Petition for Writ of Certiorari — Applied Companies Companies v. Geren (No. 06-817)

Supreme Court, U.S.

FILEO

06-81 70cC 08 2006

No. OFFICE OF THE CLERK

In the

Supreme Court of the United States

APPLIED COMPANIES,

Petitioner,

V.

FRANCIS J. HARVEY,

Secretary of the Army,

Respondent.

On Petition for a Writ of Certiorari to the United

States Court of Appeals for the Federal Circuit

PETITION FOR WRIT OF CERTIORARI

PeTerR B. JONES

(Counsel of Record)

JONES & DONOVAN

3636 Bircu STREET

SurrE 210

Newport BEAcH, CA 92660

(949) 833-8893

Counsel for Petitioner

Applied Companies

Becker Gallagher + Cincinnan, OH - Washington. DC. ° 8U0. Sey) SiN

pf pes | tf

i

QUESTION PRESENTED

At issue is the vitality of the Supreme Court’s rule limiting

issues absent a cross-appeal; specifically:

May a court of appeals entertain an appellee’s affirmative

defense to liability, rejected at trial level, where the appellee

has not cross-appealed?

ee.

PARTIES TO THE PROCEEDING

(and Corporate Disclosure Statement) -

Petitioner

Applied Companies is a California corporation, which has

not issued shares to the public. No publicly held corporation

owns any of Applied Companies’ stock.

Respondent

Respondent is the United States of America acting by and

through the Department of the Army, Francis J. Harvey,

~ Secretary.

iil

TABLE OF CONTENTS |

Page

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PARTIES TO THE PROCEEDING ......ccccccess 1

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BASIS FOR JURISDICTION .... 0... ee cee eee J

RECFULA TRI IN VOIVED «cece ea cen wees 2

STATEMENT OF THE CASE .. 2... ccc eevee 2

ARGUMENT FOR GRANTING THE WRIT ....... 6

A. THE FEDERAL CIRCUIT’S DECISION

FLOUTS AN “INVETERATE AND CERTAIN”

RULE THAT LIMITS ISSUES ABSENT A

CROSS-APPEAL

B. THE - FEDERAL CIRCUIT’S DECISION

FLOUTS THE CROSS-APPEAL RULE IN

ORDER TO CONTINUE THAT COURT'S

PATH OF DISCARDING COMMERCIAL

CONTRACT LAW, CONTRARY TO SUPREME

COURT INSTRUCTIONS TO APPLY THAT

CONCLUSION

APPENDIX

Appendix A - Federal Circuit Order Denying

I IE I eo. Vio no wv soe la

Appendix B - Federal Circuit Errata Sheets of 8/23/06

and 7/14/06 and Federal Circuit Opinion

UU oo ais he ee eae 8 ee 2a

Appendix C - Federal Circuit Judgment

PE 6 6 ek ksi a od ree ew ae 14a

Appendix D - Armed Services Board of Contract

Appeals Opinion of 11/2/04 ............... 15a

Appendix E - Armed Services Board of Contract

Appeals Opinion on Appellant’s Motion for

mecomenberation OF GITSIGS 2. ce ees 85a

Vv

TABLE OF AUTHORITIES

: Page

Cases

B.F. Goodrich Co. v. United States,

Se ae ee CER, BD. co Oe eo eck Caw 12

Brownlee v. Dyncorp,

349 F.3d 1343 (Fed.Cir. 2003)

El Paso Natural Gas Co. v. Neztsosie,

526 U.S. 473, 119 S.Ct. 1430,

SAS 5 ae Ce vcs cs ew ha eS 6,7

Lynch v. United States,

292 U.S. 571, 54 S.Ct. 840,

78 L.Ed. 1434 (1934)

Mobil Oil Exploration and Producing, Southeast, Inc.

v. United States,

530 U.S. 604, 120 S.Ct. 2423,

54F 5 Oe CR onc ba oo we ee oe 12

Morley Constr. Co. v. Maryland Casualty Co.,

300 U.S. 185, 57 S.Ct. 325,

81 L.Ed. 593 (1937)

Perry v. United States,

294 U.S. 330, 55 S.Ct. 432,

79 L.Ed. 912 (1935)

TEG-Paradigm Environmental, Inc. v. United States,

Federal Circuit No. 06-5007 (September 29, 2006) . 13

2

vi

United States v. ITT Continental Baking Co..,

420 U.S. 223, 95 S.Ct. 926,

TP Eee SP CIRIOE 6 vo vec ca ccd tetewe 4,7,8

United States v. National Exchange Bank of

Baltimore, Md..,

270 U.S. 527, 46 S.Ct. 388,

Se. Pe CO on oc ao ok eee eae 12

United States v. Winstar Corp.,

518 U.S. 839, 116 S.Ct. 2432,

Par cee Oe CE 9 x ve 6 mk a wk iin wb eles 12

Statutes

ee es Oe ee i ere 8 bk ks ere eevee !

