeals for the First Circuit. The Court of Appeals for the First Circuit has taken a position directly in conflict with the holding of the court below. Jn Leonard v. United States Postal Ser- vice, 489 F.2d 814 (1st Cir., 1974), while the litiga- tion was pending, the Postal Service entered into a stipulation of settlement. Despite objections of the At- torney General, the District Court entered judgment. The Court of Appeals found that, under the special statutory scheme for the Postal Service, that agency was authorized to settle litigation. The Court further stated (at 817 n.7), however: ‘These [cited] cases may establish the proposition that where the Attorney General has supervision and control over a particular litigation he is em- powered to settle that litigation. But we have had no case pointed out to us, nor have we been able to discover any, where it has been held that the At- torney General can block a setiiement agreed to *An agency cannot, of course, take action which would render pending litigation moot if it lacks the authority to take such ac- tion in the absence of litigation. The Grey Jacket, 72 U.S. (5 Wall.) 342 (1867). It has been recognized, howeyer, that this does not mean that an agency is completely lacking in authority to com- promise a matter merely because it is in litigation. United States v. Sandstrom, 22 F. Supp. 190, 191 (N.D. Okla., 1938). 20 by a government agency involved in that litiga- tion. Such an action on the part of the Attorney General would not further the policy interest in giving him power to screen out cases which should not burden the federal courts. See, FTC v. Claire Furnace Co., supra. And, at least in some cireum- stances, it would violate the spirit of S & E Con- tractors, Inc. v. United States, 406 U.S. 1, 13, 92 S. Ct. 1411, 31 L.Ed. 2d 658 (1972).”’ (emphasis in original) The position of the Court of Appeals below and tuat of the First Circuit as to the authority of the Attorney General to set aside compromises of litigation are in direct conflict, and this conftict alone justifies the grant of certiorari to review the judgment below. C. The Decision Below Contravenes the Public Policy in Favor of Compromise of Litigation and Threatens the Efficiency of the Executive and Judicial Branches of the Federal Government. The decision of the Fourth Circuit in this case, which affects every party to litigation in which the Attorney General is involved, contravenes a longstanding pub- lie policy in favor of compromises of litigation. Wil- liams v. First National Bank, 216 U.S. 582, 595 (1910). Such compromises permit a more efficient functioning of the judicial system. At a time when the number of cases pending in the federal courts is increasingly an- nually, impediments to compromises should not be con- doned, much less approved. Such impediments are also inappropriate from the perspective of the departments and agencies of the United States whose own orderly functioning depends in part on their ability to decide whether to continue or compromise disputes with pri- vate parties. 21 Il. THE DECISION OF THE COURT OF APPEALS IS BASED ON A STANDARD OF REVIEW INCONSISTENT WITH THE DECISIONS OF THIS COURT AND THE FEDERAL RULES OF CIVIL PROCEDURE. The Court of Appeals improperly discharged its appellate function when it failed to apply the proper standard of review to the District Court’s findings of fact and substituted its judgment for that of the lower court. Both the Federal Rules of Civil Procedure and decisions of this Court accord finality to trial court findings of fact unless the findings are clearly errone- ous. Rule 52(a), Fed. R. Civ. P.; United States v. United States Gypsum Co., 333 U.S. 364, reh. den., 333 U.S. 869 (1948). Rule 52(a) does not authorize the re- viewing court to try factual issues de novo and requires that deference be given to the decisions of the trier of fact. Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 123 (1969). The duty of a reviewing court is to correct clear error and to set aside the trial court’s findings of fact only when a review of the evidence clearly compels a contrary finding. United States v. Yellow Cab Co., 338 U.S. 338, 342 (1949); United States v. Singer Mfg. Co., 374 U.S. 174, 194 n.9 (1963). A choice by the trial court between permissible views of the evidence is not ‘clearly erroneous’’. United States v. Yellow Cab Co., supra, at 342. A reviewing court is not given the choice of substituting its judgment for that of the trial court simply because it might give the facts another con- struction or resolve ambiguities differently. United States v. National Ass’n. of Real Estate Boards, 339 U.S. 485, 495-96 (1950). Instead, Rule 52(a) requires it to accept the lower court’s findings unless clearly erroneous, and this is true even though the record is 22 lengthy, contains conflicts in testimony, and includes quantities of documentary material. United States v. Oregon State Medical Society, 343 U.S. 326 (1952). The Rule applies as well to factual inferences drawn from undisputed facts. Commissioner v. Duberstein, 363 U.S. 278, 291 (1960). The opinion of the Court of Appeals, which is devoid of any reference to Rule 52(a) or any holding that the District Court’s findings of fact were clearly errone- ous, constitutes precisely the de novo retrial of fac- tual issues and substitution of judgment which Rule 52(a) and the decisions of this Court prohibit. Zenith Radio Corp. v. Hazeltine Research, Inc., supra; and United States v. National Ass’n. of Real Estate Boards, supra. A reading of the Court of Appeals opinion, which fails to consider some of the District Court’s findings and concedes that others are not in dispute, compels the conclusion that the Court of Appeals did not regard the trial court’s findings as clearly errone- ous within the meaning of Rule 52(a). Instead, the Court of Appeals simply had a different view of the evidence as to the existence of an agreement on August 20, 1976, the actions of the government constituting estoppel to deny a settlement, and the bad faith conduct of the government. Such a difference of opinion is not sufficient grounds for a reviewing court to set aside a trial court’s findings where, as in this case, the findings were made on the basis of a voluminous record, con- taining testimony, affidavits, and documentary evi- dence, United States v. Oregon State Medical Society, supra, and also the appearance and concessions of counsel before the District Court. Ms iat a a ee ee 23 The August 20, 1976 Agreement The District Court found that Mr. Rule had unlim- ited authority to negotiate a compromise and that set- tlement discussions commenced on July 15, 1976. [ Ad- dendum B hereto, pp. 24a-25a]. These discussions con- tinued for over a month and culminated on August 20, 1976 in an agreement on all substantive matters in issue. [Addendum B hereto, p. 25a]. The District Court found that the parties intended to be bound on that date [Addendum B hereto, p. 25a], and the Court of Appeals acknowledged that the Navy’s duly authorized representative, Mr. Rule, and Newport News reached what they considered to be an agreement. [ Addendum A hereto, p. 3a]. However, in direct contradiction to its acknowledgement, the Court of Appeals disagreed with the trial court and found that the parties did not in- tend to be bound by their August 20, 1976 agreement. {Addendum A hereto, p. 6a]. Whatever the reason for this inconsistency in its opinion, the contradiction dem- onstrates that the Court of Appeals did not, as indeed on this record it could not, find that the evidence clearly compels a contrary finding. The District Court’s view of the evidence was clearly permissible, and the Court of Appeals’ rejection of the trial court’s findings constitutes a substitution of judgment which is pro- hibited by Rule 52(a) and the decisions of this Court construing the Rule. See, e.g., United States v. Na- tional Ass’n. of Real Estate Boards, supra. Department of Justice Conduct The District Court held that the Department of Jus- tice was estopped from disapproving the settlement. [Addendum B hereto, pp. 15a, 40a]. Its holding was based on extensive findings of fact that the Depart- 24 ment: (1) made a ‘‘deliberate decision’’ not to go for- ward with its injunction action, but instead voluntarily agreed and subjected itself, through the order of the District Court, to negotiate and to rely upon the Navy to conduct the negotiations rather than participate it- self; (2) agreed to and promoted the August 29, 1975 court order and directed Navy officials to conduct nego- tiations on behalf of the United States and ‘‘to reach an agreement as rapidly as possible’’; (3) refused to par- ticipate in negotiations despite its knowledge that the Navy was not negotiating pursuant to the court order and was in ‘‘utter default’ prior to Mr. Rule’s ap- pointment; (4) reaffirmed its agreement when Gordon Rule was appointed and gave its express approval of settlement negotiations ; and (5) had exercised its power to control the litigation by asking the court to enter its consent order, and having done so, could not repudi- ate its position. [Addendum B hereto, pp. 39a-41la]. The August 20, 1976 agreement was negotiated by Gordon Rule pursuant to a stipulation of the parties which had been entered as an order of the court at the specific re- quest of the Department of Justice. [Addendum B hereto, pp. 21a-25a, 31a]. The opinion below neither dis- cusses any of these findings, which were fully supported in the record, nor does it cite any portion of the record which either is to the contrary or suggests any limita- tion, exception or reservation in the government’s ac- tions which would have informed the District Court or Newport News prior to the August 20 agreement that the government did not intend to be bound by its ac- tions. The Court of Appeals’ conclusion that the gov- ernment was not estopped, without citing either facts in support of that conclusion or any analysis of applicable law, is therefore precisely the substitution of judgment en 25 which the ‘‘clearly erroneous’’ standard was adopted to prevent. The Government's Bad Faith The Court of Appeals also failed to comply with Rule 52(a) and the decisions of this Court when it held that summary disposition of the case on the basis of the government’s bad faith was inappropriate. The Dis- trict Court held that the government had acted in bad faith towards the court, as well as towards Newport News, and dismissed the litigation. The dismissal was supported by extensive findings of fact concerning the manner in which the government conducted itself on and after August 29, 1975, the date on which the gov- ernment agreed to negotiate in good faith to resolve the dispute over construction of the DLGN-41 and spe- cifically requested the District Court to enter an order requiring it to so negotiate. [Addendum B hereto, pp. 21a-23a, 25a-27a]. The Department of Justice repre- sented to the District Court that the General Counsel of the Navy, E. Grey Lewis, would undertake to satisfy the government’s obligations under the order, and Mr. Lewis advised the Court that he would do so. [Adden- dum B hereto, pp. 22a, 39a]. Notwithstanding these as- surances, the District Court found that on October 29, 1975, Mr. Lewis was ordered by higher Navy officials to stop all negotiations, and that for the next eleven months **. . . the United States totally failed to meet its obligations to negotiate in good faith, although at the same time it was receiving the benefits of the Shipyard’s continued performance under the dis- puted contract.’’ [Addendum B hereto, p. 23a (em- phasis in original) ] 26 The District Court further found that during this pe- riod, the Department of Justice knew that the Navy was not negotiating and that prior to Mr. Rule’s ap- pointment ‘‘ Navy officials were in utter default’’ under this order. [Addendum B hereto, p. 39a]. Both prior and subsequent to Mr. Rule’s appointment and the August 20, 1976 agreement, the Navy attempted to un- dercut his authority and the agreement which resulted from its exercise. [Addendum B hereto, pp. 25a-27a]. Notwithstanding the foregoing findings of fact, among others, evidencing the bad faith of the govern- ment towards the District Court, the Court of Appeals held that ‘‘summary disposition’’ of the case was ‘‘in- appropriate’’. [Addendum A hereto, p. 10a]. The Court of Appeals conceded that ‘‘the underlying facts were not in dispute,’ but held that the inferences to be drawn from them were in controversy as to the mean- ing of the clause ‘‘to take other appropriate action”’ which was contained in the stipulation and court order of August 29, 1975. [Id.] This Court has held that in- ferences drawn from undisputed facts can be set aside only if clearly erroneous. Commissioner v. Duberstein, supra. However, the Court of Appeals opinion notes only that a controversy existed as to those inferences, but nowhere states that the inferences drawn by the District Court were so clearly in error as to compel a reversal of the District Court’s conclusion that the case should be dismissed because of the government’s bad faith. A fundamental defect in the Court of Appeals opin- ion is that the District Court judge was not only the trier of fact, but also a party to the order and had no doubt as to its intended scope. The District Court en- tered the order at the request of both parties ‘‘believ- — eee ee Oh es 8 er ie Cr ti ee st ee dee 27 ing that all good faith attempts to reach a settlement should be encouraged.’’ [Addendum B hereto, p. 21a}. The transcript of the hearing at which the order of August 29 was issued shows that the court was con- cerned with the total dispute between the parties, in- cluding the validity of the option and its exercise and not just the specific items enumerated in Modification P00018 as to which the government later claimed it was limited to negotiate. [App. 14, 34-38, 56]. Before the order was issued, the court inquired of Mr. David James, one of the government’s counsel, about the scope of negotiations under the Memorandum of Un- derstanding which contained the identical ‘‘take other appropriate action’’ language. ‘*THE Court: ... does this memorandum of un- derstanding contemplate the responsible people in a number more than one on each side sitting down and arbitrating the problems that apparently have beset you ? a James: Yes, Your Honor... .’’ [App. 30, Nowhere in the proceedings was there any suggestion that negotiations were to be limited to only some of the issues.® In its opinion dismissing the litigation for failure to comply with the August 29, 1975 order by negotiating all matters in dispute, the District Court stated: ‘“‘Had we been aware that the Government would later attempt to assert that it was not required to so negotiate, this Court would rover have entered * After the order of August 29, 1975 was entered, Assistant Secretary of Navy Bowers directed ‘‘negotiations with Newport 28 the stipulated agreement of the parties to nego- tiate as an order. We would have moved the par- ties along to a swift adjudication of the validity of the disputed contract.’’ [Addendum B hereto, p. 14a] In short, there was no dispute as to either the facts or the inferences to be drawn from them as to the obli- gations of the Government to the District Court to ne- gotiate all items in dispute. To hold otherwise is to con- clude that neither the District Court nor the parties knew what was meant by the stipulation and order, and that is a conclusion supported by neither logic nor the record in this case. Accordingly, the District Court’s dismissal, which was within its discretion and sup- ported by an uncontradicted factual record, should have been upheld. The opinion of the Court of Appeals evidences ap- plication of a far less stringent standard of review than that required by Rule 52(a), and this Court, in the exercise of its supervisory responsibilities, should grant certiorari to rectify this error. News in good faith on all matters contained in the stipulation set forth in the court order’’—which stipulation recited Newport News’ claim of invalidity of the option exercise [App. 75]—and further specifically directed that settlement be reached in such negotiations on the ‘‘CGN-41 Option validity.’’ [App. 633 (empha- sis added) |. It was later that Navy attempted to limit the scope of the negotiations to the eight items in P00018. wet Oe eee Bes wt at Dcpenaetere te Metie te A NO Oe 29 CONCLUSION For these reasons the petition for writ of certiorari should be granted. Respectfully submitted, WiiuiaM McL. Freravson 225 - 28th Street Newport News, Virginia 23607 K. Martin Wortry JoHN G. DeGooyer Mark Su.tuivan ITI JOHN H. SpPeLLMAN JEFFREY M. PerrasH Larry H. MircHern HaMEL, Park, McCazne & SAuNDERS 1776 F Street, N.W. Washington, D.C. 20006 Counsel for Petitioners May 1978 ADDENDUM - a oa la ADDENDUM A UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 77-1748 Unitep States or America, Appellant, v. Newport News SuHipsurtpine anp Dry Dock Company, anp Tenneco, Inc., Appellees. Appeal from the United States District Court for the Eastern District of Virginia, at Newport News. John A. MacKenzie, District Judge. Argued October 4, 1977 Decided February 27, 1978 Before Haynswortn, Chief Judge, Butzner, Circuit Judge, and Frevp, Senior Circuit Judge. Patricia N. Blair, Attorney, Civil Division, Department of Justice (Barbara Allen Babcock, Assistant Attorney Gen- eral; William B. Cummings, United States Attorney; Leonard Schaitman & Stuart E. Schiffer, Attorneys, Civil Division, Department of Justice on brief) for appellant; K. Martin Worthy (John G. DeGooyer, Mark Sullivan, ITI, John H. Spellman, Jeffrey M. Petrash, Larry H. Mitchell, Hamel, Park, McCabe & Sanders; William McL. Ferguson, Ferguson & Mason on brief) for appellees. Butzner, Circuit Judge: The United States appeals from an order of the district court enforcing an oral settlement purportedly reached between the Department of the Navy and the Newport 2a News Shipbuilding and Drydock Co., and dismissing as moot the government’s suit for specific performance of a contract for construction of a vessel. We vacate this order because we conclude that the parties’ negotiators did not settle the case orally and because the Attorney General, whose approval was essential, rejected the terms that were ultimately reduced to writing. T a This litigation arises from the Navy’s attempt to exercise an option for construction of the DLGN-41, the fourth ship in a class of nuclear powered guided missile frigates. As part of an agreement to negotiate a number of disputed matters, the final date for exercising this option was ex- tended to February 1, 1975. In the meantime, the Navy authorized the shipyard to start preconstruction work. In August 1974, however, the shipyard notified the Navy that for a variety of reasons it considered the option invalid. The Navy disagreed, and on January 31, 1975, it formally undertook to exercise the option. The parties then signed a memorandum of understanding obligating the shipyard to continue its preconstruction work while they negotiated. In August 1975, the shipyard exercised its right to cancel the memorandum of understanding because it was dissatisfied with the progress of the negotiations. As a result of the cancellation, the Navy filed this suit seeking specific performance of the contract and a tempo- rary restraining order directing the shipyard to resume work on the vessel. At a hearing on August 29, 1975, the district court adopted as its order a stipulation by the par- ties providing for continued work on the ship, for contin- ued payment for work performed, and for negotiations “in good faith to reach an agreement as rapidly as possible to modify those contract provisions requiring amendment or to take other appropriate action.” 