Opposition Brief — Boeing Co., The v. United States, (2009) (No. 1302)
Supreme Court brief2009
Ask Donna
What actually matters in this document.
Text
Supreme Court, U.S.
FILED
AUG 20 2010
Nos. 0Y¥-1298 and 09-1302 | OFFICE OF THE CLERK
In the Supreme Court of the Gnited States
GENERAL DYNAMICS CORPORATION, PETITIONER
v.
UNITED STATES OF AMERICA
THE BOEING COMPANY, SUCCESSOR TO MCDONNELL
DOUGLAS CORPORATION, PETITIONER
Vv.
UNITED STATES OF AMERICA
ON PETITIONS FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT
BRIEF FOR THE UNITED STATES IN OPPOSITION
NEAL KUMAR KATYAL
Acting Solicitor General
Counsel of Record
TONY WEST
Assistant Attorney General
JEANNE E. DAVIDSON
BRYANT G. SNEE
PAUL L.. OOSTBURG SANZ KIRK T. MANHARDT
General Counsel PATRICIA M. MCCARTHY
THOMAS N. LEDVINA Attorneys
WENDELL A. KJOS Department of Justice
Attorneys
Washington, D.C. 20580-0001
Department of the Navy SupremeCtBriefs@usdoj.gov
Washington, D.C. 20850-0001 202) 514-2217
QUESTIONS PRESENTED
1. Whether petitioners were automatically entitled
to a judicial abrogation of the government’s default
termination of their contract because the government’s
unchallenged invocation of the state-secrets privilege
precluded litigation of petitioners’ claim that their lack
of performance was caused by the government’s alleged
failure to share its superior knowledge.
2. Whether the court of appeals erred in affirming
the trial court’s determination that the responsible
federal contracting officer had acted lawfully in
terminating petitioners’ contract for default.
(I)
TABLE OF CONTENTS
Page
ED ns cite ensntabes ceaseeit eee aerated 1
Ss. 69 wk 6h Ce Bk hee eee ba cae a eee 2
Ed. cinnndisauacdhawen emote toterrere eae 2
EE iin 6.66 0asdeeeEN CER DARE SER Ee eee ee aes 12
EE <5 94a ncnhdha en eeeheeededetene neste 31
TABLE OF AUTHORITIES
Cases:
Arizona v. California, 460 U.S. 605 (1983)... .......... 24
Baginsky v. United States, 697 F.2d 1070 (Fed. Cir.),
cert. denied, 464 U.S. 981 (1983) ...............00.. 26
City Pub. Serv. Bd. v. General Elec. Co., 935 F.2d 78
SL SEE 0:6.n0b. db akecceckaeus ct neeuneateases 25
College Point Boat Corp. v. United States, 267 U.S. 12
ET 6 in 004S4b besser ccub dead CREM Ded Kae cae 28
DCX, Ine. v. Perry, 79 F.3d 132 (Fed. Cir.), cert.
GG, GED UIT. GH IRD wo ccc wwcccesccsesccens 15
Department of the Navy v. Egan, 484 U.S. 518 (1988) ... 12
El-Masri v. United States, 479 F.3d 296 (4th Cir.),
cert. denied, 552 U.S. 947 (2007) ................0.. 17
Empire Energy Mgmt. Sys., Inc. v. Roche, 362 F.3d
I I I gs cv tccncccnckabnbeianeune 11, 28
EEOC v. United Ass’n of Journeymen and
Apprentices of the Plumbing & Pipefitting,
235 F.3d 244 (6th Cir. 2000), cert. denied, 534
Ss PE 5 ks ce ckctex sku Boek Nawwenk ce eeees 24
Hatch v. FERC, 654 F.2d 825 (D.C. Cir. 1981) ......... 26
(111)
IV
Cases—Continued: Page
Jaffee v. Redmond, 518 U.S. 1 (1996) ................. 16
Johnson v. Champion, 288 F.3d 1215 (10th Cir. 2002) ... 24
Joseph Morton Co. v. United States, 757 F.2d 1273
i sees po eek pave e i ceed deh eke naa cs 29
Kasza v. Browner, 133 F.3d 1159 (9th Cir.), cert.
GE, Ge WIT, PS CHD oc ccc ce cewccccstesecces 17
Kelso v. Kirk Bros. Mech. Contractors, Inc., 16 F.3d
er GI, SD cS c Ate tebakeedeesenedssccees 29
Koppers Co. v. United States, 405 F.2d 554 (Ct. Cl.
rere ery Loren ee ene es Js eeesees 15
Lindsey v. Normet, 405 U.S. 56 (1972) ...........2..2.. 16
Lisbon Contractors, Inc. v. United States, 828 F.2d
Pe Gat BUIPED oo cc cccccvesecsvess 9, 11, 22, 23, 28
Logan v. Zimmerman Brush Co., 455 U.S. 422 (1982)... 16
Malone v. United States, 849 F.2d 1441 (Fed. Cir.
DE. SUK v ehhh bd ee Ks Baw ae TARA ROR SO We Ane Wows 14
Mazfield v. Cintas Corp., No. 2, 487 F.3d 1132 (8th
SED +tecwicendhesensinceuseuenehesenns os 0s 24
Maxima Corp. v. United States, 847 F.2d 1549 (Fed.
ee rey 5
McDonnell Douglas Corp v. United States, 529 U.S.
Ee ee eee ee ree 8
Mendenhall v. National Transp. Safety Bd., 213 F.3d
MED 6. 6:6 06:40:80 560k dss Onn e 608600 04's 25
Molerio v. FBI, 749 F.2d 815 (D.C. Cir. 1984) .......... 17
Murphy v. FDIC, 208 F.3d 959 (11th Cir. 2000) ........ 25
Pots Unlimited, Ltd., v. United States, 600 F.2d 790
Pe EE 5 cc 0c ce eeuedaccsantoeuauas ues buue ae 29
Cases—Continued: Page
Pullman-Standard v. Swint, 456 U.S. 273 (1982) ....... 26
Renegotiation Bd. v. Bannercraft Clothing Co.,
A re ere ee 28
Salisbury v. United States, 690 F.2d 966 (D.C. Cir.
lel aca eae e aces eae eek ee eK EON 18
State of Florida, Dep't of Ins. v. United States,
81 F.3d 1093 (Fed. Cir. 1996) ...................... 21
Strickland v. United States, 423 F.3d 1335 (Fed. Cir.
ee eee rere er Pe ee ree ee 21
Tenenbaum v. Simonini, 372 F.3d 776 (6th Cir.), cert.
denied, 543 U.S. 1000 (2004) ...................... 17
Trammel vy. United States, 445 U.S. 40 (1980) .......... 16
United States v. Nixon, 418 U.S. 683 (1974) ........ 12, 16
United States v. 162.20 Acres of Land, 733 ¥ .2d 377
(5th Cir. 1984), cert. denied, 469 U.S. 1158 (1985) .... 25
United States v. Reynolds, 345 U.S. 1
EE ea ccctteceeh ee nae keane een o 10, 12, 13, 14, 17, 18
United States v. Thomas, 572 F.3d 945 (D.C. Cir.
2009), cert. denied, 130 S. Ct. 1725 (2010) ........... 25
United States v. Wallace, 573 F.3d 82 (1st Cir.),
cert. denied, 130 S. Ct. 657 (2009) .................. 24
United States v. Washington, 593 F.3d 790 (9th Cir.