UI MS a NOs ar rr sh pias she mais a

Rules

NII oh eg a aah ee eee 3

Ni a Sle Gra ta ata taie and l

Regulations

Lak, bo og Ee aaa en rene pare sane ne 1]

ee te ee RE ke ke eee ee ees 2,9

Other Authorities

Graham, “Departing From Hadley: Recovering Lost

Profits on Collateral Undertakings in Suits Against

The Government,”

35 Pub. Cont. L..J. 43 (2005)

Vil

Johnson, “Interpreting Government Contracts: Plain

Meaning Precludes Extrinsic Evidence and Controls

at the Federal Circuit,”

oe ree. Cee. 1. 5. GS Ge sec ce eears 13

Restatement of Contracts (2d)

I

PETITION FOR WRIT OF CERTIORARI

OPINIONS BELOW

Armed Services Board of Contract Appeals:

Applied Companies, ASBCA Nos. 50593, 52102, 99-2

BCA 4 30,554 (on cross-motions for summary

judgment).

Applied Companies, ASBCA No. 50593, 04-2 BCA

q 32,786 (on the merits).

Applied Companies, ASBCA No. 50593, 05-2 BCA

¢ 32,986 (on motion for reconsideration).

Federal Circuit Court of Appeals:

Applied Companies v. Harvey, 456 F.3d 1380 (2006)

BASIS FOR JURISDICTION

The judgment and opinion of the United States Court of

- Appeals for the Federal Circuit were entered and issued on

July 14, 2006. Applied Companies filed a timely petition for

panel rehearing on August 17, 2006, within the 45 days

allowed by FRAP 40(a)(1). Substantive changes to the

Federal Circuit’s opinion were made by “errata” dated

August 23, 2006. The petition for panel rehearing was denied

by order dated September 12, 2006. This petition for

certiorari is filed within 90 days of that order. The Supreme

Court’s jurisdiction is invoked pursuant to 28 U.S.C.

§§ 1254(1) and 2106.

2

REGULATION INVOLVED

Federal Acquisition Regulation (FAR) 48 CFR Part 48 -

“Value Engineering” and 48 CFR § 52.248-1, contract clause

entitled “Value Engineering”, pertinent portions of which are

set out in the Appendix pp. 17a-20a.

STATEMENT OF THE CASE

Military-specification air conditioners come in five sizes.

Applied Companies contracted with the United States Army

to supply air conditioners in the 36,000 BTU size. The

contract included the standard “Value Engineering” (VE)

clause, 48 CFR (FAR) § 52.248-1. Applied submitted and

the government accepted a value engineering change proposal

(VECP). The VE change reduced the costs of air

conditioners by $2,979 apiece. Appendix pp. 40a-45a

(Finding 18).

The VE clause provides that a contractor is to receive a

50% share of three years’ savings on future contracts for

“essentially the same item.” Applied claimed a 50% share of

savings on military-specification air conditioners in five sizes

on grounds that all five were “essentially the same.” The

government asserted a defense of accord and satisfaction and

denied liability for any future contract savings. That defense

was based on the wording of bilateral contract modification

P9, which conditionally accepted the VECP (subject to

testing).

Applied’s claim was decided by the Armed Services Board

of Contract Appeals (ASBCA) pursuant to the Contract

Disputes Act, 41 U.S.C. § 607. The ASBCA’s decision,

3

under the heading “Entitlement,”' denied the Government’s

accord-and-satisfaction defense, and decided that the

contractor was entitled to share in future contract savings.

Appendix pp. 48a-55a. Under the heading “Quantum,” the

ASBCA awarded the contractor $1,000,947, as its share of

savings on future contracts for 36,000 BTU air conditioners.

The ASBCA plurality declined to award a share in future

contract savings for military-specification air conditioners in

the other four sizes on grounds that the contractor had failed

to carry a burden to prove the dollar quantum of savings on

each of those other “configurations” of air conditioners.

Appendix pp. 63a and 84a.