3a The shipyard, again dissatisfied with the Navy’s nego- tiating tactics, filed a motion on July 13, 1976, for enforce- ment of the court’s order to negotiate in good faith. It also sought to have its obligation to continue work suspended until the Navy complied. The Navy countered by designat- ing as its negotiator Gordon W. Rule, an experienced ci- vilian official in the procurement office. In view of this de- velopment, the shipyard requested the court to reserve rul- ing on its motion. Rule began negotiating with the shipyard on July 15, 1976, and subsequently the Navy issued him a contracting officer’s warrant granting him “unlimited authority with respect to negotiations.” On August 20, 1976, the parties reached what Rule and the shipyard’s negotiators consid- ered to be an oral agreement in principle which the Navy later estimated would increase the cost of the ship by about 22.7 million dollars. The shipyard prepared a written first draft of the oral agreement which Rule received on August 30, 1976. The negotiators then met on several occasions to discuss revi- sions. A second draft was circulated on September 27, 1976, and further discussions concerning revisions were held. On October 7, 1976, the shipyard executed a third draft of the agreement and sent it to Rule. Although Rule sigaed the draft as presented by the shipyard, he conditioned his exe- cution of the document by the following provisions set forth in his letter returning it to the shipyard: (i) That ultimate approval must be received from Deputy Secretary of Defense Clements, and (ii) That escalation under this Mod [i.e., modifica- tion of the contract] will be paid by the Government on the basis of the contractor’s actual experience or the BLS Indices times 1.25, whichever is less. On October 15, 1976, Deputy Secretary Clements for- warded a copy of the compromise to the Attorney General 4a with the recommendation that it be approved. The Attor- ney General, however, disapproved it on November 24, 1976. During the negotiations dissension had arisen concern- ing the scope of Rule’s duties. Rule thought he possessed plenary authority both to negotiate and to bind the govern- ment to any agreement he reached. Immediately after his appointment, he told the shipyard that this was the extent of his power. The Navy agreed that Rule possessed un- limited authority to negotiate, but it denied granting him unreviewable authority to bind the government to a settle- ment. Alerted by a news report that the shipyard consid- ered the law suit to have been settled on August 20, Rule’s superiors explicitly cautioned him several times that any agreement he reached would require approval by higher authorities. The Navy also informed representatives of the shipyard about the necessity for review and approval. Rule himself appears to have recognized that his au- thority was not as unrestricted as he first supposed. In a memorandum dated October 5, 1976, he submitted the pro- posed agreement to the Chief of Naval Material for ap- proval and referred to obtaining “final review and ap- proval” from the Oftice of General Counsel of the Navy. Finally, the letter addressed to the shipyard accompany- ing Rule’s executed copy of the agreement expressly con- ditioned his execution of the document on approval by Dep- uty Secretary Clements. Shortly after Rule executed the agreement, and even be- fore the Deputy Secretary transmitted his recommendation to the Attorney General, the shipyard moved the district court to enforce the compromise and dismiss the govern- ment’s action for specific performance. In the alternative, it moved to dismiss the action on the ground that the Navy had failed to negotiate in good faith. The court considered the shipyard’s motion to enforce the settlement without conducting an evidentiary hearing. Re- oa re he oe ae 5a lying on affidavits and discovery depositions, it found that Rule had authority to bind the government to the settle- ment he negotiated; that agreement was reached orally on August 20, 1976, and subsequently memoralized; that Dep- uty Secretary Clements approved the agreement; and that the Attorney General “is estopped to deny the settlement.” II We find no reversible error in the Navy’s complaint that the district court should have held an evidentiary hearing on the motion to enforce the settlement. When there is no real dispute about the facts, a court has inherent power to enforce summarily a compromise terminating pending liti- gation. Meetings & Expositions, Inc. v. Tandy Corp., 490 F.2d 714, 717 (2d Cir. 1974). The only conflict of any sig- nificance concerned Rule’s duties. We have some doubt that the law and the evidence support the conclusion that the Deputy Secretary vested him with authority to commit the Navy to the expenditure of additional millions of dollars for the construction of the vessel. This issue, however, is not material to our decision. The uncontradicted evidence establishes that by August 25, the Navy had notified the shipyard of the necessity for review and approval of any settlement Rule negotiated. The critical question therefore is whether the August 20 oral agreement was a binding settlement as the shipyard insists and the district court found. III Parties to contractual negotiations may enter into an enforceable oral contract that is later to be expressed in writing if, intending to be bound, they reach agreement on all major issues. Orient Mid-East Great Lakes Service v. International Export Lines, Ltd., 315 F.2d 519, 522-23 (4th Cir. 1963); In Re: ABC-Federal Oil & Burner Co., 290 F.2d 886, 889-90 (3d Cir. 1961); 1 A. Corbin, Contracts §§ 29, 30 (1963) ; Restatement (Second) of Contracts §§ 26, 6a 32 (Tent. Draft, 1973). Applying this principle to the un- contradicted facts discloses that the parties did not intend to commit themselves irrevocably to an oral » itlement of the case on August 20. First, the draft agreement pre- pared by the shipyard after the August 20 negotiating ses- sion contained an escalation clause that computed payments by using indices prepared by the Bureau of Labor Sta- tistics from data concerning steel vessel construction throughout the country. The Navy soon determined, how- ever, that the shipyard’s actual costs had increased less than the BLS indices. In subsequent discussions Rule in- sisted that the escalation clause be changed to award pay- ments based on the shipyard’s actual experience or 1.25 of the BLS indices, whichever was less. Estimating that the difference between the two clauses amounted to about 9.4 million dollars, Rule aptly characterized this issue as sub- stantive. The final draft submitted to Rule on October 7 retained the shipyard’s version of the escalation clause, and Rule expressly conditioned his execution of the draft on acceptance of the government’s position. Although the ship- yard had represented during the negotiations that it would relent if this issue “became . . . the hinge point” for the whole settlement, it did not accede to the condition Rule imposed. In January 1977, at the hearing on enforcement of the August 20 oral agreement, it pressed for the clause awarding the higher escalation payments. The shipyard’s final draft was essentially an offer of set- tlement. Rule accepted this offer subject to a condition con- cerning the escalation clause. Under these circumstances, the following principle of law applies: ‘‘when an offer or a counteroffer is accepted subject to a condition or reserva- tion, neither party is bound to an agreement until the con- dition or reservation has been withdrawn or satisfied.’’ Orient Mid-East Great Lakes Service v. International Ex- port Lines, Ltd., 315 F.2d 519, 522 (4th Cir. 1963). hh ore We. OR Oe POs ——_ Sar OSS So a ES 7a Second, by his letter of October 8 transmitting the exe- cuted agreement to the shipyard, Rule indicated that he did not intend the government to be bound either by the results of the Angust 20 negotiations or by his execution of the final draft. In this letter he conditioned his execution of the document by the statement that ‘‘ultimate approval must be received from Deputy Secretary of Defense Clements.”’ To sustain its thesis that the August 20 agreement bound the government, the district court construed this condition to mean that Deputy Secretary Clements must ‘‘approve the document as memorializing the compromise agreement between the parties.’’ This restrictive view of the Secre- tary’s function is not supported either by the plain lan- guage of the letter or by any action of the Deputy Secre- tary. He played a far more responsible role than simply determining whether the executed document prepared by the shipyard conformed to the terms of the oral negotia- tions. Moreover, the Deputy Secretary did not undertake to commit the government to the settlement that Rule had negotiated. In his letter to the Attorney General of October 15, 1976, which is set forth as an appendix, he recognized that final approval rested with the Attorney General. IV Title 28 U.S.C. §§ 516 and 519 authorize the Attorney General to supervise all litigation involving an agency of the government unless the law otherwise directs. As an incident to this broad grant, he has authority to agree to dismissal of actions brought by the government. See Con- fiscation Cases, 74 U.S. (7 Wall) 454, 458 (1868). His au- thority to compromise and settle any case referred to the Justice Department was expressly confirmed by §5 of Executive Order No. 6166, June 10, 1933, 5 U.S.C. § 901.* * Section 5 of Executive Order No. 6166 provides in part: As to any case referred to the Department of Justice for prosecution or defense in the courts, the function of decision 8a Notwithstanding these well established principles, the district court held that the Attorney General was estopped from disapproving the settlement for two reasons. First, it noted that during oral argument the Department of Justice stipulated that when Rule was appointed he had authority to bind the United States. The government, however, pro- tests that it made no such stipulation or concession. It points to portions of the transcript where it specifically de- nied that Rule could bind the government while recogniz- ing that he had authority to negotiate with the shipyard. The shipyard in its brief does not claim that the govern- ment made such a concession, and we have been unable to find it in the record. The second reason the district court assigned for its rul- ing is that the Justice Department took no action to fulfill its obligation to negotiate in good faith pursuant to the court’s order ‘‘except through its implicit delegation of any authority it had to settle this litigation to the Depart- ment of Defense.’’ We conclude that this reason does not provide a sufficient basis for invoking estoppel. The negotiations concerning settlement of the litigation between the shipyard and the Navy covered many technical issues about the construction of the vessel, the computation of its cost, and a feasible date for its delivery. It was there- fore reasonable for the Justice Department attorneys to leave discussion of these complex subjects to Navy officials who had the expertise to deal with them. But another im- portant question was whether the government should press its suit for specific performance of the initial contract in- stead of compromising, in view of the millions of dollars involved. The answer to this question depended on careful analysis of the strength of the government’s claim from whether and in what manner to prosecute, or to defend, or to compromise, or to appeal, or to abandon prosecution or defense, now exercised by any agency or officer, is transferred to the Department of Justice. > nee ae 9a both evidentiary and legal standpoints. In turn, the dis- closures of that survey had to be weighed against the re- sults of Rule’s negotiations. The final product of this study was an assessment of the litigative risk. The Attorney Generai did not, either personally or through his subordinates, delegate to Rule the authority to make this critical decision. Moreover, Deputy Secretary Clements, who was the source of Rule’s authority, under- stood that the responsibility for evaluating the litigative risk and consequently for ultimately approving or disap- proving the settlement remained with the Attorney Gen- eral. We therefore conclude that the record does not sup- port the court’s ruling that the Attorney General was estopped. The law pertaining to the Attorney General’s control over cases referred to the Department of Justice by other agencies of the government fully sustains his author- ity to disapprove the proposed compromise. V As an alternative ground for dismissing the govern- ment’s suit for the specific performance of the construction contract, the district court held that the government was barred by the doctrine of unclean hands because it did not negotiate in good faith. The controversy about the govern- ment’s negotiating tactics centers on the parties’ August 29, 1975, stipulation which was incorporated in the court’s order. In view of the dispute about the validity of the Navy’s option, the parties stipulated that they would ‘‘ne- gotiate in good faith to reach an agreement as rapidly as possible to modify those contract provisions requiring amendment or to take other appropriate action.’’ The nub of the issue is the clause ‘‘to take other appropriate ac- tion.’’ The shipyard contends that this language was in- tended to impose a duty on the parties to renegotiate the basic contract for the construction of the vessel. Although there was some difference of opinion in its ranks about the meaning of the language, the Navy asserted, at least until the time Rule was appointed its chief negotiator, that it 10a was required to bargain over the basic contract only if the shipyard offered some new legal consideration or demon- strated governmental responsibility justifying more favor- able terms. The Navy’s claim of good faith is altogether consistent with paragraph five of the stipulation, which provided, ‘‘This stipulation and any action taken by either party pur- suant hereto shall be without prejudice to the rights or legal positions of either party.’’ The Navy was not obli- gated to abandon its legal position in order to demonstrate good faith bargaining if its insistence was sincerely held. NLRB v. Almeida Bus Lines, Inc., 333 F.2d 729, 731 (1st Cir. 1964). Although the underlying facts were not in dis- pute, there was a controversy as to the inferences that could properly be drawn from them. In the context of this controversy, the clause ‘‘to take other appropriate action’”’ is ambiguous; there is a genuine dispute about its meaning. Under these circumstances, summary disposition of the case on the basis of the defense of unclean hands is inap- propriate. American Fidelity and Casualty Co. v. London and Edinburgh Insurance Co., 354 F.2d 214, 216 (4th Cir. 1965), The judgment of the district court is reversed, and the case is remanded for further proceedings consistent with this opinion. SO a Re OEE ARR A Ee eee lla APPENDIX Tue Deputy Secretary or Derense WASHINGTON, D.c. 20301 15 October 1976 The Honorable Edward Levi Attorney General Department of Justice Washington, D.C. 20530 Dear Mr. Levi: This letter forwards a proposed settlement of the CGN-41 litigation negotiated pursuant to Court Order. As you know, I have been deeply committed to efforts to settle the Navy’s on-going disputes with the shipbuilding industry and have undertaken a number of initiatives to this end. In a meeting on 13 July 1976, Senior Navy Officials, with my approval, appointed Mr. Gordon W. Rule of the Naval Material Command as the principal negotiator of this par- ticular matter. Mr. Rule has negotiated a proposed modi- fication to the contract with Newport News, attachment (1), on the CGN-41. In view of the long-standing, acrimonious, and disruptive controversy between the Navy and its sole present new con- struction surface nuclear warship contractor, I consider it vital to the national defense that this dispute be resolved as quickly as possible. I consider the proposed modification a reasonable resolution to this complex matter. Attachment (2) provides a comparative financial esti- mate of the proposed settlement. While attachment (2) indicates a difference of $22.7M I believe it is reasonable to assume that a Court might grant Newport News, as a minimum, an extension of the existing escalation coverage to an achievable contract delivery date (e.g., August 1980) ; consequently, the difference in the settlement could be re- 12a duced another $7.5M, to $15.2M. We have not included any other assessment of litigative risk since this is a matter under your purview. Quantifying the latter could further reduce or eliminate the $15.2M differential noted above. In any event, the District Court instructed the parties as follows: ‘‘The parties agree to negotiate in good faith to reach an agreement as rapidly as possible to modify those contract provisions requiring amendment or to take other appropriate action.’’ Mr. Rule, in the spirit of this order, negotiated a contract modification which, if approved, would undoubtedly facilitate the construction of the badly needed CGN-41. Accordingly, I am forwarding the results of these nego- tiations for your approval and such legal action as may be necessary to obtain ratification. /3/ W. P. Clements, Jr. Attachments ee eee ee ee ee een ee ale A i et Na ali a 5 Mate DP ll Men, Ae 13a ADDENDUM B IN THE UNITED STATES DISTRICT COURT FOR THE E\asteRN District or VIRGINIA Newport News Division Crviz, Action No. 75-88-NN Unitep States or Amenica, Plaintiff v. Newport News Surpsurtpine anp Dry Dock Company, and Tenneco Inc., Defendants Memorandum Opinion I JURISDICTION AND Parties The plaintiff, the United States of America, has brought this action seeking specific performance of a shipbuilding contract it purports to have entered into with the defendant, Newport News Shipbuilding and Dry Dock Company (the Shipyard). Defendant, Tenneco Inc. is the parent corpora- tion of the Shipyard, and its liability is allegedly based on its guarantee of the Shipyard’s contractual duties. The Court has jurisdiction pursuant to 28 U.S.C. § 1345. II Nature oF THE Motion Berore THE CouRT AND THE Court’s REeso.uTIon or THE Issues PResENTED The Shipyard here contends that a valid compromise agreement has been reached between itself and the United States which moots and settles all of the issues presented l4a in the Government’s action; it moves for an entry of judg- ment to enforce the settlement and to dismiss this litiga- tion, and in the alternative, for a dismissal with prejudice of the Government’s action because of its bad faith toward this Court and the defendants. The United States main- tains that it has negotiated towards the settlement in good faith, but that any agreement reached between the Shipyard and the Government is invalid for a variety of reasons. We have no problem with the case and hold that a com- promise agreement has been reached; that it is binding on the United States; that the matters before the Court are moot; and that judgment should be entered enforcing the settlement and thus dismissing the litigation. We find that the United States voluntarily bound itself, contractually and by the consent order of this Court, to negotiate in good faith to resolve all of the disputes be- tween itself and the Shipyard with respect to the construc- tion of the DLGN-41. The United States utterly failed, until the appointment of Gordon Rule, to so negotiate in good faith. It insists that it was only required to negotiate cer- tain items and not all of the matters that are in dispute. This false insistence evidences the Government’s complete bad faith toward this Court and the Shipyard. The Govern- ment, as well as the defendants, had every right to seek a quick judicial determination of their respective rights un- der the disputed contract. However, the parties agreed to an order entered in this Court, on August 29, 1975 and again a year later, that judicial action should be stayed to allow the parties to negotiate in good faith to resolve all their differences. Had we been aware that the Government would later attempt to assert that it was not required to so negotiate, this Court would never have entered the stipu- lated agreement of the parties to negotiate as an order. We would have moved the parties along to a swift adjudication of the validity of the disputed contract. ee ee ee ee ee eee ees es *. Sgete we l5a We conclude that sovereign immunity does not deprive this Court of jurisdiction to declare that