TT i ee Ce ae ceed eek sh eekes ee nc 25
Universal Fiberglass Corp. v. United States,
ee - | + ee ee 11, 21, 23
Upjohn Co. v. United States, 449 U.S. 383 (1981) ....... 16
Wilner v. United States, 24 F.3d 1397 (Fed Cir. 1994) ... 28
Wisniewski v. United States, 353 U.S. 901 (1957) ... 2... 25
Vi
Case Continued: Page
Zuckerbraun v. General Dynamics Corp., 935 F.2d
rr re a eaten cla ad oe Ole 17
Constitution, statutes, regulations and rules:
FR ENE Mey Ap amare Zc Wane gee EO EET ets 12
Contract Disputes Act of 1978, 41 U.S.C. 601 ef seq. .... 15
ee i eC Sere aiacdaed eueeee hoe 26
a ati hig hed bi crag tes wk aire Wa 5,14
RT ai gk i ga ed re as a 2%
Ie el le Gaile ER a on pre ed be ae 2%
a dae ea ad ith hh Oe Ra AES 14
48 C.F.R.:
at Sot ea eee eae eee 5
no oe a icewhvang eee eee 4
PRE errr rrr rer ie errr. 14
oo se wa a 6 oo a ae eee 20
Section 52-249-QiaM iii) ......... ccc ec ew een eee 11, 20
dos oun nw cc's a oat esebaesoancabses 16
yy, fo 8! ne err rr 16
Miscellaneous:
i. Allan Farnsworth, 2 Farnsworth on Contracts
nS oc aeccie seule see enedaeeane reeks 15, 29
Jn the Supreme Court of the United States
No. 09-1298
GENERAL DYNAMICS CORPORATION, PETITIONER
V.
UNITED STATES OF AMERICA
No. 09-1302
THE BOEING COMPANY, SUCCESSOR TO MCDONNEL A
DOUGLAS CORPORATION, PETITIONER
VU.
UNITED STATES OF AMERICA
ON PETITIONS FOR A WRIT OF CERTIORARL
TOTHE UNITED STATES COURT OF APTTLALS
FOR THE FEDERAL CIRCUIT
BRIEF FOR THE UNITED STATES IN OPPOSITION
OPINIONS BELOW
The opinions of the court of appeals (Pet. App. la-34a,
178a-21la, 250a-279a) are reported at 567 F.3d 1340, 3823
F.3d 1006, and 182 F.3d 1319 respectively.’ The perti-
nent opinions of the Court of Federal Claims (Pet. App.
35a-177a, 212a-249a, 2804-448a) are reported at 76 Fed.
' Unless otherwise specified, all references to the Pet. App. are to the
appendix to the petition for a writ of certiorari filed in No. 09-1298.
(1)
Z
Cl. 385, 50 Fed. Cl. 311, 40 Fed. Cl. 529, 37 Fed. Cl. 270,
$5 led. Cl. 358, and 29 Fed. Cl. 791.
JURISDICTION
The judgment of the court of appeals was entered on
June 2, 2009. Petitions for rehearing were denied on
November 24, 2009 (Pet. App. 4444-4454; 09 1302 Pet.
App. 162a-4638a). On January 22 and 2%, 2010, the Chief
Justice extended the time within which to file a petition
for a writ of certiorari to and including March 24, 2010,
in No. 09-1302 and No. 09-1298 respectively. On March
ll and 12, 2010, the Chief Justice further extended the
time to April 23, 2010, and the petitions were filed on that
date. The jurisdiction of this Court is invoked under 28
U.S.C. 1254(1).
STATEMENT
l. In January 198, petitioners entered into a fixed
price incentive contract with the Navy to develop the
A-12 Avenger, a new carrier-based attack aircraft em-
ploying low-observable (stealth) technology. Pet. App.
2a. The Full Seale Engineering and Development (FSD)
contract required petitioners to design, build, and
test eight prototype aircraft at a ceiling price of
$4 777,330,294. Thid. The contract required petitioners
to deliver the first aircraft in June 1990, with subsequent
deliveries to be made at specified times ranging fromm
July 1990 to January 1991. /d. at 5a. Fach of the cipht
aircraft would be more complex than the last. Testing
would be sequential, with later tests dependent upon suc-
cessful completion of earlier testing. Jd. at 45a-46a.
Krom early on, petitioners encountered difficulty in
designing and building an aircraft that would meet eriti-
eal contract specifications within the negotiated schedule.
In June 1990, petitioners failed to deliver the first air:
3
craft as required under the contract. Pet. App. 4a. They
informed the government that the estimated cost of per-
forming under the contract would substantially exceed
the contract ceiling price, resulting in an estimated cost
that was “unacceptable” to them. /bid. Petitioners pro-
posed to address these difficulties by modifying the
fixed-price nature of the contract. /bid. The Navy’s con-
tracting officer sent petitioners a letter expressing “seri-
ous concern” and warning that the failure to meet the
first delivery date “could jeopardize performance of the
entire [contract] effort.” /bid.
In August 1990, because neither petitioner would
commit to a schedule without first reaching agreement
with the government on outstanding “technical and busi-
ness” issues (Pet. App. 135a), the government unilater-
ally modified the contract to extend the delivery dates for
all eight aircraft by 18 to 25 months, thereby producing
revised delivery dates ranging from December 1991 to
February 1993. /d. at 5a, 199a-200a. At the time of the
modification, petitioners believed they could deliver
sooner chan the revised schedule required. /d. at 225a.
Several months later, because of their continuing perfor-
mance failures, petitioners projected a first delivery date
of March 1992 a date in which petitioners themselves
soon lost confidence, and which they believed to be
achievable “only after significant changes.” Jd. at 5a-6a.
On December 17, 1990, the Navy issued a cure notice
informing petitioners that their performance under the
contract was “unsatisfactory.” Pet. App. 6a. The notice
explained that petitioners had “failed to fabricate parts
sufficient to permit final assembly in time to meet the
schedule for delivery” and had “failed to meet specifica-
tion requirements.” /d. at 6a-7a. Because those deficien-
cies were “endangering performance of [the] contract,”
4
the Navy informed petitioners that it might terminate
the contract for default unless the deficiencies were
cured by January 2, 1991. Jd. at 7a.”
In meetings with the government during the next two
weeks, petitioners adhered to the position that they could
not build the A-12 aireraft for the agreed-upon price,
under the agreed-upon schedule, and to the agreed-upon
specifications. Pet. App. 7a. Petitioners asserted they
could not “get there if [they didn’t] change the contract,”
and that the contract had “to get reformed to a cost type
contract or [they could not] do it.” /bid. On January 2,
1991, in their formal reply to the cure notice, petitioners
reiterated that they would “not meet delivery schedules
or certain specifications of the original contract, or the
revised FSD delivery schedule.” /bid. Petitioners repre-
sented that compliance with the Navy’s demand to cure
the schedule, weight, and other conditions was “unach-
ievable.” /d. at Ta-8a.
* The contract at issue incorporates by reference 48 C.F.R. 52.249-9
(1984) (see Pet. App. 2a-3a), which provides in relevant part:
(a)(1) The Government may * * * by written Notice of Default to
the Contractor, terminate this contract in whole or in part if the
Contractor fails to—
(i) Perform the work under the contract within the time specified
in this contract or any extension;
(ii) Proseecute the work so as to endanger performance of this
contract (but see paragraph (a)(2) below);
+ + +
(2) The Government’s right to terminate this contract. under
subdivisions (1)(ii) and (1)(iii) of this paragraph may be exercised
if the Contractor does not cure such failure within 10 days (or more,
if authorized in writing by the Contracting Officer) after receipt of
the notice from the Contracting Officer specifying the failure.