Pursuant to 41 U.S.C. § 607(g)(1)(A), Applied appealed

the ASBCA’s decision to the Federal Circuit Court of

Appeals. Applied’s brief presented and argued the issues

whether the ASBCA applied the correct law in determination

of quantum.

The government did not appeal pursuant to 41 U.S.C.

§ 607(g)(1)(B)’ or file a cross-appeal pursuant to FRAP

4(a)(3). But in appellee’s brief the government argued that in

modification P9 “Applied Companies Abandoned Any Claim

' It is the ASBCA’s long-standing practice to bifurcate its cases into

phases of “entitlement,” meaning liability, and “quantum,”

meaning dollar amount of the claimant’s recovery. See e.g.

Brownlee v. Dyncorp, 349 F.3d 1343, 1347-1349 (Fed.Cir. 2003).

’ The Contract Disputes Act, 41 U.S.C. § 607(g)(1), gives both the

contractor and the government 120 days to appeal to the Federal

Circuit. Applied’s notice of appeal was filed 58 days after the date

of the ASBCA’s order denying reconsideration. Therefore the

government had plenty of time after notice of Applied’s appeal to

file its own appeal.

4

For Compensation Based On Other Contracts” and that, “the

board erred in refusing to enforce the plain meaning of ...

modification [P9].”* Applied’s reply brief argued that, absent

a cross-appeal, the government’s argument of error in the

ASBCA’s adjudication of entitlement, rejecting the

government’s affirmative defense, was not cognizable by the

court of appeals.

Without acknowledging the cross-appeal rule, the Federal

Circuit entertained the appellee’s argument that the ASBCA’s

adjudication of the affirmative defense to liability was error,

held that the appellant was not entitled to any recovery, and

“affirmed” an award of $1 million on grounds that the correct

award was zero. The Federal Circuit’s decision is based on

that court’s interpretation of mod P9, in disagreement with the

ASBCA:

* The government’s appellee’s brief conceded that the ASBCA’s

quantum decision was “flawed” and resorted to the argument that

Applied “abandoned” its right to share in any future contract

savings as an “alternative basis for affirming the board.” Brief for

Appellee dated January 27, 2006, pp.26-27. Compare with

respondent's arguments in United States v. ITT Continental Baking

5

“... we hold that mod P9 and mod P15,* read

together harmoniously, clearly provide that Applied is

not entitled to a share in future savings.

“Because the agreement between Applied and the

Army provided unambiguously that Applied was not

entitled to share in any future savings, the Board

correctly declined to award Applied a share of future

savings for additional AC models. Accordingly, the

decision of the Board is AFFIRMED.” Emphasis

added. Appendix pp. 11a and 13a.

* Contract modification P15 was a- unilateral modification not

signed by the contractor. The government did not argue that

modification P15 was part of the parties’ agreement. The Federal

Circuit’s “reading” of modification P15 into the parties’ agreement

was done sua sponte. The Federal Circuit’s original opinion stated

that the parties’ agreement consisted of mod P9 and “... mod P15,

which unconditionally accepted the VECP.” After Applied filed a

petition for panel rehearing on August 17, 2006, noting the

inaccuracy of the court’s characterization of PI5, the Federal

Circuit issued an “errata” dated August 23, 2006 which made

substantive changes to the original decision including replacement

of the court’s characterization of mod PI5 with “... mod P15,

which definitized mutually agreed upon cost savings data in

accordance with Applied Companies’ fax of December 20, 1991.”

Appendix p. 2a.

6

ARGUMENT FOR GRANTING THE WRIT

A. THE FEDERAL CIRCUIT’S DECISION FLOUTS AN

“INVETERATE AND CERTAIN” RULE THAT

LIMITS ISSUES ABSENT A CROSS-APPEAL. _

__ By entertaining an appellee’s argument attacking the trial

tribunal’s ruling against an affirmative defense, without a

cross-appeal, and by allowing that defense as the basis for

decision, the Federal Circuit has so far departed from the

accepted and usual course of judicial proceedings as to call

for an exercise of the Supreme Court’s supervisory power.

Repeated Supreme Court decisions establish the principle

that “[a]bsent a cross-appeal, an appellee may ‘urge in

support of a decree any matter appearing in the record,

although his argument may involve an attack upon the

reasoning of the lower court,’ but may not ‘attack the [lower

court’s] decree with a view either to enlarging his own rights

thereunder or of lessening the rights of his adversary.’