the compromise agreement here binds the United States. The Department of Defense, in this case, delegated its executive authority to Gordon Rule to bind the United States to an agreement which compromises and settles the rights of the parties to this suit. We need not reach the issue whether it would have been proper for the Department of Defense, once the dis- puted contract became the subject of litigation, to nego- tiate a compromise agreement without the consent and ap- approval of the Department of Justice. That issue is not before the Court because the Department of Justice repre- sented to this Court, in August, 1975, that the United States would be bound to negotiate in good faith, and yet we find that the Department of Justice has refused to directly par- ticipate in any of the negotiations over the past seventeen months. The United States here is estopped to deny the authority of the Department of Defense to bind the United States to a compromise agreement. We find that the United States is fully bound to the com- promise agreement negotiated on August 20, 1976 between Gordon Rule, for the Government, and the Shipyard. This agreement is evidenced by the documents executed by Rule which memorialize the prior oral agreement. The documents which speak to the compromise agreement are Contract Modification P00037 and Rule’s cover letter imposing two conditions. These documents satisfy any statute of frauds require- ment. There was a meeting of the minds of the parties on August 20, 1976; there is adequate consideration to support this compromise agreement; and failure to provide cost of pricing data does not invalidate the agreement. We find that Deputy Secretary of Defense Clements, who initiated the negotiation efforts, has approved the compromise agree- ment. l6a III Tuer Facts A The Disputed Contract: June 25, 1970 to August 25, 1975 This acrimonious confrontation between the United States Navy and the Newport News Shipyard over the con- struction of the DLGN-4i, a nuclear-powered guided mis- sile frigate, a high priority national defense item, is consid- erably affected by the public interest. On June 25, 1970 the Navy entered into a contract (Con- tract N00024-70-C-0252) with the Shipyard for the precon- struction preparation necessary for the construction of a nuclear guided missile frigate, DLGN-38. This contract also contained an option exercisable by the Navy for the actual construction of the DLGN-38. Subsequently various documents, identified as Contract Modifications P0001 et seq., have been executed and en- larged the scope of the original contract, and modified its terms. The most important of these, for our purposes, are Contract Modifications P0007, P00018, P00024, and P00037. They raised issues upon which the parties disagree as to their legal effects. P0007 was executed on December 21, 1971. a “ avy purported to exercise its construction options for the means ant two ships of the same class, the DLGN-39 and 40. In addition, P0007 in Article 28 granted the Navy two options for the construction of two additional ships of the same class, the DLGN-41 and DLGN-42, the options to be exercised by February 1, 1973 and February 1, 1974 respectively. The Shipyard does not admit these legal effects. On February 1, 1973 the parties executed P00018. The United States maintains that this document amended Ar- ticle 28 to extend the time for the exercise of the construc- RE: 17a tion options for DLGN-41 and DLGN-42 by two years. Two provisions are important for our purposes. One is the op- tion provision which the Navy purported to exercise which states: On or before 1 February 1975, the Government, by modification to this contract, may require the con- tractor to construct and deliver DLGN 41, but only if the Government, by modification to this contract, by 1 December 1973, authorizes the contractor to expend funds in an amount of $29,062,200 for material pro- curement, shop fabrication, and other preliminary work. The second relevant provision states: The Parties agree to negotiate in good faith to reach an agreement as rapidly as possible on the provisions of this contract which require modification in order to express the agreement of the parties as to new option provisions for DLGN 41 and DLGN 42. Therefore, such contract modification will: (i) establish a target cost, a target price, a ceiling price, and a share ratio within the profit-cost envelope set forth below for each option so ex- ercised separate from that for the other ships under this contract, and revise Article 7, entitled “Limitation or Contractor’s LiaBiuity ror Cor- RECTION OF Derects” to provide a limitation on the Contractor’s liability for correction of de- fects for each vessel to two percent (2%) of the initial Target Price for that vessel, (ii) provide for a total final negotiated cost pursuant to Article 5 hereof entitled “Incentive Price Re- vision (Firm Tarcet)” separate from that for DLGN 38, 39 and 40 combined, (ili) (iv) (v) (vi) (vii) (viii) 18a establish escalation tables separate and different from those for the DLGN 38, 39 and 40 com- bined, modify the payment provision as necessary to provide payment for DLGN 41 and 42 separate from DLGN 38, 39, and 40, revise the project milestones in Articles 17 for DLGN 41 and 42, establish a fixed fee, and other terms and condi- tions on account of the work which may be re- quired by the Option Conditions described be- low which will be effective until the correspond- ing option is exercised, or the work, which may have been continued pursuant to the direction of the Contracting Officer, stops, contain a provision for computing equitable ad- justment on account of changes in the Longshore- men and Harbor Workers’ Act, the Federal In- surance Compensation Act, state workmen’s com- pensation, unemployment, disability compensa- tion and public liability acts occurring since June of 1970, and revise Schedule “A” to provide for DLGN 41 and DLGN 42 equipment delivery schedules the same as those listed for DLGN 39. If, despite the best efforts of both parties, the afore- said agreement is not executed before the Govern- ment exercises either or both options, the parties agree that interim billings will be in accordance with the terms and conditions of the payment provision for the DLGN 38, 39 and 40 using the maximum profit-cost envelope ... until such time as the aforesaid agree- ment is reached, said interim billings not to exceed total incurred costs for DLGN 41 and DLGN 42. 19a On November 29, 1973 the parties executed P00021. The United States maintains that modification extended the de- livery dates for the DLGN-41 and DLGN.-42 to October 1978 and June 1979 respectively, in return for an exten- sion of the date by which the Navy must provide funding for the preconstruction work on the DLGN-41 and DLGN- 42 in order to exercise the options for actual construction. On February 27, 1974 the Navy executed P00022 which re- cites that the Shipyard is authorized to expend 35 million dollars to accomplish the preconstruction work on the DLGN-41. The bulk of this authorization was a prerequi- site under Article 28 to an exercise of the DLGN-41 con- struction option. The Shipyard does not agree with the Government as to the legal effects of these modifications, and maintains, and we find as a fact, that it notified the Navy during August 1974 that it no longer considered the DLGN-41 option to be valid. The Navy was well aware of the Shipyard’s position when, on January 31, 1975, it executed P00024 which re- cites that the Navy exercises its construction option for the DLGN.-41. In fact, the Shipyard and the Navy agreed, prior to the execution of P00024, that an agreement, which was contained in a document entitled a Memorandum of Under- standing, would become effective on February 3, 1975. Un- der this agreement, which was to remain in effect for at least thirty days and to continue until one party had given forty-eight hours’ notice, the Shipyard agreed to continue the preconstruction work for the DLGN-41, and each party agreed ... to negotiate in good faith to reach an agreement as rapidly as possible to modify those contract provisions requiring amendment or to take other appropriate action. [Emphasis added.] Some attempts to negotiate were made by both parties; however, they failed because of the parties’ disagreement 20a over the meaning of the phrase, “or take other appropriate action.” The same language was incorporated into the Court’s order of August 29, 1975. Certain elements in the Navy maintain that this phrase did not obligate the Navy to negotiate outside of the eight specific items which the Navy was already obligated in February 1975 to nego- tiate pursuant to P00018. We find this contention to be in- eredible in light of the drafters’ deliberate rejection of language which would have specifically limited negotiations to those eight areas contemplated by P00018, and in light of the fact that the Shipyard consistently maintained that the exercise of the DLGN-41 option was invalid. On May 28, 1975 the Navy sent the Shipyard a letter ad- vising the Shipyard of the Government’s maximum accept- able position. This Navy position basically was that the exercise of the DLGN-41 construction option was valid and therefore the Navy was not required to negotiate outside of the eight items in P00018; this meant no change in the October 1978 delivery date or the production schedule, no change in target cost, profit, or ceiling price, and no change in the incentive formula. The Navy would not negotiate outside of the eight items to accomplish a modification of the contract unless the Shipyard could prove that it was entitled to an equitable adjustment due to Government re- sponsibility, or the Shipyard could furnish new considera- tion. The disputed contract for the construction of the DLGN- 41 is a fixed-price, incentive-type contract, with a cost-price envelope defined in terms of a target cost, target profit, target price, and ceiling price as follows: Target cost $ 76,050,000 Target profit + 9,691,000 Target price + 85,741,000 Ceiling price $ 100,951,000 2la The contract compensation