5
On January 7, 1991, the Navy’s contracting officer
sent petitioners a letter terminating the contract for de-
fault. Pet. App. 8a. The termination letter explained
that the action was based on petitioners’ inability “to
complete the design, development, fabrication, assembly
and test of the A-12 aircraft within the contract sched-
ule,” as well as their “inability to deliver an aircraft that
meets contract requirements,” including the “weight
guaranty contained within the contract specification.”
C.A. App. 18,297. Shortly thereafter, the Navy issued a
formal demand for the return of unliquidated progress
payments totaling $1.35 billion. Pet. App. 8a.
2. In June 1991, petitioners filed suit in the Claims
Court (now the Court of Federal Claims (CFC)) under
the Contract Disputes Act of 1978 (CDA), 41 U.S.C.
609(a), challenging the default termination on a number
of grounds. Petitioners requested, inter alia, that the
CFC enter a judgment that the government had brea-
ched the contract, and that the court convert the termi-
nation for default into a termination for convenience.
Pet. App. 8a-9a; see Second Am. Unclassified Compl. at
79,"
* “The right to terminate a contract when there has been no fault or
breach by the non-governmental party, that is, for the ‘convenience’ of
the government, appeared as a legal concept after the Civil War, to
facilitate putting a speedy end to war production.” Mazima Corp. v.
United States, 847 F.2d 1549, 1552 (Fed. Cir. 1988). When a contract
is properly terminated for convenience, the contractor ordinarily is
entitled to recover “costs incurred, profit on work done and the costs of
preparing the termination settlement proposal. Recovery of anticipated
profit is precluded.” /bid.; see 48 C.F.R. 52.249-2(7). When a contract
has been terminated because of an erroneous determination that the
contractor was in default, the court may treat the termination as one for
the convenience of the government. Maxima Corp., 847 F.2d at 1553.
6
a. In December 1995, after a trial that focused on
petitioners’ claim that the Department of Defense had
deprived the contracting officer of the ability to make an
“independent decision” regarding the termination, the
CFC converted the government’s termination for default
into a termination for convenience. Pet. App. 382a-429a.
Although the CFC found that the contracting officer had
“based the termination on the fault of the contractors
beeause he did not believe that the Navy bore any re-
sponsibility for the contractors’ perceived inability to
achieve the contract specifications or deliver the aircraft
on schedule,” it concluded that the termination decision
was not the product of “reasoned discretion.” /d. at 402a,
407a. The CFC did not address the extent of petitioners’
performance or whether they had actually been in default
of their contractual obligations.
b. Relying on the state-secrets privilege, the CFC
dismissed petitioners’ claim that the government had
caused their performance failures by withholding its
“superior knowledge” of classified stealth technology.
Pet. App. 3438a-38la. The CFC had initially allowed peti-
tioners to pursue discovery on the theory that the gov-
ernment had a duty to provide petitioners at least a
“general warning” about problems concerning production
of the A-12 aircraft. /d. at 354a-355a n.7 (citation omit-
ted). In March 19938, the Acting Secretary of the Air
Force invoked the military and state-secrets privilege to
protect against disclosure of relevant but sensitive infor-
mation. /d. at 358a. In December 1996, after noting the
occurrence of security breaches during the course of the
litigation, the CFC determined that petitioners’ superior-
knowledge claim could not be safely, fairly, or reliably
litigated:
We cannot permit the parties to litigate plaintiffs’
equitable adjustment claims for three reasons: (1)
One party or the other would be unfairly prejudiced
due to limitations placed on discovery by the Execu-
tive for national security reasons; (2) Highly classified
information may be compromised in discovery despite
procedures in place to prevent that from happening;
and (3) Even if information available to the parties
could be protected properly in discovery, other infor-
mation necessary for the court to render an honest
judgment would not be available.
Id. at. 345a.'
3. a. In 1999, in its first published opinion in this
case, the court of appeals reversed the CFC’s initial
judgment invalidating the default termination. Pet. App.
250a-279a. The court ruled that the CFC had “erred
by vacating the termination for default without first
determining whether a default existed.” Jd. at 269a.
The court distinguished this case from one involving a
pretextual termination, explaining that “[t]he record and
the facts found by the trial court establish that the gov-
ernment denied additional funding for the A-12 program
and terminated the contract for default because of con-
cerns about contract specifications, contract schedule,
and price-factors that are fundamental elements of con-
tract performance.” J/bid. The court explained that
“(b]Jecause the trial court focused on the legitimacy of the
government’s default termination decision, rather than
* On the merits, the government argued that petitioners’ participa-
tion in other classified Air Force programs provided them the informa-
‘ tion necessary to develop the A-12 aircraft according to specifications.
Pet. App. 355a. The CFC found, however, that the privileged nature of
the evidence “would lead to an incomplete record” precluding an
accurate determination. /d. at 380a.
8
on whether | petitioners] were in fact in default, the par-
ties have not yet been afforded the opportunity to fully
litigate default.” /d. at 278a. The court therefore re-
manded the case to the CFC to decide whether the de-
fault termination was justified. /bzd.
b. Without expressing any view on the merits, the
court of appeals also vacated the CFC’s dismissal of peti-
tioners’ superior-knowledge claim, inviting the CFC to
reconsider its state-secrets ruling in light of the passage
of time and other possible developments. Pet. App. 271a,
278a-279a.
This Court denied petitioners’ petition for a writ of
certiorari. 529 U.S. 1097 (2000).
4. a. In 2001, after conducting another trial on re-
mand, the CFC sustained the default termination. Pet.
App. 212a-249a. The CFC found that petitioners would
not have delivered the first aircraft by the revised con-
tractual deadline (December 1991) and therefore were in
default of the contract. /d. at 218a-228a. The CFC re-
jected petitioners’ various arguments for excusing their
default, including their contentions that the revised de-
livery schedule was unreasonable and therefore unen-
forceable; that the schedule, even if enforceable, had
been waived by the Navy; and that “the contract was
impossible to perform.” /d. at 228a-230a, 246a-248a.
b. The CFC also reaffirmed its prior ruling that peti-
tioners’ superior-knowledge claim could not be litigated
due to national security concerns. Pet. App. 2438a-246a.
The CFC found that “the circumstances that prompted
the |December 1996] ruling persist.” Jd. at 244a. The
CFC added that it was unable to “establish that the in-
formation that has been removed from this case would
have benefitted either party.” /d. at 245a.
9
5. In 2003, in its second published decision, the court
of appeals vacated in part and affirmed in part. Pet. App.
178a-21 1a.
a. The court of appeals affirmed the CFC’s determi-
nation that the revised delivery schedule imposed by the
government was enforceable and had ‘not been waived.
Pet. App. 198a-202a. The court nevertheless held that
the CFC “did not make adequate findings” to sustain the
default termination. /d. at 187a. The court explained
that although “absolute impossibility of performance or
a contractor’s complete repudiation or abandonment” is
not required, a default termination cannot be justified
“based solely on a contractor’s concerns about meeting a
contractual schedule milestone.” /d. at 190a. Citing Lis-
bon Contractors, Inc. v. United States, 828 F.2d 759, 765
(Fed. Cir. 1987), the court stated that the government
must establish a “reasonable belief on the part of the
contracting officer that there was no reasonable likeli-
hood that the contractor could perform the entire con-
tract effort within the time remaining for contract perfor-
mance.” Pet. App. 19la. The court again remanded the
case to the CFC to make pertinent factual findings and
to apply the Lisbon standard. /d. at 196a-197a.
b. The court of appeals affirmed the CFC’s dismissal
of petitioners’ superior-knowledge claim. Pet. App. 202a-
210a. The court held that the government had properly
invoked the state-secrets privilege and that the CFC had
properly barred litigation of the superior-knowledge
claim in light of the attendant risks. /d. at 205a-207a.