[Citations omitted.]” El Paso Natural Gas Co. v. Neztsosie.

526 U.S. 473, 119 S.Ct. 1430, 1434-1435, 143 L.Ed.2d 635

(1999). In its last statement of the cross-appeal rule, the

Supreme Court took the trouble to state that it had “repeatedly

affirmed” the rule, that it was recognized “as early as 1796,”

and that “more than 60 years ago we spoke of it as ‘inveterate

and certain.’” Ibid, 526 U.S. at 479-480, 119 S.Ct. at 1434-

1435.

In this case, without a cross-appeal, the Federal Circuit

entertained and adopted an argument that revived an

affirmative defense to any liability which the appellee had lost

below. The Federal Circuit thereby flouted the Supreme |

Court's rule without even acknowledging its existence (even

though the rule was invoked in the appellant's reply brief).

7

It is no answer to the cross-appeal rule to assert that the

appellee accepted the judgment below and therefore did not

seek to lessen the rights won by his adversary. That is no

answer because the rule operates to limit issues; it “is meant

to protect institutional interests in orderly functioning of the

judicial system, by putting opposing parties and appellate

courts on notice of the issues to be litigated and encouraging

repose of those that are not.” El Paso Natural Gas Co. v.

Neztsosie, supra, 526 U.S. at 481-482, 119 S.Ct. at 1436.

The issue-specific nature of the rule is illustrated in Morley

Constr. Co. v. Maryland Casualty Co., 300 U.S. 185, 191,

57 S.Ct. 325, 81 L.Ed. 593 (1937) (which is cited in El Paso

Natural Gas, supra), in which the plaintiff-appellee had sought

alternative forms of relief, lost one and won the other, and did

not cross-appeal. The Supreme Court reversed a court of

appeals’ reinstatement of the relief that was lost because

“where only one party appeals the other is bound by the

decree in the court below and he cannot assign error in the

appellate court ...”. 300 U.S. at 191, 57 S.Ct. at 328. In

Applied’s case, the appellee government succeeded with the

assignment that “the board erred by refusing to enforce the

plain meaning of the relevant paragraphs of modification

PO00009” (by which paragraphs, the government argued,

“Applied Companies abandoned any claim for compensation

based on other contracts”). Brief for appellee dated January

27,2006, pp.42-43. The reasoning that an appellee, without

a cross-appeal, can re-argue a lost defense if he is willing to

accept the end result has been attempted and specifically

rejected by the Supreme Court. In United States v. ITT

Continental Baking Co., 420 U.S. 223, 95 S.Ct. 926, 43

L.Ed.2d 148 (1975), ITT had been held liable for a single

violation penalty. The Government appealed arguing for a

continuing violation and daily penalties. At the Supreme

Court, ITT did not cross-petition for certiorari but argued that

——

8

there had been no violation. The Court would .ot hear that,

stating:

“Respondent [ITT] recognizes that, not having

cross-petitioned, it cannot attack the judgment insofar

as it sustained the findings of violations and imposed

penalties for violations. [Citations, including Morley

Constr. Co., supra, omitted.] Respondent argues that

it may nevertheless seek to sustain the Court of

Appeals’ limitation on the penalties on the theory that

no penalty should have been awarded at all.

Ordinarily however ... we do not entertain a

challenge to a decision on the merits where the only

petition for certiorari presents solely a question of the

remedy granted for a liability found to exist, even if

the respondent is willing to accept whatever judgment

has already been entered against him.” 420 U.S. at

225 n.2., 95 S.Ct. at 929 n.2.

The Federal Circuit’s decision rides over the Supreme

Court’s “inveterate and certain” rule of limitation of issues on

appeal, without even acknowledging that rule. The Federal

Circuit’s decision usurps the authority to substitute that

court’s own determination of liability and of an affirmative

defense in a case in which a trial tribunal’s determination of

those matters was not appealed. The Supreme Court should

exercise its supervisory power to reverse that usurpation and

confirm the vitality of the cross-appeal rule.

9

B. THE FEDERAL CIRCUIT’S DECISION FLOUTS

THE CROSS-APPEAL RULE IN ORDER TO

CONTINUE THAT COURT’S PATH OF

DISCARDING COMMERCIAL CONTRACT LAW,

CONTRARY TO SUPREME COURT

INSTRUCTIONS TO APPLY THAT LAW.