provisions also contain adjust- ment and escalation clauses for the contingencies that ac- tual costs may exceed target costs, and that there may be inflation of labor and material costs. . On August 25, 1975 the Shipyard notified the Navy that it was exercising its right to cancel the Memorandum of Understanding, and that all preconstruction work on the DLGN-41 would be suspended as of August 27, 1975. B The Court’s Order: August 29, 1975 to July 13, 1976 On August 29, 1975 the United States filed in this Court its complaint and a motion for a preliminary injunction and a temporary restraining order. On that same day, a hear- ing was heid before the Court on the motion for a tempo- rary restraining order. It was at this hearing that the Court first became aware of the positions of the parties. The Shipyard maintained that the exercise of the DLGN-41 construction option was invalid because: (1) there were in- sufficient appropriations, that the exercise was in contra- vention of 41 U.S.C. §11(a), 31 U.S.C. § 665(a), and the Armed Services Procurement Regulations (ASPR) : (2) the Navy had failed to notify the Shipyard of the specifications for the DLGN-41; and (3) under various legal theories, the option was unenforceable, e.g. commercial impracticability. After arguments on the TRO motion and a brief recess, the parties asked the Court to allow an agreement, which had been reached between the parties, to be read into the record and to be entered as an Order of the Court. The Court, believing that all good faith attempts to reach a settlement should be encouraged, agreed. This Order, by the Court, mooted the TRO issue and stayed the judicial pro- ceedings. It directed, first, that the Shipyard would imme- diately resume the preconstruction work and proceed to 22a undertake construction of the DLGN-41. The Navy agreed to pay for such work. In addition, all changes he. etofore made in the specifications for the earlier DLGN-38, 39 and 40 were to be considered as incorporated into the specifica- tions for the DLGN-41, and the parties agreed to negotiate in good faith the appropriate equitable adjustments for all specification changes. Second, it stated that: The parties agree to negotiate in good faith to reach an agreement as rapidly as possible to modify those contract provisions requiring amendment or to take other appropriate action. Third, the parties agreed to urge the Comptroller General to expedite his opinion on the issues previously submitted by the Shipyard concerning whether the exercise of the DLGN-41 construction option violated 41 U.S.C. §11(a), 31 U.S.C. § 665(a), or the ASPR’s. Mr. Jeffrey Axelrad, representing the United States and the Department of Justice, stipulated to the Court that E. Grey Lewis, the Navy’s General Counsel, would “under- take to ensure the Navy’s obligation” to negotiate under the Order. Unfortunately, the United States’ agreement to negotiate has been undercut by the existence of diverse points of view within the Navy, with the result that the record dis- closes, without possible peradventure, that the United States has fully and totally ignored not only its own February, 1975 agreement, but also the Order of this Court, that ne- gotiations in good faith should ensue. Even before the Mem- orandum of Understanding took effect on February 3, 1975 there was an effort within the Navy to limit negotiations only to certain items listed in P00018. Although counsel for the United States, Mr. Axelrad, in open court acknowl- edged that the Navy’s General Counsel would ensure the Navy’s compliance, on October 29, 1975, Mr. Lewis, that - aids Maca 23a Generai Counsel, was ordered by higher Navy officials to stop all negotiations. Despite the Navy’s appointment of two succeeding chief negotiators, we find that in the eleven months following our August 29, 1975 Order, the United States totally failed to meet its obligations to negotiate in good faith, although at the same time it was receiving the benefits of the Ship- yard’s continued performance under the disputed contract. C Rule’s Appointment and the Compromise Agreement: July 13, 1976 to date On July 13, 1976 the Shipyard instituted, by a motion, an effort to enforce the United States’ agreement to negotiate in good faith and it asked the Court to suspend the Ship- yard’s obligation under the Order of August 29, 1975, to continue work on the DLGN-41 until the United States did undertake to negotiate in good faith to resolve all disputes between the parties concerning the DLGN-41. On that same date, July 13, 1976, Gordon Rule was sum- monsed, with others, to the office of Deputy Secretary of Defense Clements to a meeting concerning the DLGN-41 dis- pute. The United States has claimed executive privilege concerning certain Government minutes of meetings, docu- ments, and records of conversations, which frankly the Court has viewed with an eye to ruling thereon. However, there is ample evidence in the record, to which no privilege is asserted, to justify our findings of fact that: 1. Gordon Rule was appointed by the Deputy Secretary of Defense as chief negotiator for the DLGN-41 dispute with the authority to bind the United States to a compro- mise agreement. In fact, the United States admitted this fact during its argument on January 13, 1977. 24a 2. Deputy Secretary Clements instructed Rule that he wanted to see four items negotiated in any DLGN-41 com- promise agreement: (a) a new escalation clause; (b) a new “changes in the law” clause; (c) a new ceiling price; and (d) a new delivery schedule. 3. Rule was appointed as chief DLGN-41 negotiator in direct response to the Shipyard’s filing of its July 13, 1976 motion. 4. Deputy Secretary of Defense Clements specifically called this meeting of July 13, 1976 for the purpose of prod- ding the Navy to reach a DLGN-41 compromise agreement with the Shipyard. In tuis regard Clements instructed the high Navy officials in attendance that they should there- after meet with him on a daily basis to keep him informed of Rule’s progress in negotiating a compromise. 5. The Shipyard interpreted the appointment of Rule as an indication of the United States’ willingness to negotiate, for the first time, in good faith. As a result, the Shipyard asked this Court, on July 19, 1976, to stay action on its July 13, 1976 motion. 6. On July 16, 1976 Assistant Secretary of the Navy Bauers issued a memorandum which designated Rule as the Navy’s chief DLGN-41 negotiator. On August 19, 1976 the Navy issued Rule a Certificate of Appointment as Contract- ing Officer which recited that he had ‘‘unlimited authority’”’ to negotiate with the Shipyard concerning the DLGN-41 negotiator. On August 19, 1976 the Navy issued Rule a Cer- tificate of Appointment as Contracting Officer which recited that he had ‘‘unlimited authority’’ to negotiate with the Shipyard concerning the DLGN-41 contract dispute. It is significant that Bauers’ memorandum recites that Rule was appointed, after consultation with the Department of Jus- tice, to deal directly with the Shipyard, without the in- volvement of the Department of Justice, and that Rule was to be assisted by the Navy’s General Counsel. 25a 7. Rule is a high ranking civilian Navy employee who is normally assigned as the Director of the Procurement Con- trol and Clearance Division in the Office of the Chief of Naval Material. It is his job function to approve or disap- prove the business clearance on all Navy procurement con- tracts. He is referred to as the ‘‘top civilian contracting officer in the Navy.’’ Rule had previously signed for the United States an unrelated contract modification involving over $1,037,000,000. 8. Serious negotiations between Rule and the Shipyard began on July 15, 1976, continued on an almost daily basis, and resulted on August 20, 1976 in an oral agreement be- tween Rule and the Shipyard on all of the outstanding sub- stantive issues concerning the construction of the DLGN-41, including those specifically charged to him by Secretary Clements. The negotiators agreed that a written document, to be labelled Contract Modification P00037, would confirm and memorialize the terms of the August 20, 1976 agree- ment. 9. On August 20, 1976 the parties orally agreed to a change in the delivery date from October 1978 to August 1980, to a new escalation clause appropriate to the new delivery date, to new and separate fringe benefits and en- ergy cost provisions, and to agree later on a new ‘‘changes in the law’’ provision as they were already obligated to do under the earlier P00018. 10. At the completion of the August 20, 1976 meeting the parties intended themselves to be bound by the agreement reached and only contemplated a memorialization of this agreement in a written document. Despite the United States’ admission that Rule was ini- tially appointed with full authority to bind the United States, an effort was mounted within the Navy before August 20, 1976 to undercut Rule’s specific authority, and to bring it under further Navy scrutiny. Even in the face of that internal Navy effort, such action would not have re- 26a voked Rule’s authority as granted by the Deputy Secretary . of Defense on July 13, 1976, and by Assistant Secretary of . the Navy Bauers, on July 16, 1976, and as expressed as ‘‘ynlimited”’ in the Contracting Officer’s warrant issued. Further Navy efforts to undermine Rule’s authority oc- curred after the agreement was reached on August 20, 1976. On August 30, 1976 an Admiral Michaelis sought to appoint a review panel of three Navy persons, and purported to grant them the sole final authority to bind the Navy to a compromise agreement. On August 23, 1976 Rule met with Deputy Secretary Clements and reported to him that an agreement had been reached with the Shipyard on August 20, 1976. On August 25, 1976 Admiral Reich, a top consultant to Clements, ap- proved a press release announcing that a settlement agree- ment had been reached. A final draft, setting forth the agreement as reached on August 20, 1976, was prepared by the Shipyard, and signed by Rule, subject to two conditions, on October 7, 1976, at 6:00 P.M. On the morning of October 8, 1976, Rule was called to his immediate superior’s office where he was handed a document which stated: ... you do not have the authority to bind the Govern- ment contractually on the proposed modification to CGN-41 contract until the legal and business reviews have been completed .... This document, although dated October 7, 1976, was re- ceived by Rule on the morning of October 8th. Rule delivered Contract Modification P00037 to the Ship- yard but expressly conditioned his execution and delivery of the document on the conditions that: (1) Clements approve the document as memorializing the compromise agreement between the parties; and (2) the labor escalation clause contained in P00037 be modified to provide that the Shipyard would receive the 27a lesser of its actual experience in escalated labor costs, or 125% of the Bureau of Labor Statistics indices. These con- ditions were dictated to a secretary, in the presence of the Shipyard’s agent, and later incorporated in the cover letter for the executed P00037. Later, on October 8, a memorandum from a Navy Cap- tain Thompson was sent to Rule’s office, reciting that Rule’s warrant as a Contracting Officer was revoked. On October 15, 1976 Deputy Secretary of Defense Clem- ents forwarded a copy of the writings executed by Rule to Attorney General Levi. In his cover letter Clements states that the writings present ‘‘a reasonable resolution of this complex matter.’’ He further states: In any event, the District Court instructed the parties as follows: ‘‘The parties agree to negotiate in good faith to reach an agreement as rapidly as possible to modify those contract provisions requiring amendment or to take other appropriate action.’’ Mr. Rule, in the spirit of this order, negotiated a contract modification which, if approved, would undoubtedly facilitate the construction of the badly needed CGN-41. The Department of Justice has since informed the Court that the Attorney General would disapprove the Rule compromise agreement and contends that therefore there is no compromise agreement binding on the United States. IV Conciusions or Law A The United States’ Failure to Act in Geod Faith toward this Court and the Shipyard Even if there is a valid contract the breach of which would entitle the aggrieved party to a damage remedy at law, the specific performance of that contract is not a mat- ter of right under either federal or state law. The granting 28a of the remedy of specific performance rests in the sound discretion of the trial court, which is to exercise its discre- tion according to the established principles of equity and the facts of the case, Williston on Contracts § 1418 (3rd Ed., 1976 Supplement) citing among other cases, Manufac- turers’ Finance Co. v. McKay, 294 U.S. 442, 55 S.Ct. 444 (1934); Barnes v. Sind, 341 F.2d 676 (4th Cir. 1965); Raney v. Barnes Lumber Corp., 195 Va. 956, 970, 81 S.E.2d 578, 586 (1954). A fundamental equity principle is that one who asks for specific performance of a contract must have ‘‘clean hands’’; he must have acted in a fair and equitable fashion with respect to the party against whom he seeks to have the contract enforced. Long before the Navy purported to exercise its option rights on January 31, 1975, the Shipyard informed the Navy that it considered the DGLN-41 construction option to be void. If this litigation had proceeded to trial, this Court would have been required to pass on the validity of the original DLGN-41 option provision. However, the Court’s decision today that the subsequent compromise agreement is binding on the United States moots this issue and settles this litigation. Certain personalities within the Department of the Navy have taken the position that the Navy should not negotiate with the Shipyard on the matters required to be negotiated pursuant to the January 31, 1975 Memorandum of Under- standing and, of more importance to us, this Court’s Order of August 29, 1975. The Navy was not coerced by anyone, including this Court, to agree to negotiate in good faith to resolve the DLGN-41 dispute. The Government, if it were 80 positive of the validity of the original option provision, _ could have had this Court’s final adjudication of the valid- ity of that provision within%six or seven months after the filing of its complaint. However, the United States, through its Department of Justice, represented to this Court that no immediate adjudication of the validity of the disputed 29a option provision was desired, but rather that good faith efforts would be undertaken by the Navy to resolve this dis- pute through an out-of-court compromise agreement, and that while the Court’s Order remained in effect the Ship- yard would be obligated to continue its construction of the DLGN-41, despite its contention that the exercise of the option contract was invalid. If that group within the Navy which disapproved of any negotiations or settlement of the DLGN-41 dispute had at- tained ascendancy in the Navy’s decision-making hierarchy, they could have asked this Court to revoke its Order of August 29, 1975, and to proceed to adjudicate the validity of the exercise of the option. This did not occur. Instead the official position of the Government was that good faith ne- gotiations to resolve all of the DLGN-41 dispute were de- sired, while certain Navy elements were even then under- cutting the progress of any efforts toward good faith nego- tiation. We do not decide whether it was in the best inter- ests of the United States to negotiate or to litigate the DLGN-41 dispute; we only conclude that the Navy, and the United States, has not acted in good faith. For this reason, the United States does not have clean hands to ask this Court to specifically enforce the original DLGN-41 con- struction option. B A Declaratory Judgment that the United States is Bound by the Compromise Agreement is Justified The United States has raised numerous legal objections to the validity and enforceability of the August 20, 1976 compromise agreement. These cbjections include: (1) that sovereign immunity deprives the Court of jurisdiction to declare that the United States is bound by a compromise agreement which settles and moots this action; (2) that Rule lacked authority to bind the United States; (3) that the August 20, 1976 agreement is unenforceable because it 30a was oral; (4) that there has been no meeting of the minds; (5) that the compromise agreement is void because of the Shipyard’s failure to provide the Government with cost and pricing data; (6) that Rule could not bind the United States without the approval of the Attorney General; and (7) that the compromise agreement is not supported by adequate consideration. While we consider some of these charges to be of no moment, nevertheless, we separately ad- dress each of these legal objections and conclude that none of them prevent the compromise agreement from binding the United States. 1 Sovereign Immunity We need not dwell long on the two sovereign immunity arguments raised by the United States. By granting judg- ment for the Shipyard neither do we grant a damages judg- ment against the United States, nor do we order the equi- table reformation of a contract to which the United States is a party. We merely declare that the parties are legally bound by a compromise agreement. This compromise agree- ment moots the issue as to whether that prior contract was enforceable. Certainly if the facts show that the issues are moot in a suit brought by the United States for specific performance of a contract, the Court has jurisdiction, under 28 U.S.C. § 1345, to so find, and to dismiss with prejudice the Govern- ment’s case. It make no practical difference whether the Court’s judgment is styled a dismissal with prejudice be- cause of mootness, or a declaratory judgment for the de- fendant that the settlement agreement is binding. The res judicata and collaterai estoppel effects are the same.’ 1 We find it a little tenuous for the Government, after instituting this suit in this Court, to now question the jurisdiction of the Court to hear and determine the whole matter, including a bona fide settlement of the dispute. 3la We need not decide whether the enactment on October 21, 1976 of Public Law 94-574, 90 Stat. 2721, which amends 5 U.S.C. § 702, grants this Court any additional jurisdiction with respect to this litigation. 2 Rule’s Authority The United States admits that Gordon Rule had complete and final authority to bind the United States when he was appointed on July 13, 1976, as chief Navy negotiator in the DLGN-41 dispute. However, the United States contends that, subsequent to his appointment and prior to any agree- ment reached between himself and the Shipyard, his author- ity was limited to the negotiation of a proposed settlement, which required the further approval of a higher authority in the Departments of Defense or Navy, and the approval of the Attorney General. We disagree. Gordon Rule was appointed as the Navy’s chief negoti- ator for the DLGN-41 dispute by Deputy Secretary William P. Clements during a meeting held in Clements’ office at- tended by the high-level Department of Defense and Navy personnei concerned with this dispute with the Shipyard. Rule’s appointment was in direct response to the Ship- yard’s having filed a motion to compel the United States to comply with this Court’s Order of August 29, 1975. It was Mr. Clements’ stated and recorded belief that the Navy had failed so far to negotiate with the Shipyard in good faith. The Department of Justice admits that the Attorney Gen- eral was aware of this grant of authority to Rule. The Justice Department attempts now to discredit the settlement worked ont by Rule. It suggests that Rule did not act with the best interests of the United States in mind. We find nothing in the record to svpport this view. In fact, Rule was apyointed by Clements because of his reputation in negotiating settlements with contractors. That segment 32a of the Navy command which was upset at Rule’s appoint- ment, but was then unable to prevent it, now attempts to discredit his completed settlement. On August 19, 1976 Rule was issued a contracting offi- cer’s warrant signed by Captain Gerald J. Thompson, Dep- uty Chief of Naval Material. That document stated that Rule had ‘‘unlimited authority to negotiate with the Ship- yard concerning the DLGN-41 dispute.’’ This warrant was not revoked until October 8, 1976. It is incredible to the Court that the United States now maintains that ‘‘unlim- ited authority to negotiate for the United States’’ does not include the authority to bind the United States. This argu- ment is contrary to the dictates of common sense and the English language. If the warrant authority did not include the power to bind the United States, why did certain Navy officials feel the need to revoke the warrant on October 8, 1976? Rule had signed and delivered the draft setting out the Contract Modification P00037 prior to this revocation. 3 Statute of Frauds The United States claims that even if Rule had the au- thority on August 20, 1976 to bind the United States, any agreement reached on that date would not be enforceable because it was oral. The United States contends that 31 U.S.C. § 200(a) es- tablishes that an agreement must be evidenced by docu- ments before it can be binding on the United States. This provision states in pertinent part: After August 26, 1954 no amount shall be recorded as an obligation of the Government of the United States unless it is supported by documentary evidence of— (1) a binding agreement in writing between the par- ties thereto, including Government agencies, in a man- ner and form and for a purpose authorized by law, 33a executed before the expiration of the period of availa- bility for obligation of the appropriation concerned for specific goods to be delivered, real property to be pur- chased or leased, or work or services to be peformed ; or @ e @ (6) a liability which may result from pending litiga- tion brought under authority of law; or (8) any other legal liability of the United States against an appropriation or fund legally available thereto. The Government cites United States v. American Ren- assance Lines, Inc., 494 F.2d 1059 (1974) where the Court of Appeals for the District of Columbia Circuit held that an oral charter agreement was unenforceable against the United States because of § 200(a). That Court rejected the argument that § 200(a) was merely ‘‘a recordation statute to facilitate auditing’’ by Congress of the Executive’s spending in order to determine future appropriation re- quirements; rather it held that the statute makes oral con- tracts with the Government unenforceable. It is unneces- sary for us to reach the issue whether 4 200(a) is applicable to the August 20, 1976 compromise agreement for we find that the requirements of § 200(a) have been met under both subsections (1) and (6). Under subsection (1) the oral compromise agreement on August 20, 1976 is evidenced by the document (Contract Modification P00037) which Rule signed on October 7, 1976, and the cover letter of October 8, 1976. Secondly, the requirements of subsection (6) have been met. The oral agreement which was reached on August 20, 1976 was negotiated pursuant to this Court’s Order of Au- gust 29, 1975. This oral agreement entered into by the duly authorized agents of the parties to this pending litigation 34a certainly establishes the liability of the parties after this Court accepts that agreement as the settlement of this action. 4 Meeting of the Minds The United States maintains that there was no meeting of the minds on August 20, 1976 and therefore no binding agreement. As evidence of this contention they cite the parties’ agreement that a draft of the agreement be for- malized. It is well settled that the mere fact that the parties contemplated a reduction of an oral agreement to writing does not prevent the agreement from becoming binding as of the date of the oral agreement. Here, a draft was agreed to in order to correctly reflect the August 20th oral agreement. The precise language and operation of the labor costs escalation clause had been a major item of disagreement between the parties in the negotiations. The parties agreed on August 20th to grant the Government the most favor- able escalation provision as disclosed by the Shipyard’s actual experience. In the original DLGN-41 construction option contained in Article 28 of P0007, the Shipyard was to receive the lesser of its actual experience or 125% of the Bureau of Labor Statistics’ index for wage costs. The basic writing signed by Rule on October 7, «.e., Contract Modification P00037, recited only that the Shipyard would receive 125% of the BLS index irrespective of its actual experience; however, Rule conditions his signing and de- livery of the document on the modification of the writing to go back and incorporate the same type provision as was in force in P0007. The Shipyard has agreed. We find that this modification by Rule of P00037 reflects the substance of the oral agreement reached by the parties on August 20, 1976. 17 C.J.S., Contracts, § 31. 35a At the August 20th meeting the parties did not work out the specific language for a labor cost escalation clause. At subsequent sessions it was found that all parties were operating under the mistaken impression that the Ship- yard was experiencing a rate of increase in labor costs greater than the BLS index. To give the Government the best position, the 125% of the BLS index provision was chosen to reflect the August 20, 1976 agreement. When, however, by October 7, it became known that the Shipyard had sometimes been experiencing a rate of increase in labor costs less than the BLS index, the change in lan- guage imposed by Rule was appropriate to reflect the actual August 20, 1976 agreement. We need not worry whether the parties contemplated on August 20, 1976 that approval by Deputy Secretary Clements was necessary to bind the Government, for we find that Clements, in any case, has granted such approval. In his letter of October 15, 1976 to Attorney General Levi, Clements granted his approval to the Rule compromise agreement. We do not agree with the Government that Clements must use the magic words ‘‘I approve’’ before this Court can conclude that Clements in fact has approved the compromise agreement. Clements stated: In view of the long-standing, acrimonious, and disrup- tive controversy between the Navy and its sole present new construction surface nuclear warship contractor, T consider it vital to the national defense that this dispute be resolved as quickly as possible. I consider the proposed modification a reasonable resolution to this complex matter. 5 Failure to Provide Cost or Pricing Data The United States argues that the compromise agree- ment negotiated between Rule and the Shipyard is not 36a binding on the Government because the Shipyard failed to submit cost or pricing data to the Government. This argu- ment rests on the proposition that such data is required by Armed Services Procurement Regulations (ASPR) § 3-807.3 and by statute, 10 U.S.C. § 2306(f), that the absence of such data invalidates the agreement, and that the requirements cannot be waived. 10 U.S.C. § 2306(f) states in pertinent part: A prime contractor or any subcontractor shall be re- quired to submit cost or pricing data under the cir- cumstances listed below, and shall be required to cer- tify that, to the best of his knowledge and belief, the cost or pricing data he submitted was accurate, com- plete and current— (2) Prior to the pricing of any contract change or modification for which the price adjustment is expected to exceed $100,000, or such lesser amount as may be prescribed by the head of the agency.... Section 3-807.3 of ASPR [32 C.F.R. § 3.807] implements this statute and provides: (a) The contracting officer shall require the contractor to submit, either actually or by specific identification in writing, cost or pricing data in accordance with 16-206 of this chapter and to certify by the use of the certificate set forth in 3-807.4, that, to the best of his knowledge and belief, the cost or pricing data he submitted was accurate, complete and current prior to: (2) the pricing of any modification to any formally advertised or negotiated contract, whether or not cost or pricing data was required in connection with the initial pricing of the contract, when the modification involves aggregate increases and/or decreases in cost plus applicable profits expected to exceed $100,000. 37a The Shipyard has not furnished the Navy the certificate of cost data as specified by ASPR 3-807.3. The original cortract (N00024-70-C-0252) contained a now standard ‘‘Price Reduction for Defective Cost of Pricing Data’’ clause which reads: (a) If the Contracting Officer determines that any price, including profit or fee negotiated in connection with this contract was increased by any significant sums because the Contractor . . . furnished incomplete or inaccurate cost or pricing data not current as cer- tified in the Contractor’s Certificate of Current Cost or Pricing Data, then such price shall be reduced accordingly and the contract shall be modified in writ- ing to reflect such adjustment. This provision was included in the contract, as required by 10 U.S.C. § 2306(f), which states: m Any prime contract or change or modification thereto under which such certificate [Certificate of Current Cost or Pricing Data] is required shall contain a pro- vision that the price to the Government, including profit or fee, shall be adjusted to exclude any signifi- cant sums by which it may be determined by the head of the agency that such price was increased because the contractor required to furnish such a certificate, furnished cost or pricing data which, as of date agreed upon between the parties . . . was inaccurate, incom- plete, or non-current. .. . It appears obvious from these quotations that the submis- sion of price and cost data is not a preccndition to a find- ing that the Government is bound by the contract or any subsequent modification thereof. The failure on the part of the Shipyard to ultimately furnish complete an [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_1080%3A1. Public record. Not legal advice.