The court also rejected petitioners’ contention that, once
the state-secret privilege was found to preclude litigation
of petitioners’ superior-knowledge claim, the Due Pro-
cess Clause required the CFC to set aside the default
termination. The court of appeals relied on this Court’s
10
distinction in United States v. Reynolds, 345 U.S. 1, 12
(1953), between the government as criminal prosecutor
and the government as civil defendant. The court ex-
plained that, because petitioners “are the plaintiffs in
this purely civil matter, suing the sovereign on the lim-
ited terms to which it has consented,” the Due Process
Clause “does not require that [petitioners] be able to
present all defenses, including a defense that would
threaten national security.” Pet. App. 208a-209a.
6. In 2007, after petitioners declined an opportunity
to reopen the trial record (Pet. App. 113a n.54), the CFC
again sustained the default termination. /d. at 35a-177a.
The CFC found that the contract did not specify a date
for completion of the entire effort, given that not all the
milestone dates had been revised and that the completion
date for a research-and-development contract is often
indefinite. /d. at 70a-74a. The CFC nevertheless deter-
mined that the government’s revised delivery schedule
for the prototypes provided a yardstick that enabled the
court “to consider |petitioners’] progress in light of fac-
tors that are probative of their ability and willingness to
perform.” /d. at 40a. After considering the record evi-
dence in its totality, the CFC concluded that the govern-
ment was justified in terminating the contract for failure
to make progress. /d. at 1382a-155a.
7. In 2009, in its third published decision, the court
of appeals affirmed. Pet. App. la-34a. The court ac-
knowledged that a literal application of the standard an-
nounced in Lisbon was difficult because the contract at
issue here contained no definite completion date. /d. at
14a. Like the CFC, however, the court of appeals re-
jected petitioners’ contention that the absence of a com-
pletion date categorically precludes the government from
terminating a contract for failure to make adequate prog-
11
ress. /d. at 15a. The court relied on Universal Fiber-
glass Corporation v. United States, 5387 F.2d 393 (Ct. Cl.
1976), a decision cited approvingly in Lisbon, see 828
F.2d at 765, in which the Court of Claims (a predecessor
to the Federal Circuit) had upheld a default termination
for failure to make progress even in the absence of a con-
tract completion date. Pet. App. 16a-17a. The court held
that it was possible to apply the Lisbon standard in
this case based on the totality of the circumstances
including the contractor’s failure to meet progress mile-
stones, its problems with subcontractors and suppliers,
its financial situation, and its performance history (all
factors enumerated in its 2003 opinion, see id. at 193a-
194a)—to determine whether petitioners had failed
to “[p|rosecute the work so as to endanger performance”
of the contract. Jd. at 2la (quoting 48 C.F.R.
52.249-9(a)(1 )(ii)).
Based on its review of the record, the court of appeals
held that the government had satisfied its burden under
Lisbon of establishing a reasonable belief that there was
no reasonable likelihood of timely performance of the
contract. Pet. App. 22a-27a. The court noted that peti-
tioners on appeal had presented no argument for excus-
ing their default and no evidence to show that they could
have completed the contract on any date without contract
restructuring. /d. at 28a. The court also rejected peti-
tioners’ argument that the default termination could not
be sustained because the contracting officer had not con-
ducted the Lisbon analysis prior to termination. The
court explained that “the government is not required to
establish that the contracting officer conducted the anal-
ysis necessary to sustain a default.” /d. at 29a (quoting
Empire Energy Mgmt. Sys., Inc. v. Roche, 362 F.3d 1348,
1357 (Fed. Cir. 2004)). The court further held that the
12
record evidence established that the contracting officer
had exercised reasonable judgment and had not acted
arbitrarily in terminating the contract. /d. at 30a-32a.
In closing, the court reiterated that “the Lisbon test re-
mains good law and our conclusion here is dictated by the
unique facts of this case.” /d. at 33a.
ARGUMENT
1. Petitioners do not dispute that the government
properly invoked the state-secrets privilege in this case,
nor do they challenge the lower courts’ determination
that the superior-knowledge issue could not be litigated
without risking disclosure of secret information. 09-1298
Pet. 14; 09-1302 Pet. 30. Rather, petitioners contend that
because the state-secrets privilege barred litigation of
their superior-knowledge claim, the lower courts should
have automatically entered judgment invalidating the
government’s default termination. 09-1298 Pet. 13-22;
09-1302 Pet. 28-34. No decision of this Court or any
court of appeals supports that contention. Further re-
view is not warranted.
a. The basic legal principles governing the applica-
tion of the state-secrets privilege are well established
and do not appear to be in dispute here. The state-
secrets privilege is deeply rooted in both “the law of
evidence,” United States v. Reynolds, 345 U.S. 1, 6-7
(1953), and the Executive’s “Art[icle] II duties” to pro-
tect “military or diplomatic secrets,” United States v.
Nixon, 418 U.S. 683, 710 (1974). The government has a
“compelling interest” in protecting national-security in-
formation, and the responsibility to do so “falls on the
President as head of the Executive Branch and as Com-
mander in Chief.” Department of the Navy v. Egan, 484
U.S. 518, 527 (1988).
13
The state-secrets privilege “helongs to the Govern-
ment,” which must assert it in a “formal claim of privi-
lege, lodged by the head of the department which has
control over the matter, after actual personal consider-
ation by that officer.” Reynolds, 345 U.S. at 7-8 (foot-
notes omitted). The privilege applies when “there is a
reasonable danger that compulsion of the evidence will
expose military matters which, in the interest of national
security, should not be divulged.” /d. at 10. While “[t]he
court itself must determine whether the circumstances
are appropriate for the claim of privilege,” it must not in
the course of considering that claim “forc[e] a disclosure
of the very thing the privilege is designed to protect.”
Id. at 8. When properly invoked, the privilege is abso-
lute: “even the most compelling necessity cannot over-
come the claim of privilege if the court is ultimately satis-
fied that military secrets are at stake.” /d. at 11.
b. As noted above, petitioners do not challenge the
invocation of the state-secrets privilege or the dismissal
of their superior-knowledge claim. 09-1298 Pet. 14; 09-
1302 Pet. 30. Rather, petitioners contend that, once their
superior-knowledge claim had been dismissed, the courts
below were required to set aside the default termination.
In support of that contention, petitioners rely signifi-
cantly on the Court’s reference in Reynolds to lower-
court decisions finding it “unconscionable” to allow the
government to undertake a criminal prosecution and then
invoke its privileges to deprive the accused of his de-
fense. 345 U.S. at 12. Petitioners’ current challenge to
the default termination, however, cannot properly be
analogized to a criminal prosecution brought by the
United States.
The government did not file any claim or seek any
affirmative relief in the CFC, but rather is the defendant
14
in a suit commenced by petitioners. This case, moreover,
is a civil rather than a criminal proceeding. See Pet.