The gravamen of the Federal Circuit’s decision is that

court’s interpretation of the parties’ written agreement

conditionally accepting Applied’s VECP. That agreement,

modification P9, included:

“It is mutually agreed that there will be no future

contract sharing provisions.”

and

“This price adjustment is an estimate ... the savings

are subject to negotiation and final adjustment ..

Further, it is mutually agreed that the negotiated

settlement method shall be the ‘Lump-Sum Settlement

Method.’” Appendix p. 29a.

The VE clause’s provision for a “lump sum” applies only to

future contract savings and is an alternative to “a series of

payments over time as future contracts are awarded”. 48

CFR § 52.248-1, “Value Engineering,” 4 (i)(4).2 The

ASBCA interpreted mod P9 to mean that there was no need

to provide for future contract sharing provisions because the

parties agreed to discharge the future savings in a single lump

sum. Appendix p. 52a. Rejecting (and mischaracterizing)

> “When the Government wishes and the Contractor agrees, the

Contractor's share of future contract savings may be paid in single

lump sum rather than in a series of payments over time as future

contracts are awarded.”

- 10

that interpretation, the Federal Circuit held that the “lump

sum” language adopted by the parties in their agreement was

“irrelevant” and meaningless:

“The Board also found mod P9's language that

‘the negotiated settlement method shall be the Lump-

Sum Settlement Method’ to contradict® language

indicating that Applied would not be entitled to future

savings, because the VE clause only mentions a lump-

sum settlement method as an option with future

contract savings. [Emphasis in original.

The inclusion in mod P9 of language referring to

the lump-sum payment method was, at most,

irrelevant. ... Accordingly, we hold that mod P9 and

mod P15, read together harmoniously clearly provide

that Applied is not entitled to a share in future

savings.” Appendix pp. 10a-l1la. Emphasis added.

° The Board made no such “finding” or conclusion of contradiction.

To the contrary, the Board interpreted mod P9 harmoniously and

coherently:

‘... a lump sum adjustment was the agreed procedure.

Therefore there would be no provision for future savings

by way of royalties as future AC units were procured.

Accordingly there was no need for ‘future contract sharing

provisions’ in the modification.” Appendix p. 52a.

11

The Federal Circuit’s interpretation’ offends a basic canon

of contract interpretation as set forth in Restatement of

Contracts (2d):

Ҥ 203. Standards of Preference in Interpretation

“(a) an interpretation which gives a reasonable,

lawful, and effective meaning to all the terms is

preferred to an interpretation which leaves a part

unreasonable, unlawful, or of no effect;”

It is hard to imagine an interpretation that would more offend

that rule than the Federal Circuit’s procrustean expedient of

simply lopping off a perfectly comprehensible sentence -

which bears precisely on the subject of a signed agreement —

as “irrelevant.”

The Federal Circuit’s decision offends another

fundamental rule of contract law: interpretation against the

draftsman. Ina finding of fact that is final, the ASBCA found

that mod P9 was “drafted by the government.” Appendix

pp. 26a-27a, Finding 11. The Restatement of Contracts (2d)

provides:

” No Government representative testified that the government held

or relied on an interpretation like the Federal Circuit’s. No

government representative testified to an intention that the

contractor would waive, release or exchange its VE clause right to

a share in future contract savings. Since 48 CFR (FAR) § 48.102

directs that “Agencies shall ... provide contractors a fair share of

the savings on accepted VECPs” it is questionable whether agency

contracting officials would have had authority to extract a waiver

of the contractor’s share.

12

Ҥ 206. Interpretation Against the Draftsman

In choosing among the reasonable meanings of a

promise or agreement or a term thereof, that meaning

is generally preferred which operates against the party

who supplies the words or from whom a writing

otherwise proceeds” .

That rule was held, by the Federal Circuit’s predecessor

court, to apply specifically to the VE clause. B.F. Goodrich

Co. v. United States, 398 F.2d 843, 847 (Ct.Cl. 1968)

(“Since this [VE] clause was drafted by the Government, it

should be read against the defendant.”) But the Federal

Circuit’s decision “interprets” the parties’ agreement in a

manner exceedingly adverse to the party who did not draft the

agreement — as a complete forfeiture of that party’s VE clause

right to share in millions of dollars of future contract savings.

Those actions of the Federal Circuit in this case are further

steps on the path taken by that court to discard established

commercial contract law, especially as set out in the

Restatement.

It is a principle, often restated by the Supreme Court, that

contracts of the United States are subject to the same law that

governs the contracts of private parties. United States v.