App. 208a. Lower-court decisions requiring the govern-
ment to forgo criminal prosecution when it invokes cer-
tain privileges have “no application in a civil forum where
the Government is not the moving party, but is a defen-
dant only on terms to which it has consented.” Reynolds,
345 U.S. at 12. The CFC proceedings commenced by
petitioners are far removed from a criminal prosecution
where an accused’s liberty is at stake. And while peti-
tioners characterize the government’s demand for pay-
ment in this case as an altempt to impose “punishment”
(09-1298 Pet. 28) or a “civil penalty” (09-1302 Pet. 32),
the government simply seeks to recoup (with appropriate
interest) monies that it had advanced to petitioners as
progress payments for aircraft that it never received.
Among the government’s contract rights is the right
to terminate a contract for default in appropriate circum-
stances. See 48 C.F.R. 52.249-9(a) (incorporated by ref-
erence into the A-12 contract, see Pet. App. 2a-3a). Un-
der the Tucker Act’s waiver of sovereign immunity, 28
U.S.C. 1491(a)(1), and as authorized by the CDA, 41
U.S.C. 609(a), a contractor that is dissatisfied with the
government’s decision may sue for relief in the CFC.
Petitioners’ CFC action is thus no different from any
other civil suit by a party seeking relief against the
United States based on an applicable waiver of sovereign
immunity.
Petitioners’ characterization of the government as the
“moving party” (09-1298 Pet. 16; 09-1302 Pet. 31) in this
case is based in part on the fact that default termination
has been deemed a “government claim,” Malone v.
United States, 849 F.2d 1441, 14438 (Fed. Cir. 1988), for
which the government bears the burden of proof under
15
the CDA, 41 U.S.C. 601 et seq. In contract cases as in
other litigation, however, the plaintiff may bear the bur-
den of proof on some issues and the defendant on others.
Thus, while petitioners bore the burden of proof on the
superior-knowledge claim in response to which the gov-
ernment invoked the state-secrets privilege, see DCX,
Inc. v. Perry, 79 F.3d 132, 134 (Fed. Cir.), cert. denied,
519 U.S. 992 (1996); Koppers Co. v. United States, 405
F.2d 554, 563-564 (Ct. Cl. 1968), the defendant ordinarily
bears the burden of proving affirmative defenses. The
government here is similarly situated to a private defen-
dant sued for breach of contract after terminating the
contract due to the other party’s failure to perform or
material breach: both bear the burden of justifying the
termination based on the plaintiffs non-performance.
See EF. Allan Farnsworth, 2 Farnsworth on Contracts &
8.15, at 509 (3d ed. 2004). But the fact that the defendant
bears the burden of proof on that defense does not cause
it to he the “moving party” in the litigation.”
¢. Petitioners also rely (09-1298 Pet. 18; 09 1302 Pet.
32) on decisions of this Court stating that due process
principles guarantee a civil defendant “an opportunity to
Ifthe A-12 contract had not required the first progress payment to
be made until some date after the yovernment determined that peti
lioners were in default, the government could simply have declined to
make the progress payment (or any other payments) rather than enter-
ing a default termination, Petitioners would then have been forced to
bring a breach-of-contract action ayainst the government. In such a
lawsuil, petitioners clearly would have been plaintiffs and the yovern
ment the defendant—free to raise petitioners’ non-performance as a
defense and the state-secrets privileye to rebut any superior-knowledpe
claim. There is no apparent reason that the timing of progress pay
ments under the contract —-the only difference between the hypothetical
case and this one- should make any substantive difference with respect
lo the consequences of invoking the state-secrets privileye.
lt)
present every available defense.” Lindsey v. Normet,
405 U.S. 56, 66 (1972); Logan v. Zimmerman Brush Co.,
A455 US. 422, 429 (1982)). even putting aside the fact
that petitioners are not defendants here (see pp. 13-15,
supra), those decision do not speak to the application of
evidentiary privileges yenerally or the state-secrets priv
lege in particular.
This Court’s precedents, as wellas the Federal Rules
of Civil Procedure and Evidence, have long recognized
that evidentiary privileyes may limit both plaintiffs’ and
defendants’ access to material and may thereby affect a
party’s ability to prove its case. To further competing
public policy interests, the attorney-client privilepe, the
spousal privilege, the psychotherapist- patient privilege,
and the Presidential communications privilege all limita
litivant’s access to potentially relevant material. See,
v.g., Upjohn Co. vy. United States, 449 US. 383, 389 (1981)
(attorney-client privilege); Jaffee v. Redmond, 518 US.
1, 10-15 (1996) (psychotherapist-patient privilege); Tram
mel y. United States, 445 US. 40, 50 52 (1980) (spousal
privilege); Nearon, 418 US. at 708 (Presidential communi
cations privileye); see also kred. RK. Civ. P. 260b); ed. I.
kievid. 501-502. The lower courts’ application of the state
seerets privilege similarly limits petitioners’ ability to
litigate the superior-knowledye claim in this case. But
petitioners cite no civil case in which this Court has
deemed the legitimate invocation of a privilege to violate
the affected party’s due process rights.
Although the courts below rejected petitioners’ con
tention that judgment should automatically be entered in
their favor, the CIC afforded petitioners the opportunity
to challenyve the yovernment’s proof that petitioners were
in default, and it entertained every argument petitioners
sought to present that would not have risked the disclo
17
sure of secret information. Neither the Due Process
Clause nor this Court’s decision in Reynolds which re-
versed a trial court’s automatic finding of negligence
against the United States based on the government’s
invocation of the state-secrets privilege, 345 U.S. at
5 requires the extreme result sought by petitioners. To
the contrary, where matters can be fairly litigated with-
out resort to secret information, a suit may continue. /d.
at 11.
d. Contrary to petitioners’ contention (09-1298 Pet.
19-21; 09-1302 Pet. 33-34), the court of appeals’ applica-
tion of the state-secrets privilege does not conflict with
decisions of other circuits. Petitioners rely on court of
appeals decisions holding that dismissal of a claim is ap-
propriate if invocation of the state-secrets privilege un-
duly hampers a defendant in establishing a valid defense.
See El-Masri v. United States, 479 F.8d 296, 309-310
(4th Cir.), cert. denied, 552 U.S. 947 (2007); Tenenbaum
v. Simonini, 372 F.3d 776, 777-778 (6th Cir.), cert. de-
nied, 543 U.S. 1000 (2004); Molerio v. FBI, 749 F.2d 815,
825 (D.C. Cir. 1984); see also Kasza v. Browner, 133 F.3d
1159, 1166 (9th Cir.), cert. denied, 525 U.S. 967 (1998);
Zuckerbraun v. General Dynamics Corp., 935 F.2d 544,
547 (2d Cir. 1991). Because petitioners are plaintiffs
rather than defendants in this litigation, the court of ap-
peals’ decision in this case is fully consistent with the
precedents on which petitioners rely. Indeed, the courts
below correctly found petitioners’ superior-knowledge
claim unamenable to adjudication, in part because the
state-secrets privilege prevented the government, as the
defendant, from effectively responding to that claim. See
Pet. App. 367a (“defendant may be unfairly prejudiced if
discovery were restricted to these programs”); id. at
372a-373a (“it is not proper to consider plaintiffs’ prima
18
facie evidence in a vacuum when defendant might refute
plaintiffs’ evidence with greater access”).