National Exchange Bank of Baltimore, Md., 270 U.S. 527,

534, 46 S.Ct. 388, 389, 70 L.Ed. 717 (1926) (“The United

States does business on business terms”); Lynch v. United

States, 292 U.S. 571, 579, 54 S.Ct. 840, 843, 78 L.Ed. 1434

(1934); Perry v. United States, 294 U.S. 330, 352, 55 S.Ct.

432, 435, 79 L.Ed. 912 (1935); United States v. Winstar

Corp., 518 U.S. 839, 895, 116 S.Ct. 2432, 2464-65, 135

L.Ed.2d 964 (1996). In Mobil Oil Exploration and

Producing, Southeast, Inc. v. United States, 530 U.S. 604,

607, 120 S.Ct. 2423, 2429, 147 L.Ed.2d 528 (2000), the

Supreme Court again reaffirmed the principle and noted “The

13

Restatement of Contracts reflects many of the principles of

contract law that are applicable to this case.”

In Applied’s case the Federal Circuit gave not even a nod

to the Restatement’s principles of “effective meaning to all

terms” and “interpretation against the draftsman,” §§ 203(a)

and 206, above. That is all of a piece with the Federal

Circuit’s path away from established contract law, as noted in

commentary: Johnson, “Interpreting Government Contracts:

Plain Meaning Precludes Extrinsic Evidence® and Controls at

the Federal Circuit,” 34 Pub. Cont. L. J. 635 (2005). (The

Circuit has not explained its reasons for rejecting the

Restatement _(Second)’s_ rules of contract interpretation.

Notwithstanding the Supreme Court’s insistence that the

general law of contracts governs federal contracts, the Circuit

* The Federal Circuit has recently restated its “ plain meaning” and

“extrinsic evidence” rules in TEG-Paradigm Environmental, Inc.

v. United States, No. 06-5007 (September 29, 2006), Slip Op. pp.

14-16, which asserts that “extrinsic evidence may not be used to

interpret an unambiguous contract provision.” Slip Op. at 15.

That rule is directly contra Restatement § 212, Comment b, “Plain

meaning and extrinsic evidence” which includes: “Any

determination of meaning or ambiguity should only be made in light

of the relevant evidence of the situation and relations of the parties

... preliminary negotiations and statements made therein ...” and

Comment c: “The rule of [§ 212] Subsection (1) permits reference

to the negotiations of the parties, including statements of intention

... $0 long as they are used to show the meaning of the writing.”

Emphasis added. In Applied’s case, the Federal Circuit

characterized the testimony of a government official (and Army

procuring activity Deputy Commander) to the Army’s intention as

“parol.” Appendix p. Ila. (Compare with Restatement § 213

“(Parol Evidence Rule)” (“A _ binding integrated agreement

discharges prior agreements to the extent that it is inconsistent with

them.” Emphasis added. ))

14

may see no need to explain ...”) Emphasis added. 34 Pub.

Cont. L.J. at 636 and 672.°

CONCLUSION

Certiorari should be granted and the Federal Circuit’s

decision should be reviewed and summarily reversed because

that decision deviates from established law limiting issues

cognizable by a court of appeals. The Federal Circuit’s

arrogation of power to decide issues excluded by the long-

standing cross-appeal rule calls for use of the Supreme

Court’s supervisory power. The Federal Circuit’s decision

unmistakably signals that, if not reined in, that court will

honor no such constraint on its power to entertain any issues

at all.

In addition, the Federal Circuit’s decision in this case

signals that that court will continue on its path of ignoring

established contract law, especially the Restatement of

Contracts 2d, and of fashioning wholly new law for contracts

of the government. It would be appropriate for the Supreme

Court also to rein in the Federal Circuit’s deviation from

established contract law.

® See also Graham, “Departing From Hadley: Recovering Lost

Profits on Collateral Undertakings in Suits Against The

Government,” 35 Pub. Cont. L.J. 43 (2005). (“In suits against the

Government Hadley [v. Baxendale, 156 Eng. Rep. 154 (1854)] is

subject to an important qualification. ... the Federal Circuit

generally holds that lost profits must flow from the contract with

the Government ... This rule ... constitutes a stark departure from

Hadley and the common law of contracts.” pp.59-60.)

15

Respectfully submitted,

Peter B. Jones

Counsel of Record

JONES & DONOVAN

3636 Birch Street, Suite 210

Newport Beach, CA 92660

PH: (949) 833-8893

Attorney for Petitioner

APPLIED COMPANIES