Petitioners further suggest (09-1298 Pet. 21; 09-1302
Pet. 32) that federal officials may be tempted to invoke
the state-secrets privilege arbitrarily if the government
can obtain favorable rulings on issues as to which the
privilege has been claimed. As petitioners acknowledge
(09-1298 Pet. 20; 09-1302 Pet. 33-34), however, some of
the cases on which they rely have culminated in the dis-
missal of claims against the government after the govern-
ment’s invocation of the state-secrets privilege precluded
the assertion of an effective defense. The safeguards
against capricious invocation of the state-secrets privi-
lege lie in the procedural and substantive restrictions
that this Court has imposed upon the privilege, see
Reynolds, 345 U.S. at 7-8, 10; p. 13, supra, and in the
presumption that high-level Executive Branch officials
discharge their duties conscientiously and in good faith,
not in any prophylactic rule that the government must
lose any claim as to which the privilege has been invoked.
The rule that petitioners advocate, moreover, would
itself be susceptible to manipulation by private parties.
A contractor that challenges the government’s termina-
tion of a contract for default could raise a superior-
knowledge claim simply to induce the government to in-
voke the state-secrets privilege. Automatic invalidation
of the default termination in those circumstances would
inappropriately “punish[{] [the government] for asserting
the privilege.” Salisbury v. United States, 690 F.2d 966,
975 (D.C. Cir. 1982).
There is likewise no sound basis for the speculation
of petitioners and their amici that contractors will cease
to do business with the government if the court of ap-
peals’ decision remains in place. 09-1298 Pet. 21-22;
19
Chamber of Commerce Amicus Br. 4, 7-8, 16; Nat’! Def.
Indus. Assoc. Amicus Br. 5-7, 14, 23-25. The government
has a strong interest in attracting contractors to ensure
that our Nation’s national security and other needs are
met. Moreover, contractors like petitioners are highly
sophisticated entities that can protect themselves against
undue risk in their negotiation of future contracts. The
government is not aware of any refusal to deal by con-
tractors, many of whom rely on the government for busi-
ness, as a result of the court of appeals’ decision on the
“unique facts of this ease.” Pet. App. 33a.
2. Petitioners also seek the Court’s review of the
court of appeals’ application of its failure-to-make-prog-
ress standard to affirm the CF'C’s judgment upholding
the default termination. Petitioners argue that (a) the
contract’s lack of a completion date precludes a default
termination (09-1302 Pet. i, 37-40); (b) the court of ap-
peals’ 2009 decision impermissibly deviated from its 2003
mandate (09-1298 Pet. 31-36); (¢) in issuing its 2009 deci-
sion, the court of appeals should have remanded again
rather than affirm on the existing record (09-1302 Pet.
18-27); and (dG) the court of appeals erred in upholding
the default termination on grounds not relied on by the
contracting officer (09-1298 Pet. 23-31). The lower
courts’ highly factbound application of the well-estab-
lished default-termination standard after nearly two
decades of litigation is correct and does not conflict
with any decision of this Court or another court of ap-
peals. Further review is not warranted.
a. Petitioner Boeing (09-1302 Pet. i, 37-40) argues
that the government can never terminate a contract for
failure to make adequate progress if the contract lacks a
definite date of completion for all contract performance.
Such a per se rule does not comport with the terms of the
20
default-termination clause, unnecessarily restricts con-
sideration of relevant circumstances, and conflicts with
longstanding Federal Circuit precedent.
The federal acquisition regulation, which was incorpo-
rated by reference into the A-12 contract (see note 2,
supra), permits (in relevant part) a default termination
when the contractor fails either (i) to “[pJerform the
work under the contract within the time specified in this
contract or any extension;” or (ii) to “[p}Jrosecute the
work so as to endanger performance of this contract.” 48
C.F.R. 52-249-9(a)(1). Although subsection (i) might
plausibly be read to require a specific contract comple-
tion date, the contracting officer in this case terminated
the A-12 contract under subsection (ii) for a failure to
prosecute that “endanger|ed]| performance of [the] con-
tract.” Pet. App. 7a. Nothing in the text of subsection
(ii) requires a definite completion date before a determi-
nation can be made that the contractor’s progress is so
inadequate as to call performance into reasonable doubt.
The court of appeals correctly rejected “such a per
se rule.because it serves only the contractors’ interest.”
Pet. App. 20a. Instead, the court examined all the rele-
vant circumstances to determine whether petitioners
had failed to make adequate progress so as to justify
the default termination under the terms of the provision.
See id. at 2la (“Only after analyzing the totality of
the circumstances can a court determine whether a con-
tractor failed to ‘[pJrosecute the work so as to endanger
performance’ of the contract.”) (quoting 48 C.F.R.
52.249-9(a)(1)(ii)). The court of appeals relied on the ex-
tensive record of petitioners’ deficient performance his-
tory (including the failure to meet several milestones
such as the first delivery date) as well as their financial
difficulties (including repeated statements that the con-
21
tract could not be performed without significant cost re-
structuring). /d. at 22a-27a. Even petitioners appeared
to acknowledge that the contract’s sequential, “building
block” structure made failure to deliver the first aircraft
a critical event. See zd. at 23a (noting petitioners’ admis-
sion that “one cannot test an aircraft before it has been
built, nor build a production airplane before developing
its prototype”). The court of appeals correctly held that
those facts taken together supported the default termina-
tion under the applicable legal standard.
To the extent that petitioners are concerned about an
ad hoe factual inquiry into the totality of cireumstances
for default terminations in contracts that lack a comple-
tion date (09-1302 Pet. 34-40), they are free to negotiate
completion dates or other metrics into future contracts.
As noted above (p. 19, supra), contractors like petitioners
are highly sophisticated businesses that can adequately
protect themselves against any alleged uncertainty cre-
ated by Federal Circuit precedent. In any event, Boe-
ing’s contention (id. at 34) that the court of appeals’ deci-
sion will “[dJestabilize” the law in this area is particularly
unavailing because the per se rule that Boeing advocates
is itself inconsistent with established Federal Circuit law.
In Universal Fiberglass Corporation v. United
States, 537 F.2d 393, 398 (1976), the Court of Claims (the
Federal Circuit’s predecessor, whose decisions are bind-
ing precedent in that Circuit, see, e.g., Strickland v.
United States, 423 F.3d 1335, 1338 (Fed. Cir. 2005)) sus-
tained a default termination for failure to make progress
even though the contract contained no specific comple-
tion date. See also State of Florida, Dep’t of Ins. v.
United States, 81 F.3d 1093, 1097 (Fed. Cir. 1996) (hold-
ing that the Postal Service was justified in terminating a
contract for failure to make progress even though the
22
original deadline for completion had passed and the
Postal Service had not set a new one). Indeed, in Lisbon
Contractors, Inc. v. United States, 828 F.2d 759 (Fed.
Cir. 1987) a decision that all the parties to this case
endorse—the court of appeals cited Universal Fiberglass
approvingly. /d. at 765. Although a completion date may
facilitate the Lisbon analysis, it is not a prerequisite for
default termination if the totality of the circumstances
indicates that the contractors’ failure to make progress
makes it reasonably likely that performance would be
untimely or not occur at all.°
b. Petitioner General Dynamics contends that the
court of appeals in its 2009 decision altered the standard
articulated in its 2003 opinion, in violation of the “law of
the circuit” doctrine (under which ordinarily only an en
bane court can overrule a panel decision). 09-1298 Pet.
31-37. In petitioners’ view, the standard for default ter-
mination articulated in the court’s 2003 decision required
a contract completion date. /d. at 32-33; 09-1302 Pet. 23.
Petitioners’ argument depends on an unduly narrow
parsing of the 2003 opinion. In any event, any refine-
ment in the 2009 opinion in light of new facts on remand
does not violate the “law of the circuit” doctrine.
In all three of its published opinions in this case be-
tween 1999 and 2009, the court of appeals reaffirmed the
Lisbon standard embraced by petitioners here. See Pet.
App. 15a-1l6a, 33a, 19la-194a, 269a-270a. To support a
default termination under Lisbon, “the government must
° Boeing suggests in passing (09-1302 Pet. 38) that the court in
Universal Fiberglass recognized an “exception” to the per se rule
Boeing advocates, but it contends that the exception applies only when
a contractor is “making no progress at all.” The court of appeals, in
construing Universal Fiberglass more broadly, determined that the
record in this case supported its application here. Pet. App. 17a-21la
23
establish by a preponderance of the evidence * * * a
‘reasonable belief on the part of the contracting officer
that there was no reasonable likelihood that the contrac-
tor could perform the entire contract effort within the
time remaining for contract performance.’” /d. at lla
(quoting zd. at 191a) (citing Lisbon, 828 F.2d at 765). All
three opinions (like Lisbon itself, 828 F.2d at 765) also
approvingly cite Universal Fiberglass, in which the court
upheld a default termination for failure to make progress
in the absence of a definite completion date. Pet. App.
16a n.3 (citing 7d. at 194a, 267a). In its 2009 decision, the
court of appeals faithfully applied those two established
circuit precedents to the facts of this case. /d. at 13a-21a.
Petitioners contend (09-1298 Pet. 30; 09-1302 Pet. 23-
24) that the court of appeals in its 2009 decision unfairly
upset petitioners’ expectations by applying a legal stan-
dard significantly different from the standard articulated
in the court’s 2003 opinion. That is incorrect. Although
the court in its 2003 opinion directed the CFC on remand
to determine the “contract completion date” and the
“time remaining for performance” (Pet. App. 196a), the
court did not purport to overrule Universal Fiberglass,
which remained bindiny precedent within the Federal
Circuit and which made clear that a specific completion
date is not a prerequisite for a default termination (see
pp. 21-22, supra).
The court of appeals’ 2003 mandate, as reaffirmed in
the 2009 decision, required a review of “the evidence and
circumstances surrounding the termination” and “the
events, actions, and communications leading to the de-
fault decision in ascertaining whether the contracting
officer had reasonable belief that there was no reason-
able likelihood of timely completion.” Pet. App. 187a,
195a; see id. at 21a. The 2003 opinion specifically identi-
24
fied relevant factors other than the completion date, in-
cluding “the contractor’s failure to meet progress mile-
stones,” “problems with subcontractors and suppliers,”
its “financial situation,” and its “performance history”
(id. at 193a-194a (citations omitted))—all factors on
which the court relied in its 2009 decision in affirming the
CFC’s subsequent judgment (7d. at 21a-27a). Indeed, the
court in its 2009 decision “reiterate[d] that the Lisbon
test remains good law and our conclusion here is dictated
by the unique facts of this case.” /d. at 33a.
In any event, because any difference in emphasis be-
tween the 2009 and 2003 opinions in the articulation of
the Lisbon standard was attributable to intervening fac-
tual findings by the CFC, the case falls comfortably
within an established exception to law-of-the-case doc-
trine. In Arizona v. California, 460 U.S. 605, 618 n.8
(1983), this Court recognized that a court may appropri-
ately depart from its own decision in the same case if the
prior holding is clearly erroneous and would work a man-
ifest injustice. Contrary to petitioner General Dynam-
ies’s contention (09-1298 Pet. 33), other circuits generally
follow this Court’s guidance in Arizona to permit modifi-
cation of a prior ruling—including in light of further re-
cord development. See United States v. Wallace, 573
F.3d 82, 89 (1st Cir.) (“A panel’s reconsideration of a rul-
ing made by a previous panel in the same case may be
proper if the initial ruling was made on an inadequate
record, * * * if newly discovered evidence bears on the
question, or if reconsideration would avoid manifest in-
justice.”) (internal quotation marks omitted), cert. de-
nied, 130 S. Ct. 657 (2009); EEOC v. United Ass’n of
Journeymen and Apprentices of the Plumbing &
Pipefitting, 235 F.3d 244, 249-250 & n.1 (6th Cir. 2000),
cert. denied, 534 U.S. 987 (2001); Maxfield v. Cintas
25
Corp., No. 2, 487 F.3d 1132, 1135 (8th Cir. 2007);
Mendenhall v. National Transp. Safety Bd., 213 F.3d
464, 469 (9th Cir. 2000); Johnson v. Champion, 288 F.3d
1215, 1226 (10th Cir. 2002); Murphy v. FDIC, 208 F.3d
959, 966 (11th Cir. 2000); United States v. Thomas, 572
F.3d 945, 948 (D.C. Cir. 2009), cert. denied, 130 S. Ct.
1725 (2010); ef. City Pub. Serv. Bd. v. General Elec. Co.,
935 F.2d 78, 82 (5th Cir. 1991).
Petitioner General Dynamics quotes stricter language
from Fifth and Ninth Circuit decisions that might appear
to foreclose panel reconsideration notwithstanding the
Arizona exception. See Pet. 09-1298 Pet. 33-34 (quoting
United States v. 162.20 Acres of Land, 733 F.2d 377, 379
(5th Cir. 1984), cert. denied, 469 U.S. 1158 (1985); United
States v. Washington, 593 F.3d 790, 798 n.9 (9th Cir.
2010)). The Fifth Circuit’s subsequent decision in City
Public Service Board, however, recognizes that albeit
“to|nly in extraordinary circumstances” “this court
{may] sustain a departure from the ‘law of the case’ doc-
trine on the ground that a prior decision was clearly erro-
neous.” 935 F.2d at 82. And the Ninth Circuit’s decision
in Mendenhall applies the Arizona exception to vacate
an earlier panel ruling that was “clearly erroneous and
would work a manifest injustice.” 213 F.3d at 469. In
any event, defining the precise circumstances under
which one Federal Circuit panel may depart from the
reasoning of a prior panel in the same case is a function
principally entrusted to the Federal Circuit itself. Cf.
Wisniewski v. United States, 353 U.S. 901, 902 (1957)
(per curiam) (“It is primarily the task of a Court of Ap-
peals to reconcile its internal difficulties.”’).
c. Petitioner Boeing contends (09-1302 Pet. 18-27)
that the Due Process Clause required the court of ap-
peals to remand the case to the CFC for further fact-
26
finding under the standard for default termination artic-
ulated in the court of appeals’ 2009 decision. That con-
tention lacks merit. As explained above (see pp. 22-24,
supra), the Federal Circuit’s 2003 opinion had instructed
the CFC to consider substantially the same factors that
the court of appeals identified in 2009 in affirming the
CFC’s ensuing judgment. In any event, although the
Federal] Circuit may remand to the trial court to apply a
newly announced legal standard, e.g., Baginsky v. United
States, 697 F.2d 1070, 1074 (Fed. Cir.), cert. denied, 464
U.S. 981 (1983) such a remand is not required in every
case in which the appellate court elaborates on the appli-
cable legal standard. See, e.g., Pullman-Standard vy.
Swint, 456 U.S. 273, 292 (1982) (remand is unnecessary
where “the record permits only one resolution of the fac-
tual issue”); Hatch v. FERC, 654 F.2d 825, 835 (D.C. Cir.
1981) (“In those cases in which courts have not required
the agency to allow the litigants to submit new evidence
relevant to the newly announced standard, either actual
notice of the operative standard existed at the time of the
first hearing, or an additional opportunity to submit evi-
dence was not deemed critical because the agency merely
revised the legal significance of the same kind of facts.”)
(citations omitted).
Boeing’s contention (09-1302 Pet. 23) that it “had no
reason to anticipate” the relevance of other circum-
stances underlying its contract performance, and that it
therefore lacked a meaningful opportunity to present
material evidence, rings hollow in light of this case’s long
and winding litigation history. The court of appeals first
mandated a broad ‘actual inquiry in 1999, which it re-
peated verbatim in 2003:
The question of whether Contractors satisfied their
duty is of course that of breach, and must be deter-
27
mined by taking into account all of the relevant facts
and testimony, such as Contractors’ statements that
they could not meet the contract specifications, the
contract delivery schedule, nor complete performance
at the specified contract price.
Pet. App. 186a (quoting zd. at 278a). Petitioners thus
were apprised well before 2009 of the relevance of the
type of evidence that the court of appeals ultimately in-
voked in affirming the CFC’s judgment.
Accordingly, the court of appeals was well within its
discretion in deciding that the extensive factual record
compiled over nearly two decades of litigation was suffi-
ciently developed to permit it to apply directly the Lis-
bon standard to this case. Pet. App. 32a (“the facts in the
record are sufficient for the court, in a de novo review, to
sustain the default termination”). In light of the ample
evidence the court cited (id. at 23a-27a), there is no rea-
son to believe that a third remand to the CFC would have
yielded a different result.
d. Petitioner General Dynamics contends (09-1298
Pet. 23) that the court of appeals’ application of the Lis-
bon standard “conflict|s] with basic principles of judicial
review of administrative action” because the court did
not limit itself to the reasons for default termination
proffered by the contracting officer. General Dynamics
appears to base that argument on the fact that the Fed-
eral Circuit upheld the default termination notwithstand-
ing the CFC’s statement that “the contracting officer did
not conduct a Lisbon analysis prior to termination.” Pet.
App. 29a (quoting id. at 176a n.92); see id. at 28a-32a.
Petitioner’s argument lacks merit.
Unlike the court in an Administrative Procedure Act
suit, which must sustain a challenged agency decision
unless it is unsupported by substantial evidence in the
28
administrative record, 5 U.S.C. 706, the CFC in a CDA
action does not review an administrative record or defer
to the contracting officer’s decision to terminate for de-
fault. See 41 U.S.C. 605(a) (“Specific findings of fact | by
the contracting officer] are not required, but, if made,
shall not be binding in any subsequent proceeding.”); 41
U.S.C. 609(a)(3) (actions challenging contracting officer
decisions in the CFC proceed “de novo in accordance
with the rules of the * * * court”); ef. Renegotiation
Bd. v. Bannercraft Clothing Co., 415 U.S. 1, 23 (1974)
(“contractor may institute its de novo proceeding in the
Court of Claims, unfettered by any prejudice from the
agency proceeding and free from any claim that the
|prior| determination is supported by substantial evi-
dence”). Rather, “the parties startin court * * * with
a clean slate,” Wilner v. United States, 24 F.3d 1397,
1402 (Fed Cir. 1994) (en bane), and the CFC decides de
novo, based on a judicial record, whether the government
has satisfied its burden to demonstrate that the default
termination was valid. See Lisbon, 828 F.2d at 765.
For nearly a century, the government in such a suit
has been entitled to establish that a default termination
is justified based on any grounds available, regardless of
whether those grounds were known at the time of termi-
nation. See College Point Boat Corp. v. United States,
267 U.S. 12, 15-16 (1925) (“A party to a contract who is
sued for its breach may ordinarily defend on the ground
that there existed, at the time, a legal excuse for nonper-
formance by him, although he was then ignorant of the
fact. He may, likewise, justify an asserted termination,
rescission, or repudiation, of a contract by proving that
there was, at the time, an adequate cause, although it did
not become known to him until later.”); see also Pet. App.
29a; Kmpire Energy Mgmt. Sys., lnc. v. Roche, 862 F.3d
29
1344, 1357 (hed. Cir. 2004) (explaining that “the subjec-
tive knowledge of the contracting officer herself is irrele-
vant” to the proper disposition of a contractor’s suit chal-
lenging a default termination); Kelso v. Kirk Bros. Mech.
Contractors, Inc., 16 F.3d 11738, 1175 Ged. Cir. 1994)
(“This court sustains a default termination if justified by
circumstances at the time of termination, reyardless of
whether the Government originally removed the contrac
tor for another reason.”); Joseph Morton Co. v. United
States, 757 F.2d 1273, 1277 (led. Cir. 1985) (LI |t is set-
tled law that a party can justify a termination if there
existed at the time an adequate cause, even if then un-
known.”) (quoting Pots Unlimited, Ltd. v. l/nited States,
600 F.2d 790, 793 (CL. Cl. 1979)); 2 Farnsworth & 8.18, at
526 (“If an injured party terminates, a court will not ask
whether the injured party was actually motivated by the
other party’s breach or even whether the injured party
knew of the breach.”).'
In any event, as the court of appeals explained (Pet.
App. 30a-32a), the contracting officer considered several
significant deficiencies before deciding: to terminate the
A-12 contract for default. The contracting officer sum
marized his reasoning at trial:
[Petitioners] were in default because they acknowl-
edged they would not be able to achieve the contract
specifications and the contract requirements. Two,
they had indicated that the|y| would not be able to
meet the delivery schedule that was currently in the
contract. And three, they would not be able to per-
* Petitioner General Dynamics (09 129% Pet. 25 26) attempts to
distinguish these precedents by construing them to permit judicial
reliance on new legal, but not factual, justifications for a prior contract
termination. As the quotations above indicate, however, those cases do
not establish such a distinction.
$0
form the contract without extraordinary relief or ad
ditional funding for the contract. So they basically
said they can’t perform under the contract and they
were in default of it.
Id. at 265a-266a. The contracting officer's conclusion
that petitioners would be unable to perform the contract
was amply supported by the course of dealing: between
the parties. For example, when asked in December 1990
by the Under Secretary of Defense whether petitioners
would complete the contract regardless of the cost, the
CRO of one of the petitioners responded that the con
tract “has pot to get reformed to a cost-type contract or
we cannot doit.” Jd. at Sa.
The court of appeals was properly “less concerned
about the label of the contracting officer’s action so long
as, in fulfilling his duty, the contracting: officer exercised
reasoned judgment and did not act arbitrarily.” Vet.
App. 30a. The contracting officer's cure notice and ter
mnination letter Qpp. 3-5, supra) substantiate his tests
mony and support the court’s determination that the offi
cer exercised “reasoned judpment” when terminating: the
contract for default. Pet. App. 30a. Thus, while the con
tractiny officer may not have explicitly conducted a “Les
bon analysis” Gd. at 29a), the rationale on which the offi
cer terminated the contract was not different in kind
from the rationale on which the court of appeals upheld
the default termination,
31
CONCLUSION
The petitions for a writ of certiorari should be denied.
Respectfully submitted.
NEAL KUMAR KATYAL
Acting Solicitor General
TONY WEST
PAUL L. OOSTBURG SANZ Assistant Attorney General
General Counsel JEANNE E. DAVIDSON
THOMAS N. LEDVINA BRYANT G. SNEE
WENDELL A. KJOS KIRK T. MANHARDT
Attorneys PATRICIA M. MCCARTHY
Department of the Navy Attorneys
AUGUST 2010
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.